From missiles to pillcams

AS THE dust from Operation Protective Edge settles, the toll of dead and wounded on both sides of the Gaza border are uppermost in our thoughts. But the direct and indirect economic costs must also be weighed. The economic cost of Operation Protective Edge as of August 3 was estimated at six billion shekels ($1.7 billion). The government's 2014/15 budget is far behind schedule, and all talk of defense budget cuts has been replaced by discussion of how many additional billions of shekels will be needed for the IDF. Israel has already asked the US for $225 million for additional Iron Dome parts. Iron Dome is co-produced in the US and Israel, with about 40-50 percent of the components made by Boeing. An economist, it is said, is someone who knows the cost of everything and the value of nothing. As an economist, I find there is some truth in this saying. Costs are far easier to measure than benefits. But, I wondered, are there any spillover benefits from Israel's vast investments in military hardware and technology to the civilian economy? History offers many examples: We know the Romans built roads to speed troop transport – roads that later served civilians well, some even to this day. The Internet was first developed by DARPA (US Defense Advanced Research Projects Agency), as ARPANET. But what about here at home? To find out, I spoke with four former senior engineers and managers from Rafael Advanced Defense Systems Ltd., Israel's leading defense contractor and the developer of Iron Dome and many other highly advanced systems. Rafael is now a government corporation, which had sales of $2.05 billion (7.4 billion shekels) in 2013, up 15 percent from 2012. Rafael is profitable, earning more than $100 million in profit last year. It employs 7,000 workers and creates jobs for many times more among its network of subcontractors. Its order backlog is $4.1 billion or about two years of sales. Much attention has been focused on Iron Dome, the anti-rocket missile system developed by Rafael and called “one of the most impressive weapon defense systems of the past 20 years” by Mitchell Osak, a consultant writing in the Financial Times of London. Apart from the hugely important savings in human life and property resulting from the success of Iron Dome, I tried to determine whether it and other very costly military technologies have spurred civilian spinoffs. I spoke with Rafi Nave, who was senior vice president at Given Imaging, after a long career at Intel. He told me how guided missiles can become pillcams, the tiny pill-sized capsules pioneered by Given Imaging which, when swallowed, film the gastrointestinal tract. Nave explained that the idea for the capsule was triggered by a query from Dr. Eitan Skapa of Assaf Harofe Hospital while he was on sabbatical leave in Boston and lived in the same residential complex as Dr. Gavriel Iddan, senior engineer in Rafael's missile division. Iddan had worked on developing Rafael's infra-red homing heads for air-to-air missiles. Could the missile's sensors be extremely shrunk and miniaturized to perform a similar function inside the human body? That conversation occurred in 1982. It was a wild, impossible idea, the kind of chutzpah that often leads to amazing breakthroughs or colossal failures. It took another 16 years until funds were raised and the idea became feasible, Nave recounts. Iddan, together with Dr. Gavriel Meron, founded Given Imaging in 1998 with funding provided by Rafael and Elron Electronic Industries. US Food and Drug Administration approval was granted in 2001. The tiny PillCam really is like a small guided missile, with a sensor that captures data and relays it to an external receiver. Giora Shalgi, former Rafael CEO, recounted that Iddan was the first of several Rafael “sprouts” – especially creative individuals given the freedom to work on whatever they wished as long as it was consistent with Rafael's overall “compass” – a program initiated when Shalgi headed Rafael's Missile Division. According to Nave, no military technology was embodied directly in the pillcam. “The actual technologies employed in the prototype and the products were not borrowed from military technologies but rather from consumer and medical products/practices,” he told me. “But the creativity, skill and motivation of the founding entrepreneurs, honed at Rafael, played a key role.” This perhaps is the major lesson I learned from the Rafael veterans – capabilities learned and practiced in military research create incredible inventions for us civilians even when the military technology itself does not find direct use. Dr. Reuven Eshel headed Rafael's missile division and later became senior vice president and head of research and development. He told me how, for more than 30 years, Rafael has sought to build civilian business to offset the roller-coaster ups and downs of the defense industry – a tactic adopted by Israel Aerospace Industries, as well. Eshel mentioned Rafael Development Company (RDC), a subsidiary formed by Rafael and Elron Electronic Industries and led by Reuven Krupik, who later went on to lead Clal Biotechnologies to market success. The basic principle, Eshel explained, was to combine experts in military technology with those who understand how to raise capital and sell and market products. Among the successful civilian start-ups emerging from RDC were Given Imaging and Galil Medical, which developed devices for cryogenic (low-temperature) surgery. Shalgi added that Rafael's initial attempt to penetrate the civilian market was a subsidiary named Galram, formed in the 1980s, which failed because, as it was later understood, Rafael “did not have the organizational culture” needed to sell commercial products. Based on that lesson, RDC was formed as a joint venture with a partner, Elron, which brought both money and market savvy to Rafael's technology. TO ESHEL'S list of RDC successes, Shalgi adds 3DV, which developed 3D video and Medingo, which developed an insulin pump for those with diabetes. But perhaps Rafael's biggest contribution to Israeli entrepreneurship is the very large number of Rafael “graduates” who went on to launch start-ups. Among them is Dr. Shimon Eckhouse, a serial entrepreneur who launched a string of highly successful companies after retiring from Rafael in his mid-50s. Eckhouse notes that his age was an advantage – because he had no time for failure, he was forced to quickly bring to market products that would get fast market acceptance. In Dan Senor and Saul Singer's best-selling book “Start-up Nation,” the military historian Edward Luttwak is quoted: “Instead of the quiet acceptance of doctrine and tradition, witnessed in the case of most other armies,” Luttwak wrote, “the growth of the Israeli army has been marked by a turmoil of innovation, controversy and debate.” This holds doubly and triply for the teams of creative engineers and managers in the Administration for the Development of Weapons and Technological Infrastructure (in Hebrew, Mafat, an acronym), a body jointly run by the IDF and Ministry of Defense, which directs IDF R&D and hires and directs subcontractors, of which Rafael is a major one. In 2004, Brigadier-General Daniel Gold became head of Mafat. He was a strong backer of the Iron Dome project. Gold ran an end run around army regulations to begin funding the project, and R&D for the intercepting system began in 2005 when Gold chose Rafael over US defense contractor Lockheed Martin. In 2007, then-Defense Minister Amir Peretz decided to approve the Iron Dome project against fierce IDF and government opposition. Major funding came from the US Congress, too, amounting to about $900 million to date. Iron Dome went from the drawing board to operational combat readiness in less than four years – it was first deployed on March 27, 2011 – an impossibly short time for a totally new and complex weapons system designed from scratch. How was this done? I asked a former senior Rafael engineer for the inside story. It reveals the same creative elements that also drive the pathbreaking civilian innovations of Start-up Nation. “It began in 2000 with the first Kassam rockets launched against the southern town of Sderot, population about 26,000,” he said. “Sderot is only about three kilometers from the Gaza town of Beit Hanun and has since been under constant attack. Creative people at Rafael developed the early-warning system now known as Red Color, which gave local citizens a short 10-15 second interval to reach shelters before the rockets landed. But a small group of engineers and scientists at Rafael's famous Missile Division gathered informally to find a more robust solution to the Kassam problem. That entrepreneurial group actually defined the (Iron Dome) product and wrote operational requirements based on extensive simulations that led to the development of key algorithms needed for the Iron Dome missile to intercept and destroy the Kassam, Grad and Fajar-5 rockets in mid-air. There was a unique, strong link and cooperation between industry, IDF systems operator and Ministry of Defense experts.” An example of such collaboration is Iron Dome's software, developed by mPrest, a small software house based in Petah Tikva. The software developed very quickly by mPrest is able to use the data from the radar that tracks enemy rockets (developed by Elta/Israel Aerospace Industries), plot their trajectory, compute where they will land, decide whether to intercept, and, if yes, intercept and destroy them – all without human interference and within fractions of a second. It turns out that all the innovation elements that created Iron Dome are also the ones that drive successful civilian start-ups. Military R&D may not directly spill over to civilian uses (with a few exceptions) but several identical processes drive innovative success in each. Urgency: It was clear from the outset that rocket attacks from Gaza would increase in size and frequency. There was no time to waste. Winning civilian start-ups have the same desperate urgency. Improvisation: Iron Dome engineers cut many corners to save time. One source published on the Internet told the following remarkable story: “Time and budget constraints forced us to think hard. There are parts in the (Iron Dome) system 40 times cheaper than the parts we buy normally. Iron Dome contains the world's only missile components from Toys R Us. One day I brought to work my son's toy car. We passed it around. We saw that there were components in it suitable for us. More than that I cannot tell.” Quality people: Rafael engineers fought to be part of the development team. Many brought with them valuable prior experience gained by developing generations of air-toair and other missiles. This highly motivated A-team thus was able to sustain very heavy workloads and tight deadlines. Small, lean teams: The group of engineers and scientists working on the Iron Dome project was very small, much smaller than is common in such projects. This made managing the project faster and simpler. Correct decisions: A great many crucial decisions are made in any such development project. A wrong one can sink the whole thing. The Iron Dome team made the right choices, and apparently did so by employing an effective way to decide. Experiment: Sometimes, to know what will work and what won't, you need to try things. The Iron Dome team ran many such trials and followed Thomas Edison's dictum that a failed experiment simply brings you one step closer to success. 'It can't be done': In my work with Israeli entrepreneurs, I've found there is one phrase that energizes them more than any other: “It can't be done!” Financial Times writer Osak quoted an Iron Dome team member who said, “Maybe we should thank the media because when you read a cynical article you say to yourself, 'Let's show them' and you tackle the project invigorated.” Collaborate with the end user: Iron Dome was developed in close cooperation with field units that eventually would use and operate the system. This is true, in general, of Israel's military R&D, which, sadly, has many opportunities for field testing in real-world combat. Eshel added “management support” to the list. “The team got both financial and technological highest priority by Rafael top management wherever needed.” I once taught a Technion student who had served in an elite technology unit in IDF Military Intelligence. I presented to her my theory of why graduates of this unit, known as 8200, generate dozens of successful civilian start-ups. And there are a number of such IDF units. In this unit, soldiers with very junior ranks pepper their superior officers with ideas. If approved, they are given a budget and a team to lead, and manage the project they invented. By the time they complete their service, they've already built several start-ups. When they come to do their own in civilian life, they've had lots of valuable practice. She agreed that this was indeed the case. A good example is Check Point Software Technologies Ltd., an Israeli company that leads the market in firewall protection for internal networks. It was founded in 1993 by three friends led by Gil Shwed (still the CEO), who all worked for an IDF technology unit. In the unit, Shwed had developed sophisticated firewall software. After the friends finished their army service, in short order, Check Point was up and running and selling its software to civilian users. Today its annual revenues are about $1.4 billion. Worldwide, there is a trend toward declining defense spending (particularly in the US and Europe) as governments battle to control budget deficits. This has put pressure on leading defense contractors, including those in Israel, who find export markets less favorable. One response has been to find ways to transform military technology for civilian use. This is no easy task, but it can bring huge payoffs. Elbit Systems is an Israeli company that develops sophisticated weapons systems, communications equipment and command- and-control systems for military use. According to Yoram Gabison, a journalist at the Tel Aviv economic newspaper TheMarker, Elbit's CEO Bezhalel (Butzi) Machlis, who took over a year ago, wants to boost Elbit's revenue from civilian sales to one-fifth of total sales within five years. Elbit has developed technology that can solve a key military problem – how to supply enormous amounts of energy for things like laser cannon and satellite launchers, quickly and massively, without cables. According to Gabison, Elbit's “super-capacitor” can supply 10,000 amps with only a tiny device. This could be used, Elbit believes, for charging electric buses or trams while they stop to pick up passengers, without cables, in just 30 seconds, providing enough power for them to travel two kilometers before the next charge. Bye bye, diesel fumes. A pilot project is now being planned for an Israeli bus line. According to the Stockholm Peace Research Institute, Israel spends $14.6 billion on defense annually, slightly less than Turkey, a nation with 10 times Israel's population, and equal to more than six percent of Israel's Gross Domestic Product. This is a very heavy burden for a small country, albeit an obviously necessary one. In contrast, the US spends about $682 billion on defense annually, or 4.4 percent of GDP, which amounts to a massive 40 percent of total world-defense spending, in turn equal to $1.8 trillion. In a world rife with hunger, poverty and illness, the vast resources devoted to weapons are simply a travesty and massive human failure. Isaiah prophesied that one day swords would be beaten into plowshares and spears into pruning hooks. He may have underestimated how hard that is to do with modern-day weaponry, even if missiles do become pillcams from time to time. Perhaps, in Israel, we can take comfort in knowing that the same brainpower, which generates the military technology that protects us, our homes and families, and hones its creative skills in doing so, also creates the civilian technologies that drive Start-up Nation and prolong and enrich our own lives and those of people everywhere.  The writer is a senior research fellow at the S. Neaman Institute, Technion

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