Can Israel learn to dance?

The Jewish state needs to learn some new steps to cope with the challenges of an ever-changing world.

October 18, 2012 11:43
shekel and dollar exchange

shekel versus dollar 370. (photo credit: REUTERS)

Israel can claim a dubious distinction, as the country with the greatest instability and threats on its borders and in its region. In response, what Israel needs, according to business gurus Yves Doz (France) and Mikko Kosonen (Finland) is to learn how to dance “fast strategy” or strategic agility.

Doz is a chaired professor at Europe’s leading business school, INSEAD, based just outside of Paris. Kosonen once headed strategy at Nokia and now runs Finland’s billion-dollar innovation fund SITRA.

The two are authors of the 2008 book, “Fast Strategy: How Strategic Agility Will Help You Stay Ahead of the Game”. They recently gave a workshop in Tel Aviv for local managers, which I chaired. They were joined by Dr. Nira Adler, a senior consultant at the Israeli branch of Deloitte professional services company. Doz and Kosonen met here with top Israeli global managers, with IDF officers and with Prof. Eugene Kandel, who heads the National Economic Council for Prime Minister Benjamin Netanyahu.

Their key message: Most organizations are ill-prepared to face the twin challenges of speed, in reacting to surprises, and of change of direction, to adapt to those surprises. Not only can they diagnose decision-makers with two left feet, Doz and Kosonen can help them learn to foxtrot or even salsa.

They consult to several key nations, as well as to global companies.

Fast strategy for both businesses and for nations has three elements, according to their book: First, “strategic sensitivity – heightened alertness (to shifting trends and dangers)”; second, “leadership unity (top leaders) working together as a team”; third, “resource fluidity – dynamic resource allocation (to shift funds rapidly to meet new and changing priorities)”.

How well do Israel’s leaders and policymakers dance? Alas, they stumble on all three of the strategic agility “steps”.

Strategic sensitivity: As it did most of the world, the Arab Spring took Israel by surprise. As yet, no clear Israeli response has emerged to the rapid changes occurring in the Mideast, especially in Egypt. America, too, has waffled, but this is small consolation. So on strategic sensitivity, Israel flunks.

Leadership unity: Here, the score is even lower. In the past year, the daily Haaretz twice ran an identical headline, “Netanyahu’s office distances itself from [Foreign Minister Avigdor] Lieberman…” Once, last year, in eschewing Lieberman’s wildly wrongheaded plan to aid the Kurdish PKK terror group in Turkey, in retaliation for Turkey’s anti-Israel rhetoric, and again last August, in renouncing Lieberman’s call to oust Palestinian Authority President Mahmoud Abbas.

In most well-run countries, a loose-cannon foreign minister would be instantly dismissed. In Israel, Lieberman’s Yisrael Beiteinu party, with 15 Knesset Members, is apparently an indispensable part of the ruling coalition, whatever Lieberman says or does.

Resource fluidity: The score for this key agility component is below sea level. The chronic crisis in Europe and the sluggish American recovery have dragged the world into a double-dip economic slowdown. Even China’s economy has slowed. The result has impacted Israel’s economy, which is export-driven.

At the same time, Prime Minister Netanyahu loosened his purse strings following the Trajtenberg Report on social justice. As a result, a massive NIS 14 billion ($3.6 billion) gap between budget spending and revenue has emerged.

What is needed is a new 2013 budget that cuts this deficit. But with elections in the offing early next year, coalition partners stubbornly resist budget cuts and tax hikes.

Politics has set spending in concrete. Unable to pass a budget, Netanyahu has called for early elections rather than next October.

The last thing Israel needs right now is the paralysis of an election campaign.

A major offender in killing resource fluidity is Finance Minister Yuval Steinitz’s pride and joy, the two-year budget.

Ostensibly good for long-term planning, the inability to adjust budgets yearly, to make resources fluid and react quickly to global trends, is now deeply hurting Israel’s internal stability. In California, Proposition 31 (on the November 6 ballot) calls for a two-year budget cycle. But Israel is not California and Israel’s neighbors, Syria and Lebanon, are not Nevada and Oregon. And anyway, Proposition 31 will likely be defeated.

In September, Netanyahu instructed Harel Locker, director general of the Prime Minister’s Office, to draft legislation enabling government ministries to fire workers or shift them internally. Without such fluidity, Israel’s 676,000 public-sector workers (of which 256,000 are government civil servants) are set in stone. But the initiative has been stalled by, among others, the Histadrut Labor Federation.

On the upside, the budgetary paralysis may ironically help resource fluidity. Without a 2013 budget, Accountant General Michal Abadi- Boiangiu, normally ignored by the media, becomes a key player. She can force ministries to cut spending and can also shift funds between ministries to pay, for instance, for free age-3 preschool education, mandated by law but whose cost is still unbudgeted.

I ask Doz and Kosonen which nations they believe are strategically agile, worthy of benchmarking. They name Sweden, Denmark, South Korea, and Singapore.

Denmark has deftly become a world leader in alternative energy and in medical tourism. So has Singapore. The two experts acknowledge that democracy is sometimes a foe of agility, not a friend. Singapore’s oneparty democracy is minimal, but in spite of (or because of) that, it renews its national strategy every five years, backed by agile deep pockets (funded by massive compulsory saving) and often led by its current president, Dr. Tony Tan Keng Yam, who holds an MIT master’s degree in operations research.

China’s one-party system too can impose rapid change.

Doz and Kosonen tell The Jerusalem Report that of the three key components of agility, resource fluidity is often the toughest for nations. As Ireland, Greece, Spain, Portugal and Italy struggle to impose austerity and cut budgets to control public debt, fierce public protests show how hard that process is to implement. It seems a very tough nut for Israel to crack, too. This basic asymmetry in democratic countries – easy to boost public spending, tough to restrain it – sank Greece and Spain. Hopefully, Israel will not follow suit.

I ask them why Europe hasfailed to shape a coherent policy.

There, they say, the problem is lack of leadership unity. “What is being done now in finance,” they tell me, “should have been done in 2008 and there would have been no devastating [euro] crisis.” There is no strategic mindset in Europe, they claim.

In 1993, Louis V. Gerstner became CEO of IBM, inheriting $16 billion in losses and a failing global company. In his 2002 book, “Who Says Elephants Can’t Dance?”, Gerstner recounts his decade at IBM, the turnaround he led and the high-level strategic agility IBM acquired under his tutelage. The first thing Gerstner did at IBM was to redirect the company’s attention to the outside world, to changing market conditions and to customers who felt neglected.

Israel’s leaders need a dance instructor like Gerstner or Doz and Kosonen. They should refocus on the Mideast and the world, rather than on narrow parochial politics.

They need to learn more than just an obsessive two-step (“Iran, Iran”), repairing relations with the US, Egypt and Europe.

They need to waltz with Abbas, even if in desperation he is seeking a unilateral declaration of statehood. In foreign policy, they need to learn a smooth line dance, not step on each other’s toes. And they need to offer a serious peace initiative.

In economics, they must rumba, to adjust priorities as unemployment rises and exports slow.

Israel can learn how to dance, because it must. Let the lessons begin.

The writer is a senior research fellow at Technion’s Samuel Neaman Institute.

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