Israeli companies (often start ups) are often acquired by European, American and Chinese companies which are in need of innovation. The acquired Israeli companies often already have a value-add product for the purchaser, or even a suite of products, and the expectation is that the acquisition will result in an endless stream of innovation.
Indeed, this is the very essence of the Israeli high-tech scene. Israeli companies often lack the ability to scale properly after innovation due to poor discipline as well as distance from the market place , and the acquiring company has proximity both to market, an install base as well as resources to make it happen.
The success rate of integrating innovative companies is impressive but there are failures, huge failures, and I want to point out the most frequent reason for these failures.
1-Too much “process” is thrown at the Israelis: development, methodologies, business process, new IT systems, all of which divert the focus of the acquired company from continuing to innovate.
2-Senior management on the acquiring side puts the Israeli site at the mercy of HQ -based middle managers and staff members who have no skills in managing innovation, and micromanage the Israelis to death.
3-Upon acquisition, top talent and key developers leave, fearing becoming part of a “big company”
4-Frequent clashes occur as the Israeli site strives to gain favour directly with very top decision makers to ensure that the Israeli site maintains strategic positioning in the company roadmap. This often is very effective, but puts the Israeli site in conflict with everyone except the acquiring CEO.
5-The acquiring company wants the innovation, but lacks the stomach to deal with the results of “fast and dirty”, so characteristic of Israeli high tech, where speed is strategy.
6-Israeli developers tend to tell customers what they need, as opposed to giving customers what they want; this causes huge clashes with the acquiring company’s sales force, who want innovation, but don’t like how innovators interact with their customers.
7 The sales force of the acquiring company is reticent to sell innovative products to their clients, so they choke the products of the acquired company to death, in a slow squeeze, to the dismay of the acquiring CEO and the Israeli site. This is often a mean and brutal power play.