‘To evolve, companies should integrate start-ups into their day-to-day operations’

Does the concept of open innovation form part of a process of collaboration between companies and start-ups? How?

‘For collaboration to become a genuine driver of economic growth, it must evolve from a client-supplier relationship into a mutually beneficial partnership. Start-ups possess the agility, cutting-edge technologies and speed of execution that large companies often lack. Large companies, on the other hand, have the scale, market access, customer data and distribution channels that start-ups desperately need. A series of questions needs to be asked to facilitate a smooth workflow. The company identifies an urgent operational problem or a specific commercial need within a particular business unit. The innovation team searches the global market for a start-up that has already developed a working solution to that problem. Once the pre-defined key performance indicators (KPIs) have been met, the solution is integrated into the wider corporate infrastructure, generating a rapid benefit for both parties.”

The book suggests that companies should not develop everything in-house, but should collaborate with the external innovation ecosystem. 

‘This requires the creation of dedicated channels for external collaboration, such as corporate venture capital funds, start-up accelerators, hackathons and strategic co-development partnerships. Through structured interfaces that lower the barriers to entry for external innovators, organisations can rapidly acquire advanced technologies and new market insights without bearing the full risks and costs of in-house development.”

How does the Israeli model of open innovation work?

‘The Israeli model of open innovation is based on an integrated and collaborative ecosystem in which the boundaries between multinationals, local start-ups, academic institutions and venture capital funds are deliberately very permeable. Rather than replicating closed models of in-house innovation, over 500 major global companies operating in Israel have set up highly specialised innovation hubs or corporate venture capital funds. These structures do not seek to develop everything in-house, but act as active observers and operational partners that are fully integrated into the local technology ecosystem. The model is also based on rapid, low-friction prototyping processes. Companies make their global scale and operational data available, collaborate with local start-ups to carry out pilot projects in real-world contexts and, once the solutions have been validated, roll them out internationally. It is an ecosystem built on speed, which prioritises time-to-market over traditional multi-year internal planning cycles.”

Israel has been described as a hub for innovation and start-ups. Is this down solely to the entrepreneurial mindset and the military operating model, or are there other factors as well?

Although the distinctive Israeli entrepreneurial mindset and the influence of the military organisational model — which fosters leadership, rapid crisis management and advanced technological training — are fundamental pillars, they are not the only decisive factors. In particular, targeted government initiatives launched in the 1990s, such as the Yozma programme, have fostered the emergence of a robust venture capital ecosystem through co-investment mechanisms with foreign investors. Today, the Israel Innovation Authority continues to support innovation by mitigating the risks associated with early-stage research and development through non-repayable grants, thereby creating a particularly resilient public-private infrastructure. As the domestic market is relatively small, Israeli start-ups are compelled to adopt an international outlook from the outset, designing scalable solutions geared towards global markets. This approach is reinforced by world-class universities capable of transforming academic research into commercial applications. Combined with the high concentration of research and development centres run by multinational technology firms such as Intel, Google and Microsoft, the ecosystem benefits from a constant influx of expertise, capital and access to international markets. In short, Israel’s evolution into a ‘Start-up Nation’ has been the result of economic necessity and a deliberate, state-led strategy to transform itself into a technological powerhouse.