What Australia can learn from Israel’s innovation ecosystem

Israel has a best practice approach to innovation. There’s three elements I’d love to see Australia emulate.

Israel has created a setting that allows them to punch well above their weight when it comes to innovation and entrepreneurship. In fact, their venture capital per GDP is the highest in the world – ahead of the US and far ahead of Australia.

While Israel has a set of circumstances that Australia can never recreate, and I certainly hope we never have the existential threats that Israel faces every day, there is a lot we can learn from their innovation ecosystem. That’s why I have just returned from a study trip for the second time in as many years.

This trip started in Jerusalem, and right from the very start, innovation was alive and well in Israel. It has underpinned daily life, culturally and socially, for centuries. At our visit to the Israel Museum, our tour guide embedded ideas from Start-Up Nation: The Story of Israel’s Economic Miracle, so we could see their early innovations that helped people carry water, grow crops and hunt animals.

Data analytics were next on the agenda, learning about how the power of machine learning can be used in analytics. We spoke to SparkBeyond, a company who believes it’s important to teach machines to ask questions rather than assuming that humans will always lead the enquiry. By taking a different perspective, they’ve been delighted and quite surprised by how smart machine-led questions have been.

Tipa is another company that has looked at their problem from a different perspective. They are working on compostable plastics that have the same feel and shelf life as plastic packaging. Rather than approaching the issue as an eco-problem, they’ve looked at it as a social problem, and are trying to solve it in a way that doesn’t require existing packaging machinery to be replaced.

In the north of Israel, we visited a kibbutz that has developed some very interesting agri-tech innovations like genetically engineered bumblebees that pollinate plants for much less than a human wage. They are also looking at natural solutions to prevent rodent and bug infestations in grain and other crops, potentially removing the need for pesticides and herbicides. We saw the bees in action on a moshav in the south of Israel. (A moshav is a private settlement that operates like a cooperative.)

You can’t help but return from a trip like this and be amazed by how much innovation this tiny country manages to produce. In Australia, we come from quite similar legal settings, taking influences from the United Kingdom, both countries are well-educated – so what makes Israel so special?

1. Israel looks out, not in

Israel understands that they’re not a large country. They have just under 9 million people, so when they develop something they know their domestic market isn’t going to be big enough to commercialise it in a sustainable way. That’s why the first thing they do is look for where they can commercially exploit their idea – they stand in Israel looking out towards the world.

In Australia, we kid ourselves that we’re a large country. We’re 24 million people – not even three times the size of Israel – yet we typically focus on our domestic market. We stand around the fringes of our island nation and look inside. That’s our biggest weakness.

It’s not as if we don’t have good creative ideas, we invented Wi-Fi for example. We’ve also created some great things in agriculture, energy, mining and resources, oil and gas, to name just a few sectors. Sometimes those inventions flow out across industry verticals and sectors, but it’s not something that’s built into the DNA of our ecosystem.

While Australia can build enterprises of a certain scale, we rarely build companies that take on the world. We’re missing the muscle that deals with international commercialisation.

Israel understands that they’re not a large country. They have just under 9 million people, so when they develop something they know their domestic market isn’t going to be big enough to commercialise it in a sustainable way. That’s why the first thing they do is look for where they can commercially exploit their idea – they stand in Israel looking out towards the world.

2. The government is not afraid to take a direct role in the innovation ecosystem

A big difference between Israel and Australia is how we approach the role of government. In Australia, we don’t allow the government to take a direct role in innovation or to pick winners. But in Israel, the government is directly involved in shaping the roles that universities and corporations play.

The Israeli government, through the Office of Chief Scientist, is prepared to interact directly in the innovation ecosystem. They have a big budget, hundreds of millions of dollars a year, and are empowered to take direct positions in innovations they think will succeed.

There is a lot that we can learn from this approach. Imagine pooling the myriad of investments at each tier of government that are directed towards fostering innovation? If we brought these together and applied them directly – placed a few bets and picked a few winners – innovation in Australia might look very different than it does today.

The Israeli government goes further than just funding innovation. It also encourages education, industry associations and individual companies to interact. Labour representatives are treated more as social partners in the ecosystem not as adversaries.

There is a real opportunity for the Australian government to take a more hands-on approach to bring all the disparate innovation initiatives together into one coherent place – taking a stronger and more direct role in the innovation ecosystem.

3. The power of state-sponsored networking

Israel appears to me as the world leader at building people networks that generate long-term benefits. Their ultimate network is the Israeli Defense Forces. That’s because almost everyone in Israel serves in the Defense Forces – women for two years and men for three. But it’s how they leverage this network and develop skills that is most interesting.

From the age of about 13, people are tested so they can identify what unit they are best suited to. They’re not afraid to be selective about who they choose for what role, particularly when it comes to individuals with technical skills. Someone who is strong in analysis may be placed in the specialist elite units working on big data analytics and they may be personally motivated to continue to work there after they finish their service.

This selective streaming also flows into their universities. By harnessing the talent in their human resources, Israel has been able to build its strength in areas like cyber security and low water agriculture. There is an opportunity for Australia to develop strong centres of talent by selectively streaming people with technical skills into education. This could focus in on topics like cyber security, big data and analytics or agri-tech.

Taking it one step further, the Defense Forces also encourage people to nurture networks after they finish their service. Annually they bring each unit together so people can reconnect and maintain their networks. While Australia would need to find a different mechanism, there is opportunity say for Australian universities to take a more active role in whole-of-career networking. By encouraging people with similar skills and talents to maintain their networks, tertiary institutions could play a substantial role in encouraging industry based innovation.

This trip opened my eyes to new perspectives and diverse ideas. By taking 10 days, I’ve returned to Australia a more nuanced director with a wealth of new ideas of how we can build a stronger innovation ecosystem.

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