When an Israeli company nears the sales stage, the debate whether it is time to hire an American CEO almost always begins. A man who knows the target market, has more experience in sales (very few Israeli managers of life sciences companies have reached this stage), and who can open doors. A well-known American CEO signals comfort and reliability to US customers and investors.
However, alongside the advantages, there can be disadvantages when an Israeli CEO, whom the team has learned to trust, leaves in favor of a stranger parachuted in from another culture. Differences can develop between the Israeli and foreign activity, and the new CEO might not understand how Israeli companies work. Another problem is the difficulty of Israeli companies in hiring US CEOs with stature.
A classic example of the hopes pinned on a foreign CEO and how they are broken can be seen in the hiring and firing of Dr. Jeremy Levin as the CEO of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). He arrived at the company as its great hope, and for two years he planned a strategy, but did not earn the chance to implement it.
Despite the difficulties, three strong executives have recently come to Israel to run life sciences companies: Christopher Rowland at Medigus Ltd. (TASE:MDGS), which has developed an endoscope for the treatment of gastroesophageal reflux disease (GERD); Lawrence Cohen at Exalenz Bioscience Ltd. (TASE:EXEN), a developer of diagnostic tools for diseases of the digestive system; and Rick Randall at MCS Medical Compression Systems (DBN) Ltd. (TASE:MDCL), which has developed a non-invasive non-pharmaceutical therapy to prevent blood clots in limbs. None of the three men had prior relations with Israel, and only one of them is Jewish. "Globes" spoke with them about their experience in their new world.
"Globes": How did you come to work for an Israeli company?
Rowland: "I'm not Jewish. My connection with Israel began when I worked at Boston Scientific, which had marketing activity and collaborations in Israel. I even had an apartment in Herzliya, although I did not move my family here. I met Dr. Gabi Meron, then the CEO of Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN), and he persuaded me to become the CEO of Given Imaging America. There, I also met OrbiMed Advisors LLC, which brought me in to manage Medigus, after it invested $8 million in the company. I have also known Dr. Elazar Sonnenschein, who previously managed Medigus, and will now serve as the CTO, for many years, and I greatly admire the company's technology. I first joined the board of directors, and from there became the CEO."
Cohen: "I'm actually Jewish, but I had no plans to work for an Israeli company. I was approached by headhunters. I hadn’t previously heard of the recruiter or the company, but I had heard in general about Israeli life sciences companies, and I was always favorably impressed. I was told about Exalenz's technology, it seemed very interesting, and the first meeting was excellent. They seemed to be very direct and honest, and I like that. My job at Exalenz - building sales - I've done several times before, but not every company is prepared to invest the necessary budget, but Exalenz was."
Randall is neither Jewish nor was he seeking an Israeli adventure: "When I was first offered to come to the company and I looked at its website, my tendency was not to come. I told myself, 'This is old technology that doesn’t excite me.' But I know Charlie Harrison (an advisor to MCS until recently - G.W.), and he explained to me why the project was unique and its cost-benefit ratio for hospitals. If a company today offers a product that does not save hospitals' money, I don’t believe in it. Harrison decided my decision to come to the company, because when a company isn't American, you're immediately skeptical about it, and the questions arise: Do you know what's happening there? Can you assume that conduct there is like what you are used to? When I knew that Charlie was inside, I knew that I could know what was happening at the company, for better or worse.
"I'm well networked in the US, and over the years, I've never had a problem finding a small company to run, bring to handsome sales, and then do it again at a new company. But in 2011, there were only 43 hirings by new medical devices companies, compared with 120 in 2008. Venture capital was flowing to the medical devices industry, and, unusually, I wasn’t flooded with offers. To find a good company, I had to widen my search."
What did you think about the Israeli life sciences industry before your arrival?
Randall: "I didn’t know much about the Israeli life sciences before I met the company, but one stereotype immediately popped into my head: 10-15 years ago, Israeli managers would come to meetings, and were so proud of their technology that they talked about it without restraint and couldn’t take a grain of criticism. They did not know the competition or the market's limits. I would look at the product and immediately say that it could not be sold like that in the US, but they didn’t listen. Some of them dived completely, others launched, were burned, changed the product, and with real enthusiasm returned to the market and some of them ultimately succeeded. But their alienation from the market was huge, and their openness to hearing about that was zero."
Cohen: "Israelis are optimistic and aggressive. Their optimism can be seen by some people as false pretense, but that's not the case. They're simply excited. I can straighten them a bit, thanks to my experience. They listen, even though they will always ask how I reached the decision. The word of the CEO here is not taken for granted."
Rowland had a positive stereotype about Israelis: "I always appreciated Israelis' search for solutions to difficult problems. However, I knew that Israeli companies do not thoroughly know the world of marketing, or even the basic rules. They think that a good product will bring them to market, or that 'marketing' a medical device means only lectures to doctors."
Has what you've seen at the companies conformed to the stereotype?
Rowland: "I was warned that Israelis were direct, and I discovered that I really like this directness. It doesn’t frighten me."
Randall: "The enthusiasm remains exactly the same, and it's wonderful. There isn't even one employee at the company who isn't enthusiastic about what he's doing. But today, Israelis are much more modest and open to feedback than they used to be. Today, Israeli start-ups involved doctors from all over the world, including the US, in the development stage. In this way, they are sometimes the first to launch, not the third. There's still a very good atmosphere for risk-taking in Israel, which is why Israeli is a great place to be for the first years of a company. For commercialization - you have to be in the US. Every American swims in the world's largest medical devices market from birth. Israel has innovation, but you're not a big market, or a market that well represents what is happening outside it."
How do you bridge the cultural gaps between Israel and the US, development versus marketing, experience versus inexperience?
Randall: "The Israelis say that I was as excited as they were about the company, and that helped. On my first trip here, I met all the people whom I will directly manage, and they immediately talked openly with me. There is always fear about a new CEO, regardless of culture. Especially after 16 years with Adi (Dagan, MCS's previous CEO - G.W.), who was a very strong and effective manager. I am also a leader. I'm not Adi, but I am me."
Randall says that he plans to visit Israel every few weeks, and that MCS's Israeli COO will spend 30% of his time in the US. Meetings are held by videoconferencing so people can get to know each other face to face. "I tell the American workers that the commitment of everyone in Israel is very high. They don’t tell you to do something for no reason. The Americans sometimes feel that the Israelis don’t understand. But that also happens between California and Boston."
Rowland: "We promised to keep all R&D activity here. That will not change. In the US, we'll seek teams who understand the doctor, the patient, and how surgery works in the real world. Their training in the technology will probably be carried out in Israel."
Cohen: "Although I continue to live in the US, we speak on the phone with Israel every day, and we're very active on email."
Have there been breakdowns at the company because of poor inter-cultural communications?
Cohen: "I had a case in which an Israeli asked a question that interested him, something like, 'Are you sure that you can do this? Why, who are you?' The American was very insulted, took it personally, even though that is not what the Israeli meant."
Randall: "In one case, we were facing some kind of process with the US Food and Drug Administration (FDA). One of the Israeli employees sent us an email with a word that implied that she was not convinced that the process was done correctly. This was one misleading word, but she caused us a heart attack in the US. In the end it turned out that the process was managed correctly, and only the wording was wrong. If that had reached the FDA, it would have been a disaster. After that, I decided that every email should be vetted by an English-speaker, and I know that instead of being pressured, you should simply ask what was meant. Even if you tell me that the food is a 'little' spicy, I know that it's better to ask exactly what you mean."
Published by Globes [online], Israel business news - www.globes-online.com - on December 4, 2013
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