4•; t ir-
black in 1997 after years of loss- puter-based diagnostic test equip-
oq. receives 100 percent funding ment for commercial carriers and
combat evaluation systems
for the devoloPment of approved air
for the military market.
projects.
Today, Nissenson proudly
Most experts say the answer
is privatization, a solution which sports such t,op-notch customers
has sparked much debate over as British Airways, United Air-
how and when to sell off and con- lines, U.S. Air, Olympic, China
solidate the Israeli defense in- United and Royal Netherlands
Air Force.
dusty.
Nissenson, whose background
"What you should do with IAI,
TAAS and Rafael is cut them into is in pharmaceuticals, not the
little pieces and join them togeth- military, attributes Rada's suc-
er," says Ze'ev Bonen, a former cess to the company's offensive
Rafael executive and now a re- approach to doing business. Un-
searcher at Bar-Ilan University's like most military-equipment
Begin-Sadat Center for Strategic manufacturers, which respond to
Studies. "First privatize them and a customer's request rather than
then let them fight it out." develop and bring unsolicited
But public or private, prevail- goods to the market, Rada, a non-
ing market differences also pm- governmental, publicly-traded
vent defense companies from company, had to take a more ag-
succeeding in the civilian sector. gressive approach in order to stay
Unlike defense-related enter- afloat.
IAI is another example of a
prises, commercial high-tech
companies must pursue their company which has understood
markets. To stay afloat, they the need for a division of powers.
must stay ahead by providing the When it began to ache in the
latest and fastest technology at late '80s, it made several un-
cheaper prices than competitors. successful attempts to assemble
The defense industries, how- civilian products on military as-
ever, are large and unwieldy. sembly lines. In 1993, the corn-
They cannot react quickly to pany registered a $400 million
changing consumer demands and loss. Company management then
also lack a physical presence in realized that the only way to con-
many of their markets. quer new markets was to isolate
The civilian market has a civilian divisions and put them
much wider playing field which under different leadership. To-
is open to a constantly growing day, two of lAl's four divisions
number of competitors. The de- concentrate on commercial pro-
fense industry, however, is an old jests.
"We separated the civilian and
boys network dominated by a
handful of companies which sell the military departments as well
as the marketing divisions that
to a few customers.
"Usually one finds more inno- sell each of these types of prod-
vation in small start-ups simply ucts," said David Harari, IAI's
because it's the only way they can managing director of products
exist and this is really their rai- and business development,
son d'etre," says Mr. Galil. "In adding that in five years he hopes
larger organizations, the most ef- that half of IAI's activities will be
fective innovation is in areas that in the civilian market, compared
require very large investments to 35 percent today and 22 per-
cent five years ago.
or in special R&D labs."
Although IAI is still struggling
Even when technologies are re-
lated, civilian and defense corn- to enter the black— company ex-
panies cannot approach their ecutives forecast that profits in
marketplaces in the same way. 1997 will total $22 million—the
"If a defense company wants to company is undoubtedly on the
start developing commercial right road.
On May 16, 1996, IAI
goods, it has to set up a different
organization. They cannot live launched the Amos satellite,
within the same 'company," says making Israel one of only nine
countries worldwide to use its
Mr. Galli.
Not all defense companies military space technology to de-
have failed to make the transi- velop, produce and launch a corn-
tion, however. munication satellite. With good
One company that has sue- reason, IAI's President Moshe
ceeded, for instance, is Rada Elec- Keret said after the launch that
tronic Industries, Ltd., a it was one of the company's great-
manufacturer of avionics data est achievements.
The question is whether other
testing and ground support
equipment, which managed to defense companies can also learn
penetrate the civilian market cif- from the mistakes of the past.
ter a technological turnaround. Troubled times still lie ahead for
With few new orders on the the defense sector and no one can
horizon, Rada realized it was in afford to make mistakes. The pe-
trouble in 1990. It faced a diffi- riod of trial and error is over. To-
cult choice — close down or im- day it isn't bombs and aircraft
provise. Haim Nissenson, Rada's that will win the financial war,
CEO, decided the only solution it's Internet connections and
was to go into the civilian arena. satellite TV. ❑
He set a team of engineers to de- (c) Jerusalem Post 1997
velop two new products, com-
Erhard
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