Israel's hi-tech scene perceived as stagnant, study finds

Despite the BDS movement never being as effective as people thought, most Israeli firms worry about mentioning they're from Israel.

Vibe Israel (photo credit: OR KAPLAN)
Vibe Israel
(photo credit: OR KAPLAN)
Despite its reputation as the Start-Up Nation internally, Israel’s hi-tech sector is beginning to be seen as stagnant on the world stage, according to a new study commissioned by Vibe Israel.
Since the book Start-up Nation: The Story of Israel’s Economic Miracle by Dan Senor and Saul Singer was published in 2009, Israel has enjoyed a positive reputation for its thriving tech sector, including many noteworthy start-ups and innovations. This served to become a major part of the country’s global brand, and prompted major interest from foreign firms such as Intel and Facebook to expand into the country.
However, it would seem this strategy worked too well, and eleven years later, the Start-Up Nation label is no longer exclusive to the Jewish state. And within four years, Israel could be seen as just an average hi-tech player on the world stage.
“Ten years ago, when the world was coming out of the 2008 economic crisis, the ‘Start-Up Nation’ concept really resonated since Israel was one of the few countries that managed to weather the storm of the crisis almost unscathed,” Vibe Israel Founder and CEO Joanna Landau said in a statement.
“But it worked so well that by 2020, ‘Start-Up Nation’ has become a term used by many other countries promoting themselves as hubs of innovation and entrepreneurship. Just like a company would not maintain a slogan that no longer differentiates it from its competitors, Israel too needs a new business narrative. With crisis comes opportunity, and we believe that now is the time to develop a new marketing message and strategic work plan for the years ahead.”
Indeed, studies showed that the term “start-up nation” when searched online usually relates to other countries who use the term to boost their own hi-tech profile. This, Landau explained, is due to the same book that helped popularize Israel’s own success story.
“It essentially acted as a guidebook for other countries to make their own successful start-up nation,” she explained, adding that the timing of the book’s release, around Veteran’s Day, was no accident, as many soldiers were coming home from Iraq or Afghanistan.
In other countries, they would give these important hi-tech jobs to graduates from major universities like Harvard, Landau said. Israel, however, would often employ soldiers directly after completion of their IDF service. “The lesson this book taught other countries is not to overlook these soldiers, because they might have the exact qualities you’re looking for.”
But while other countries have adopted the Start-Up Nation marketing brand, Israel’s brand is now becoming stale, even if its hi-tech sector is as thriving as ever. The problem, Landau explained, is that Israel has become a white label, and is missing out on the “Country of Origin” effect enjoyed by countries such as Germany or Japan.
“We’re making all these things for foreign firms like Facebook, Intel, eBay, but we aren’t insisting we take credit,” she said, adding that this applies to other Israeli firms as well.
“Look at the top ten Israeli unicorns, their websites don’t mention Israel at all,” she said. While some do this because they might be trying to conduct business in countries without formal ties to the Jewish state, this is not the reason in most cases. Rather, it is solely due to a misconception that being from Israel could dissuade companies from doing business with them, in part due to a perception of the dangers posed by the Boycott, Divestment and Sanctions (BDS) movement. However, this reason is unfounded, Landau explained, adding that the BDS movement is far less effective than is believed.
“There is this assumption that BDS has more impact than it actually does. It was never actually that successful,” she said. “In our study, only 7% of businesspeople said they wouldn’t do business with Israel. This is no reason to abandon the country of origin effect. When you buy, for example, a car from Germany or Sweden, you know the reputation the car has for safety, fuel efficiency, etc. But what do you know when buying an Israeli product? Nothing, because we don’t tell people we’re making them.”
It is for this reason that Vibe is trying to work with the government, Israeli businesses and investors to help change the country’s marketing particularly as it’s being used more successfully by other nations. In the wake of the ongoing financial crisis caused by the coronavirus pandemic, now it’s more important than ever before, especially since the country gained considerable good will amid the first wave that hadn’t disappeared when the second wave hit.
“Businesspeople still thought we handled the crisis well. For every one regular person who said the opposite, five businessmen thought otherwise,” Landau explained.
But what does work in Israel’s favor is the recent normalizing of ties between Israel and Arab nations, such as the UAE. While some have pointed out that many Arabs in, for example, the UAE and Saudi Arabia were attracted to the technological and entrepreneurial potential of normalized ties, Landau believes there is more nuance to this.
“When we look at places like the UAE and Saudi Arabia, they can have enough money to buy any technology in the world,” she explained. Rather, “They’re drawn to Israel as a place and the Israeli people as a people. There’s a sort of underlying brotherhood many people are ignoring. They Saudis and Emiratis are inspired by us and the mindset of getting things done. It’s very appealing, and that’s why they want to come.”
This, Landau said, “is the missing piece. It’s a huge opportunity, but we can’t use the same messaging we used in the past. We need a fresh, new perspective with new formal allies. It’s up to the Israeli people and government to reevaluate the country’s marketing. No country should keep using the same slogan after ten years in the middle of a major crisis.”