You bring up a good point that merits more thought. For example, let’s say you were a Bolivian baker and you made the best bread in the world. Because it was so good, you did a deal with a distributor in Paris and wanted them to sell your bread. Do you think you’d be successful? No. Even though your bread was superior, you wouldn’t succeed because you are ignoring the market realities – namely how the French want to make and consume their breads. The best doesn’t matter in that case, any more than the best IT gizmo would matter – what matters is local (market) knowledge and participation.

You’ll never hear me tell anyone to become “American” – we’re annoying enough already. We don’t need any help in that department. Cheers.

This week I published an article on the same topic. Unfortunately it is only for hebrew readers (http://www.themarker.com/tmc/article.jhtml?ElementId=/ibo/repositories/stories/m1_2000/yc20100223_3478.xml).

My facts and conclusions contradict the main point in your article (sorry for being so Israeli – confrontal and direct…).

First – there are quite a few Israeli companies that became a billion dollar companies – some in valuation and some also in sales. Few examples: Teva, Amdocs, Checkpoint, Comverse, Mercury, NICE, M-Systems, and Gilat. All had a world leader position.

Second – What was common to all of these was keeping their HQ and top management in Israel and having an Israeli CEO. There are many more Israeli companies that make more than $100M. Again, the common to all these companies is a HQ in Israel and an Israeli CEO.

Third – my article points out that the reason for the reduction in the number of successful Israeli companies started when we started to try to become “American”, i.e. moving companies’ HQs to the US and replacing their Israeli CEOs. I don’t mean a US presence is not desirable. However, The core team should stay TOGETHER as long as possible (i.e. not move to the US as soon as possible), until the company figures out the product, the messaging, the positioning, the strategy, and the scaling etc., and now its all about execution. The problem in relocating the HQ and the CEO to the US is in breaking a company to two and breaking its internal communication when it tries to figure out its whole product.

Last – I totally agree that great marketing and generous marketing budgets are key success factors for a company. However, the successful companies I mentioned before were doing great job in this domain. True, there is less experience in S&M in Israel (since everyone is trying to become “American” these days); however, Israelis are smart and adjustable enough to do great marketing from Israel. Especially now, when the WORLD IS FLAT.

My favorite part: “Israelis are strong willed people who tend to attempt to inflict their will on the U.S. business community.”

Interesting on the Indian/Chinese commentary – very, very few of these countries produce tech startups that take over the western markets. They tend to do well on their own turf, and then suffer badly when they try to move abroad. Where this has worked for them is to “import” functions into their countries – off shore development or manufacturing, for example. Taking a product outside your own country and trying to sell it on foreign shores is where many of these efforts fail – for Americans and the rest of the world.

Seriously, as someone completely outside the storage industry, I found this post an engaging, highly entertaining read.

I’d agree that you have to be in the heat of the action to be successful in a given market, and add that the same is true of any B2B industry. You network, you learn things and get introductions 1-on-1, take someone out for a coffee or a beer (America – Australia / The Simpsons anyone ?), all of which doesn’t work nearly as well when it’s just virtual. Beyond just sales, there’s a degree of trust that we inherently give a familiar face and a strong handshake.

Separately, I think you’re playing the traditional engineer’s game of bash the marketers cuz we don’t get how they add value. Yet ironically, in this very post, you refer to companies making products for themselves that the market doesn’t want – a problem easily solved by a marketer armed with a test campaign and some analytics to measure leads or sales. That’s just one of many ways that marketers legitimately add value that engineers don’t really get, because of the ‘build it and they will come’ mentality you described (HP and Dell will fight for our gizmo…).

On a vaguely related note, do you or others in the industry take guest posts? [My storage-ignorant self would not be the writer; I'd have a qualified storage pro doing the writing.] It would be nice if you could email me back about this, please.

Regards,
Gab Goldenberg

I definitely agree on the importance of marketing, product management and customer awareness , but I beg to differ on some other points.
As an Israeli\American born in Atlanta,Georgia and living in Tel-Aviv I feel I have the right to criticize both sides

Let me challenge few assumptions that you are making in the post and others follow in their comments.
The entrepreneurs in the years in Israel grew up under heavy American cultural influence. American television, movies, songs, food and culture form day one ( no dubbing ). Most of them did MBA as a second degree and not a degree in computer science. Many have their expertise in marketing or finance and in some of the leading business schools in the world.
The question if an MBA is a good idea or not is another topic …

The myth of a sweaty army commander leading his developers to die in the C++ fields is mostly a creature of the wild American imagination.
Most Israeli developers spent their army career in air conditioned computer rooms, and the hierarchy there is much weaker than in corporate America, Japan or even a cub-scout group in Texas. Trust me, I tried both roles.

The other misconception is that you can’t run a really big company out of Israel. Having worked in Check Point for five years, I see no reason why this can’t happen in other places. It actually worked in many cases – Mercury, Nice,DSPC, Teva, Gilat,A mdocs, Comverse, M-Systems, Precise, Memco, Passave, XIV and so on.

The fact is there aren’t many big new companies in IT in last years due to many reasons, which are not related to the origin of the CEO.
HP,Cisco,IBM,EMC and the likes are buying any enterprise software\technology vendor once it hits a certain maturity and size. With their size and the lack of IPO market it is no wonder many prefer the fast exit route.

While it might be true in the early days of the company to have many people in the valley, it becomes less critical when the company gets really big and global.

I’m not sure that Israeli companies that failed had great technology but lacked market understanding. I think many of them had lousy products that had bad scalability, many crashes, memory leaks, bad user interface and slow performance.I probably interviewed some 400 engineers in the last years and not one of them admitted the technology didn’t work. It was always the management fault.

BTW,it is extremely hard to get excellent product managers anywhere in the world. Amazing VP marketing are not easy to find in San Mateo or San Francisco as well.

On a side note to American CEOs and analysts, the assumption that all technologies come out of USA and the rest of the world follows, is not going to hold for much longer,IMHO. Israel would always be a miniature market, but the common American CEO mistake is to ignore the small nations of Europe, China, Japan and India because they keep insisting on having their own culture . Not only they think differently, but they refuse to follow the same marketing, sales and product assumptions that work at home.

This new breed of highly educated, sophisticated and well traveled executives are by no means different than the older ones.
These managers have been trained by the elders, therefore carrying the same learned behavior, have for the vast majority spent several years in the army (a minimum of 3) and when out, run their business the same way as the army’s chain of command as they trained and taught.

The fundamental difference is that the elders would go through 3 to 4 business cycles to get it right, and it takes the new generation 2 to 3 business cycles if they survive the 1st one.

We all know that business is war and you have to execute accordingly. However, business strategy, tactical matrix, revenue models, risk management, and corporate leadership should take in consideration cultural differences, demographic behaviors and psychographic expectations, and in the Israeli these words don’t exist.
Companies that succeed have all one common denominator. A formula for success that can simply be described as – don’t swim against the current and focus on your customer, focus on your own revenue streams.

The concept that someone else other then “ME” is right and the client may have a real problem that needs to be solved does not exist in Israeli corporate culture and department divisions sub cultures (with a few exceptions). Therefore regardless of the CEO’s nationality, culture, background, it is extremely challenging for the small to mid size Israeli company to succeed in global competitive environments.
So, what’s the 3rd option; I have a few theories;
1st – charm school for Israeli CEO’s
2nd – An Israeli CEO must run a foreign company prior to become a CEO of an Israeli company (and not the other way around)
3rd – 3rd and 4th academic cycles. There is a clear lack of executive business education amongst Israeli senior executives
4th – grow into a job, like old times… don’t just be a CEO simply because you founded the company

Who knows, one of these may be a good idea that may work.

In my experience as a senior executive with Israeli companies operating in Israel and the USA, Israel is filled with the greatest engineering talent and creativity in the world, but with an enormous lack of understanding that the best product (often only the best in the developing engineer’s team mind) means very little to the potential buyer if it becomes disruptive for its business process or if it does not solve a problem or create a real opportunity.
Furthermore, there is a demographic tendency to describe all company’s problems as the “clients fault for not understanding or knowing how to implement it/use it”.
And this, as it was true back then, it still a reality now.

As for a new generation of “good CEO’s”, please note that the old generation also had great ones, just very few like Nochi Dankner and Yitzhak Tshuva.

Thanks.
Mario

Meanwhile, back here in the good old US of A, it seems at times the opposite in that some are lauded as luminaries or success stories for thier success in landing VC funding, launching companies and then going no where except to their next gig where the pattern repeats.

Granted, this is not always the case, there are those who have done great jobs of either launching, or, stepping in to take companies to next level for either exit, or sustaining for life as an actual business as opposed to being propped up for something else.

This all begs the question then of how do you guage success, is how much money one can raise in x number of different companies, or, how much revenue is or was generated by y different companies.

The answer of course would depend on where you sit and your particular objectives.

One thing is for sure, with all of the startups in the wings, laying in the weeds, tempting their fate launching either with or without vc funding, there are now plenty of more candidates for this trend along with the V2.009 CEO musical chairs game to watch.

Cheers gs

Point number two – by no means does the fact that you are a U.S. CEO make you any less of an idiot. Au contraire, most are total idiots. Whether the company was founded in Haifa or Cleveland, at the end of the day CEO skill is paramount to any success. My only point here was that the combination of skill requirements AND cultural differences is often too much to handle. Foreign born entities have to wrestle with both, whereas U.S. companies can focus on trying not to hire a moron, without (normally) concern for the cultural issues. —- Steve

I agree that in Israel, and the rest of the world, the next generation is armed with tools that I, my father, or grandfather simply didn’t have – and those tools can be used to turn the whole world of business on its head. —Steve

While it is easy to criticize the practice of moving Israeli CEO to the US, one must remember that this was always plan B. Plan A – hire a top-notch US CEO who can take the company all the way – has failed over and over again, which forced VCs and companies to seek the next best option (or just not the worst option), which is to ship the CEO to the US.

As for the reasons US CEOs and Israeli companies is such a misfit — this may have to do with some of the Israeli traits you mentioned, but it may as well be the result of top-notch US CEOs not willing to join an Israeli company, which leaves most of these companies with a second-rate CEO or just a first-timer you’re willing to bet on.

If Israeli CEOs fail the US test and US CEOs are not a fit, is there a third option?

BTW – I second Sunchine Mugrabi. There’s a new generation of Israeli-born, US-groomed CEOs. Doron from Diligent, with whom you are familiar, is certainly one such example.

Stepping outside of the world of storage, given our shared backgrounds there, the issue of starting a technology business and turning into a success can be extremely difficult for any geography outside of Silicon Valley. I have been attending the LeWeb conference here in Paris this week, and much of the discussion for European entrepreneurs and VCs is if they can compete with the US for innovation and aggressiveness. The entire Internet ecosystem, from Google to Microsoft to Yahoo!, Cisco, Sun, Oracle, Apple, Facebook, Twitter, you name it… has largely originated in Silicon Valley.

Comments today suggested that VCs in Europe tend to not be dreamers, and that those who fail are marked as having previously failed. It is an environment that is not conducive to taking risks and trying, trying again and again, which happens in the startup world, where 9 of 10 businesses fail, regardless of their start location.

If you look at Israel, you see some profitable acquisitions, such as ICQ (by AOL) or even XIV (by IBM), but not many start and stay in Israel and become a big success. The IT market starts and spreads from the US for the most part. I am partial to some startups (like my6sense, where I am an advisor) that are in Israel, but a free iPhone app is a much different market than a six-figure storage device.

I love your comment on matching engineering dollars with Marketing. This is not just an Israeli problem. Believe it or not, the Google diaspora has led to a number of sharp engineers in the Valley who love their code and don’t know, trust, or respect marketing. Thus, many of them dunder along with an interesting, unpolished product and a bad message. As much fun as it is to put the techies on a pedestal as amazing human beings with incredible talent, it takes a lot of salesmanship and marketing, in conjunction with good code, to make a real success.

On Tuesday, I’m going to listen to Dan Senor, author of “Start-up Nation: The Story of Israel’s Economic Miracle,” speak at Temple Israel in Natick. Want me to get you a copy of his book?

http://www.amazon.com/Start-up-Nation-Israels-Economic-Miracle/dp/044654146X

Better yet, join me.

John