Solving an Israeli high tech riddle

Zohar Zisapel: When you invent something new you are looking ahead, trying to figure out how people will behave differently in the future.You might think that running one of Israel’s most successful families of high tech companies would provide enough …

Zohar Zisapel: When you invent something new you are looking ahead, trying to figure out how people will behave differently in the future.You might think that running one of Israel’s most successful families of high tech companies would provide enough intellectual stimulation for Zohar Zisapel, the founder and chairman of RAD Data Communications.

But in fact, that’s not the case. Instead of pursuing golf or tennis in his free time, Zisapel’s likes to exercise his brain by solving mind-bending brainteasers.

“I’ve always loved brainteasers – the more difficult the better,” he told ISRAEL21c in his offices in the high tech center of Ramat Hahayal, near Tel Aviv. “I belong to a circle of friends – a community of people like myself, who enjoy difficult riddles and don’t want to know the solutions – they like to figure them out for themselves.”

Several years ago, he turned his hobby into a corporate trademark. RAD’s website features several brainteasers for the general public – and those who successfully solve them can win substantial prizes – the tougher the puzzle, the higher the dollar amount of the prize.

It’s not a conventional corporate pastime – but then, Zisapel is not a conventional corporate CEO. When others are wearing suits and ties, Zisapel can be counted on to wear a T-shirt, leather jacket and jeans.

RAD, today a world leader in network access equipment for data communications and telecommunications, was founded by Zisapel in 1981 and was built in his own creative and restless image. Zisapel and his company are true pioneers in the Israeli high tech world, blazing a trail that many young Israelis have followed.

Early in the company’s history, he understood that instead of making RAD into the largest conglomerate, he preferred continually creating new companies. The result is today, RAD is comprised of a ‘family’ of 15 companies, which had aggregate sales of more than $600 million in 2005. Six of the companies are traded on the NASDAQ stock exchange in New York.

“I never wanted to build a single company into an empire,” he says emphatically. “I know that’s the way most corporations work, that’s how they get more powerful. But that’s just not what interests me. I’m much more interested starting new things.”

To Zisapel, a new company “is like a baby, pure and fresh. When you invent something new you are looking ahead, trying to figure out how people will behave differently in the future. That’s what is exciting.”

The model of continually looking ahead and starting something new, he believes, “is very right for Israel and Israelis. This is a country where the good people don’t want to be head of a division. They want their own baby.”

His original company – RAD Data Communications, which is still privately held – creates solutions that serve the data and voice access requirements of service providers, incumbent and new carriers, and enterprise networks. RAD’s clients include more than 150 carriers and operators around the world, supported by 23 offices and more than 200 distributors in 105 countries.

To their long list of customers, RAD has most recently been able to add the Pope. Earlier this year, the Telephone Service of the Vatican State announced that it had chosen to deploy its services using several of RAD’s Ethernet access solutions.

It will now use RAD’s ETX-102 and ETX-202 Ethernet media converters, its Egate-20 channelized Ethernet gateway, and its RICi-E1 intelligent converter to transport Ethernet services over the Holy See’s fiber-optic telecommunications network.

The products chosen allow the operator to separate traffic from different sources, extending the service provider’s reach over its fiber network.

“The devices have more than satisfied our requirements,” reported an official of the Telephone Service of the Vatican, in a press release. “They have demonstrated a high degree of reliability, and the configuration parameters indicate maximum flexibility and functionality.”

Zisapel’s quarters are a far cry from the opulence of the Vatican. His office is elegant but simple, with few fancy trappings. The most striking luxury is a distinctive painting behind his desk of a bulbous-nosed cowboy by Lucien Freud. On a table by the window is evidence that he is a proud father – several stacks of books by his daughter, the author Klil Zisapel (his other child, a son, is studying medicine).

Zisapel’s own career didn’t follow a planned trajectory. He always knew he was interested in electronics and had a knack for entrepreneurship, but didn’t know how far or in what direction it would take him.

Zisapel has been creating businesses since he was a teenager. He chuckles recalling his first venture “I developed a hi-fi box, a stereo receiver, back in the late 60s.” His invention didn’t come to much as a business idea, “but at least I got a nice stereo out of it.”

As a pre-army student at the Technion – where he earned BA and Master’s degrees in electronic engineering, Zisapel started to find a business direction, along with his brother Yehuda, with whom he founded RAD and has worked closely over the years.

Together with Effi Wachtel, a fellow Technion student who now serves as RAD’s President and CEO, they “ran a business providing lighting for discotheques, and at one point we were the biggest manufacturers of strobe lights in the country.”

That proved not only profitable, but useful in a variety of ways; “I could bring my girlfriend to any club I wanted to.”

He then began extended service in the Israel Defense Forces, which took full advantage of his technical talents. By age 32, he had risen to the position of head of the Electronic Research Department of the Ministry of Defense, before heading off for civilian life. “I never pictured staying the army forever. I knew I wasn’t a professional soldier.”

Following the army, he joined forces once more with his brother Yehuda who was then distributing data communication products, and RAD was born. At that time, a globally significant export-oriented Israeli high tech industry was considered a wild fantasy.

“In the beginning of the 1980′s, nobody believed an Israeli company could sell a product that was anything less than a half-million dollar item, and that item was usually defense-oriented,” Zisapel recalls. “I didn’t see why that had to be so. I thought differently. Thank goodness I was young. You do a lot of stupid things when you are young but you are willing to take chances and go against the stream.”

He pauses. “Actually, I still like to swim against the stream.”

RAD was part of a wave that represented the transition of Israeli technology industry from strictly defense to commercial enterprises. But it was still a relatively small number of relatively large companies.

“Back then, there were no start-ups, no venture capital, no money available for such adventures. We were all bootstrapping, spending our own money,” Zisapel says. “Still, looking back, I have to say it was relatively easy. We sold our products, became profitable, and grew rapidly. RAD had new ideas and we were among the first to really target a worldwide market.”

How did he break into new markets that Israeli companies had not yet penetrated?

The trick, he said – was simply to try.

“We went after every country in the world. We were strong in Europe and then I went country by country, looking for new markets and it worked very quickly. I learned a simple lesson – if you really try – you succeed. People want to see you try. I may not understand China or Japan, but I try to understand and when my counterparts there feel that I am making the effort, they will help. And with help, you can succeed.”

For many years, conventional wisdom was that Israelis knew how to invent exciting new products but didn’t know how to sell and market abroad. Zisapel overcame this obstacle by hiring Israelis who had immigrated from North and South America, Europe, or Africa to sell and market to their native countries.

Today, he says, Israelis have learned how to sell. “Sales skills have improved tremendously, and I would argue Israelis can be better at sales than Americans. Israelis are better at listening to the customer and not getting stuck in how things are done here – a trap that Americans can fall into. We know we are not America, we are part of “the rest of the world.” Israelis understand what it is to come from a small country, and that can help when you are dealing with another small country.”

His model of growing new companies instead of building a single large entity developed early on. Currently, he founds a new company on an average of every year. The company must “fill a need that is not being served – a new market, a new technology that doesn’t fit within our existing companies.”

RAD was one of the nation’s major business success stories of the 1990s. In 1994, Zisapel won both the Israel Export Award and the Entrepreneur of the Year Award – in 1996, he received the Hugo Raminceanu Award for Economics, and in 1998, was nominated by the Technion as a Distinguished Fellow in Electronic Engineering, and in 1999, an Israeli Industry Life Award. From 1998-2000, he served as Chairman of the Israel Association of Electronic Industries. In 2001, his alma mater, the Technion, awarded him an honorary doctorate.

Then came the end of the high tech bubble in 2001. Its burst “was an experience.” But from the beginning, Zisapel was prepared. “Frankly, I expected it to happen earlier. I never believed in the bubble world. I understood we were living in a movie.”

Looking back, he says, Israel survived the slump well. “Relatively speaking, Israel came out of the bubble burst in a strong position. If you look at Israel in relation to the rest of the high tech world, our relative size is bigger post-bubble than it was before. Silicon Valley took a harder hit than we did. They were more into hype and more into the Internet. On a relative scale, we suffered less.”

The strong companies survived, and “now we are growing steadily. It’s not a bubble this time. It’s healthy growth.”

He considers Israel the third most significant concentration of high tech companies in the world, after Silicon Valley and Boston. Looking ahead, he sees many opportunities for future growth, especially in wireless. This year, he is starting not one, but two new companies.

And still – there is always time for a brain teaser. He enjoys how answers to the teasers on the RAD web site come from all over the world.

Recently, an extremely difficult riddle was posted. Its source was Zisapel’s friend, Prof. Abraham Neiman of Hebrew University, a former student and colleague of Nobel Prize Winner Prof. Robert Aumann.

It was a mathematical puzzle with a number of levels of solution – solving the most difficult level carried a $5,000 prize.

Three people solved the highest level – and Neiman decided he wanted to contact the winners to offer them the chance to study for a doctorate at Hebrew University. One worked in high tech in Israel and wasn’t interested.

“Another one – and this is fascinating, turned out to be a haredi man who had never studied mathematics in his life,” said Zisapel.

The third was a Russian studying for a BA in mathematics. “He’s half Jewish – and we’re trying to bring him to Israel to continue his studies.”

Zisapel has a number of charitable causes, including a project close to his heart, which donates computers and Internet connections to institutions that serve as foster homes for children whose parents are abusive or incapable of caring for them. RAD also offers 60-70 university scholarships a year “not necessarily to the most brilliant students, but to the ones who are overcoming the greatest obstacles.”