| In the mid-1980s, confronted by a post Cold War's fading demand for weapons and triple-digit inflation, the Israeli army began downsizing and restructuring its forces by adopting a technology- intensive strategy. This transformation, alleviated by an exceptional relief of regional hostilities in the 1990s, aimed at a faster reaction to terror and isolated skirmishes. Israel's defense benefitted its inborn peculiar structural split between large government firms (Israel Aircraft Industries, IAI), large private businesses (Tadiran), and dedicated small- and medium- size companies. In 1984, the Israeli Ministry of Defense began promoting the conversion to commercial product lines, adopted the R&D Encouragement Law, and increased spending on higher education. The initiative was a success, and companies such as IAI and Rafael launched commercial spin-offs, which rapidly outperformed certain defense production units. Some civil firms such as Elbit Systems, ELISRA, and Rafael have successfully marketed high technologies that were first developed for military applications. The achievements are especially noticeable in the space sector (IAI, Elop, Elbit), telecommunications (Gilat Satellites, ECI telecom, Tadiran, Comverse, LocatioNet), and security (CheckPoint, RadGuard, Tarzana). More surprising is the incursion of military technology in the medical sector. Rafael (acronym for Israel Weapons Development Authority) created a dedicated structure for military technology transfer called RDC, which bestows the permission to convert military knowledge in exchange for shares. Galil Medical, a spin-off of Rafael, specializes in minimally invasive surgical equipment and develops interfaces between different imaging devices. Galil Medical now sells in North America and Europe, and supplies first-class customers such as the University Hospital of Harvard. Elbit Systems specializes in military and aviation goods and has already launched commercial companies in telecommunication and aerospace. They have recently introduced MediGuard, a start-up that will develop minimally invasive navigation systems based on military expertise in optical fiber and routing technologies. MediGuard will improve surgical operation by offering 3D imaging for catheterization , endoscopies, and heart surgery, without any use of x-rays. The case of Check Point Software, illustrates the factors that have made such military technology transfers successful. Check Point was created in a small apartment by Gil Shwed, Shlomo Kramer and Marius Nacht. The founders have more or less the same profiles: they were below 30 years of age and they met in the Israeli army, where they became familiar with information security systems. Case Study: Check Point The three founders were quick to recognize the potential of the Internet and network systems to provide companies with exposure to the outside environment, but also saw that this exposure left companies vulnerable to internal and external threats. They saw that companies would need security systems more and more. Starting the company was not easy. At the end of 1993 Nacht went to the U.S. to try to sell the initial security software product of the young firm. He had no marketing or sales background and was using his car as an office. But, success came in 1994 in Las Vegas, where Check Point won the first prize of NetWorld, the prestigious Internet trade show. In 1994, the company's revenues were $24,000. Today, Check Point has more than 450 employees and two main offices (in Redwood City, California, and Ramat-Gan in Israel) and the firm controls 40% of the world market for firewalls (more than 60% in Europe). According to the International Data Corporation, a market research firm specializing in high tech, this market has shown an annual growth of 27% through 2001. The initial funding for Check Point came through venture capital. In 1993, an Israeli company, BRM Technologies, invested $300,000 and in June 1996, Check Point went public on the Nasdaq and is now capitalized between $11 and $20 billion. After the IPO, Check Point produced three millionaires: Mr. Gil Shwed and his two partners , who each owned 10% of the company. [13] | The success of Check Point is characteristic of the Israeli high-tech sector, as it was created by three army friends who had worked together as computer-savvy draftees in military intelligence agencies. For them, being identified as Israeli in the security trade is an advantage, and even the name "Check Point" has military connotations . When they left the army they had a clear idea of what a commercial software product could be. Gil Shwed is considered a role model in Israel today, as his example allows other young Israeli companies to believe they may prosper internationally with Israeli technology and management, even when remaining Israeli. Check Point arrived at these heights after just four years on the market. The range of products deriving from Israeli military blueprints stretches from unmanned planes for firefighting to voice recognition in telemedicine. The downsizing of Israel's defense industry has led thousands of skilled personnel to the civilian marketplace , while lessening the country's dependency on military production. There is in fact a strong link between the Israeli Ministry of Defense and industry. Schlomo Dror, spokesman of the Israeli Ministry of Defense, commander of a tank battalion, and security officer in the MoD mission of the Israeli Embassy in Paris, expresses his view on the relationship between military and industrial sectors. Schlomo Dror Reciprocal cooperation between the army and private companies is a key characteristic of the Israeli model The relationship between industry and the military in Israel is very different from other countries . In Israel, this relationship is so tight that sometimes, when you are visiting a company and you meet someone, you don't know if they are working for the Israeli Ministry of Defense or industry. Comverse (ex-Efrat) is an example of one company where you meet a lot of people coming from the Israeli intelligence units, especially computing. There is complete permeability between the civilian and military spheres. It is a kind of osmosis, going both ways. In typical systems, such as U.S. industry, when you build a plane, you have to plan for R&D and prototypes to test it afterwards and if the army performs these tests, it will take a very long time, and large amounts of money. When you want to launch a project in Israel you develop everything together with the army if you need its assistance. For example, if Elbit is designing a new engine, they can trust the army for the testing as soon as the prototyping is finished. The army is sharing its world-class equipment with private companies. If a private high-tech company needs equipment, they can come to the Army and work on its computers. Army and industry often work together on diverse projects. For instance, when we have an innovative idea but lack the human resources to follow through with it, we ask industry who would be the best to do it and launch common R&D. We can go to Elisra for an electrical system, tell them what we want and discuss the opportunities. Working in the same field and from the same units Let me give you an example. If we are working in a very specialized area of research and we know that the best engineer for developing the project left the army three or four years ago and works for a high-tech firm, we contract with the given company for a limited period of time and hire this engineer for the mission. Reciprocal cooperation is important, because we need skills that have now left for the private sector, and the high-tech companies need our assistance and equipment for their development. And what we end up with is a product that fits the market and supports the Israeli economy. In other countries, the cooperation with government institutions, especially defense, is very restricted, and the deals are never as unquestionable and guaranteed as with the Israeli Ministry of Defense. For example, the milouim is very important in our lives. It is an annual reserve duty for all Israeli males that gathers the members of a unit for 4 weeks every year. During this time, I meet my comrades with whom I was in the army and university 27 years ago. We served three or five years and then people scattered in various fields around the world, but at least three times a year we are united again. This kind of friendship that unites Israeli comrades is very unique and serves as a life-long networking resource. This unique relationship is persistent especially in certain units ( tankers , paratroopers, commando, and intelligence) and fields (computing, security). When two Israelis meet, usually the first question is, "Where did you serve in the army?" This helps create links and common references. On the other hand, you can understand the difficulties faced by persons who didn't serve, and the suspicions aroused. People tend to think that they suffer some disease or that they are too individualistic and that they didn't want to give something to the society. When you want to hire people, you want people dedicated to the company, not people working for themselves . Still, if you ask me if I like this system, I would answer that I'd rather have less good friends and live in a country in peace . Here it's not really a normal life. Of course the relationship developed around the army is very important, but I'd rather not be scared for my children, and not see them go to the front during their military service. That service lasts three years . . . and this is a very long time. | |
