Marketplace: Secrets of Israeli innovation

This story captures the essential elements of what makes Israelis innovative and entrepreneurial – the Shoah, the army, war, chutzpa, and invention born of desperation.

By SHLOMO MAITAL
LVT CEO Aharon Shita 311 (photo credit: Courtesy LVT)
LVT CEO Aharon Shita 311
(photo credit: Courtesy LVT)
OVER THE YEARS, I HAVE SPOKEN to groups of managers, entrepreneurs and business students from abroad who come to Israel to learn the secret of its incredible inventiveness. Among these inventions are mobile and multi-core microprocessors, Copaxone, drip irrigation, cherry tomatoes, Aziltec, a key data compression method, USB flash drives, Interferon, one of the earliest cell phones, an ingestible video camera that produces digital images of the small intestine and solar water heaters – and that list is hardly even the appetizer part of the menu.
Although I have researched innovation for many years, I struggle to provide an explanation for it. There are no laws of innovation that Israelis follow. Innovation is best defined as intelligently breaking the rules, something Israelis do with gusto. The rule is, break the rules.
In the future, I will respond differently. I will tell visitors an improbable but true story about a talented and entrepreneurial group of people that took over a run-down kibbutz factory that made fire extinguishers in the remote northern tip of Israel. Against all odds, in only five years, they transformed the factory into a world leader in fire-dousing technology that has already saved many lives and prevented horrible burns. In the process, they also earned export dollars for Israel and made 600 kibbutz members exceedingly wealthy.
This story captures the essential elements of what makes Israelis innovative and entrepreneurial – the Shoah, the army, war, chutzpa, and invention born of desperation. This story could have taken place only in Israel. It captures the secrets of Israeli innovation, and has even been used by the Technion’s Knowledge Center for Innovation to inspire managers who run low-tech plants.
KIBBUTZ LEHAVOT HABASHAN (the Flames of Bashan) is located 10 kilometers (6 miles) south of Kiryat Shmona, below the Golan Heights just west of the Jordan River. It was started by a group of pioneers from Hashomer Hatzair, a Socialist- Zionist youth group, bolstered by Youth Aliya immigrants from Poland and Germany, who came together to Israel in 1945 to set up a new kibbutz and settled on the present site in 1947. The name comes from “Lehavot,” the title of a Polish book that inflamed the pioneers’ imaginations, and Bashan, the Biblical name for the lush fertile land east of the Jordan. Since its establishment, the kibbutz has endured onslaughts, including Syrian attacks during the War of Independence, lethal Syrian shelling in 1958 and Hizballah rocket attacks since the 1980s, culminating in the Second Lebanon War barrage in 2006.
Over 40 years ago, the kibbutz sought to diversify its agricultural revenue by starting a factory. They decided to make fire extinguishers, perhaps inspired by the kibbutz’s name. For years, red Lehavot extinguishers had a near-monopoly in the closed Israeli market and the plant thrived. But in the 1990s, import tariffs were drastically cut and cheap imported extinguishers flooded in. The factory drowned in red ink, as losses mounted. Key managers left and credit dried up as banks stopped lending. Lehavot’s prospects were dismal and its workers were demoralized.
In August 2005, Aharon Shita showed up. A graduate of Ben-Gurion University in electrical engineering, he served in the career army (Signal Corps lieutenant colonel), then became a senior executive at the Bezeq phone company, Nortel and Clal Technologies. He was asked to become CEO of Lehavot (later known as LVT), and he agreed, partly because one of his children had moved to the North.
What Shita found at Lehavot was a grubby building whose walls were black with soot. But where others saw gloom, he saw promise. “The workers who remained had been through hard times and were very resilient,” he tells The Report. “And there were tiny sparks of creativity, ideas that had been suggested but dropped.”
The first thing he did was to buy paint and paint brushes. He and the workers painted the place white. It was a signal that major change was about to take place. After whitewashing the past, he tackled the future.
“Without vision,” the prophet Isaiah said, “the nation disintegrates.” Shita created a vision to drive Lehavot forward. He intuitively understood what management guru Jim Collins, author of “Good to Best,” calls BHAGs: Big Hairy Audacious Goals. Our vision, Shita decided, is to become “a leading producer at the cutting edge of technology.”
Say again? An old decrepit plant on a remote kibbutz, without money, management or technology, far from export markets? The “cutting edge of technology”? Chutzpa! Fantasy! Collins says a strong vision should arouse laughter. I am certain Shita’s vision did. But he convinced his board of directors to support him.
Next he shut down a business that was unprofitable: refurbishing fire extinguishers for the IDF. This involved a few layoffs, not easy for a left-wing kibbutz to accept (its members, essentially, were Shita’s board of directors). Shita understood that in order to create new things, you have to shut down old ones. But the really tough part still lay ahead.
The Israeli market was limited, so Shita and his team decided they had to aim for exports to foreign markets. Shita’s idea team was led by Ilan Elhalal, a veteran kibbutz member and a worker at the Lehavot plant since the 1980s. Elhalal assembled a handful of talented engineers, many of them veterans of elite commando units. The team developed a revolutionary product known as Zone 5 – rapid automatic suppression of the outbreak of fires in wheeled armored vehicles of the kind used by US Infantry and Marines in Iraq and Afghanistan. Loaded with diesel fuel and ammunition, these vehicles are vulnerable to flames, easily started by rifle-propelled grenades, improvised explosive devices or even light arms fire. Why was it called Zone 5? Because the system, unlike that of competitors, doused fires in all five sensitive points of military vehicles, including the rubber tires (devilishly hard to extinguish), engine, and interior. Shita knew instinctively that only a comprehensive fire suppression system would be competitive.
Neighboring Kibbutz Sasa is home to Plasan, the world leader in ballistic armor for military vehicles. (See “The Little Kibbutz That Could,” September 29, 2009.) Plasan CEO Dani Ziv asked Shita if he could supply on very short notice Zone 5 fire suppression systems for Plasan demonstration vehicles to be sent to a crucial upcoming Army-USA trade fair exhibition in Washington, D.C. Shita’s team pulled together, worked day and night and made the deadline.
Zone 5 was a huge hit. Orders poured in. And that led to a major crisis. Lehavot’s Zone 5 innovation was based on a unique fire detection sensor developed by Eli Hatzir, whose Ashdod-based start-up company Firesys had been acquired by Lehavot. Hatzir assembled the sensors by himself at a rate of one per month. But the US Army wanted 16 of them for testing within two months! Shita sent one of his best managers to learn from Hatzir how to make the complex sensors and then produced 16 of them, on time, within two months.
Shita’s father lived through the Holocaust as a teenager and came to Israel when he was 18. Shita was born when his father was only 20 years old, and grew up hearing about what his father went through during the Holocaust. His father’s Shoah experience, he says, powerfully influenced his life. “No matter how tough things were for me,” he tells The Report, “I always told myself, ‘Look, this is nothing compared to what my father went through.’”
“Nothing destroys an organization faster than a charismatic leader,” Jim Collins once wrote. I ask Shita whether he had charisma. In response, he recounts a story from when he was in an officers’ training course.
“What is the key element of leadership?” he and a group of officer candidates were asked.
“Charisma!” they said. “Courage. Boldness. Leading from the front!”
Shita was last to respond. “What’s your take on leadership?” they asked.
“Above all,” he told them, “be a mensch.”
His army experience served him well when he first came to Lehavot. Step by step, detail by detail, change the mood, instill hope, and improve the workers’ conditions. Be a mensch. When you do this, people will follow you.
As we tour the LVT plant, he points proudly to new yellow-and-green plastic chairs and coffee machines in coffee-break corners. Shita also shows us a new advanced robot that will soon replace several production workers, who will be reassigned.
WHAT DOES THE FUTURE HOLD? LVT continues to come up with inventions. Take the one developed by R&D engineer Carlos Feller, who came to Israel as a youth from Argentina. The US Army wanted LVT’s fire extinguishers to be hardened, encased in armor, so they would not explode and wound soldiers if hit by shrapnel or a bullet. Such “armor” adds unacceptable weight and cost.
Carlos found a solution. He adapted the ceramic flak jackets worn by soldiers. This idea, now patented, is light, effective, cheap and is another winning product for LVT. Slipping flak jackets on fire extinguishers is truly out-of-thebox thinking.
During our visit to LVT, we saw an amazing new device that detects fire within 100 milliseconds and douses it with a spray of nitrogen.
Had kidnapped IDF soldier Gilad Shalit’s tank been equipped with it, Shita explains, it could have prevented Hamas from taking him prisoner. In 2006, Hamas terrorists emerged from a Gaza tunnel and attacked Shalit’s tank with an anti-tank missile. The tank’s fire suppression system put out the resulting fire, but sprayed the interior of the tank with toxic Halon gas. Shalit and his crew had to leap out of the tank. As a result, two were killed and Shalit was wounded and captured. One crewman who remained inside was saved. LVT’s new system, in contrast, is not toxic and the tank crew need not evacuate it when the fire suppression system activates.
Recently, cautious kibbutz members debated whether to install a new swimming pool. They consulted with Shita.
Yes, he reassured them, you can definitely afford to put in a swimming pool.
“Their pensions are guaranteed,” he tells me. And then some.
The author is senior research fellow at the S. Neaman Institute, Technion.