‘Success fees’ may not lead to success for Israeli firms

The effort to market and sell world-class Israeli products is grossly inferior to the level of effort that went into creating them.

financial graph 311 (photo credit: stock photo)
financial graph 311
(photo credit: stock photo)
Imagine a farmer who does not plow his field. Does not fertilize it. Does not irrigate it. Does not even plant seeds in it. Yet at the end of the growing season, the same farmer has every expectation of reaping a harvest he did not sew.
Or consider the hunter who lays no traps. Who uses no bait. Who employs no weapons or tools for capturing prey. Yet despite his lack of effort, this hunter fully expects to mount the heads of many a beast as trophies on his wall.
Sound preposterous? Welcome to the prevailing philosophy that guides business development efforts at many Israeli companies.
We often hear in glowing terms that Israel is a fountain of world-class products in agriculture, biotechnology, computers, aviation, telecommunications and many other fields. What we don’t hear about is that the effort to market and sell these world-class products is grossly inferior to the level of effort that went into creating them.
Israeli companies often pour everything they have into breakthrough innovations but then leave little or nothing for marketing and sales. Like the farmer who does not farm or the hunter who does not hunt.
Recently in Israel’s press, Eitan Wertheimer of Iscar Metalworking shed some light on this phenomenon, observing that Israel’s management culture lacks an emphasis on international sales, which prevents startup companies from becoming large multinationals. He further pointed out that Iscar itself did not become a big international firm until it changed its priorities “from investing in production to investing in marketing.”
In pondering why so many Israeli companies refrain from making a meaningful investment in marketing and sales, it’s helpful to consider Israel’s reputation with regards to hasbara. The importance of hasbara to national security has now been well established, but for a long time its importance to Israel wasn’t taken seriously.
Marketing and sales are just as critical to a company’s economic security, but as Wertheimer points out, Israeli corporate executives don’t take it seriously, and I humbly suggest that, like hasbara, they need to.
As a business-development consultant specializing in helping companies from Israel establish or expand their operations in the US, I am astounded at the number of Israeli companies I talk to that don’t have proper marketing and sales programs in place to generate a level of business commensurate with their ambitions.
Marketing and sales cannot be an afterthought to a company’s innovation. If the innovation itself solves a problem, then marketing is critical for targeting qualified prospects to explain which problem it solves and how.
Selling is a continuation of that process, explaining to individual customers how their specific problem can be solved by deploying the company’s solution.
If the marketing and selling functions are not endowed with a level of resources corresponding to sales expectations, then companies shouldn’t be surprised when lofty revenue goals fail to materialize.
Besides, what’s the point of pouring so many resources into creating an innovation if there is nothing left over to drive its adoption? Unfortunately, many Israeli companies have a woefully similar strategy for addressing this dilemma – signing up third-party agents to market and sell their products or services on a “success fee” basis (“100% commission structure” in the US). In other words, after failing to allocate budget to properly market and sell their solutions themselves, many Israeli companies seek to outsource that burden to an outside party, who is then expected to do the marketing and selling on their behalf.
In addition, regardless of how lengthy the sales cycle is, the outside party only gets paid if they succeed! Many Israeli companies I’ve spoken with who choose this path have not completely thought through the ramifications of employing a success-fee strategy. The common misconception seems to be that this is a safe “hands off” approach that leaves the reseller with most of the risk and themselves with most of the gain. Further analysis, however, will reveal that in fact this is not the case.
Let’s look at it from the reseller’s point of view. Why should a reseller take on the burden of doing all the marketing and selling for the Israeli company? What if there are other suppliers in the same market who are also looking for resellers but bring much more value to the table? For example, assume a foreign company that sells widgets is looking for resellers to represent them in the US, and it will support them by doing the following:
• Analyze target markets in the US, segment them and share this market intelligence with their resellers.
• Conduct a comparative analysis of their primary competitors and highlight their own competitive advantages so resellers will be better positioned vis-à-vis their competition.
• Produce an ongoing, sustained demand-generation effort that funnels qualified leads to their resellers.
• Provide co-marketing funds to help finance events and other marketing campaigns their resellers engage in.
• Assign a dedicated USbased business-development specialist to provide firstlevel marketing support, sales training and assistance with all marketing initiatives.
A rational reseller looking at this from a strictly business perspective will logically conclude that the foreign widgets manufacturer will be much more supportive of his efforts than the Israeli company that offers nothing more than a success fee. In this environment, guess who gets the best resellers – and more importantly the greater market share? It should now be apparent that the success-fee strategy is not risk-free, but in fact fraught with its own peril.
Israeli companies who seek to compete in and grow their share of the US market must commit to a greater investment in their marketing and sales efforts.
In fact, some percentage of that famous Israeli brainpower that generates so much product innovation should be reapplied toward producing innovations in marketing and sales. That would be a real strategy for success.
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Guy Nadivi is CEO of SolutionBridge, a US-based consulting firm specializing in helping Israeli companies establish or expand their operations in the United States.