Jacob Harpaz is the CEO of cutting tools giant Iscar, and President of its parent company, the IMC Group of Metalworking Companies. He sat down for a chat with Barbara Schulz.
I found myself sitting down to talk to Jacob Harpaz in the cafeteria at Iscar’s head office in Tefen, Israel. Chatting with Harpaz, you would never think you were talking to a man responsible for more than 12,000 employees in 140 subsidiaries and 61 countries. He’s perfectly pleasant and charismatic, with achievements to his name few in Israel can match; yet he isn’t a spotlight-seeker.
Nevertheless, he has shaped his company like no other since joining in 1972, 20 years after its foundation by Stef Wertheimer, who had the foresight and vision to challenge an established industry. Iscar’s humble beginnings in an old shack in Nahariya, Israel, along with intense, hard work and commitment to continued innovation, have led Iscar to become an industry leader today.
Since 1982, Harpaz and Wertheimer’s son, Eitan Wertheimer, have run the company from one of the most rural and remote corners of the country, far from the commercial capital Tel Aviv. Harpaz’s office offers a commanding view of the region’s open spaces. His closest neighbour is a Druze village, and the rolling hills beyond that mark Israel’s border with Lebanon.
While he says he is happy to be the world’s No. 2 cutting tool producer, all Harpaz really wants is to be No. 1. That may take a while, because Sandvik Coromant is enormous. But the “Iscarites” are patient and are generating steady growth.
“The key is to love what you do,” says Harpaz. “Right from the beginning, I was in love with the mechanical part of the cutting tool. When I joined Iscar in 1972 as a student doing research, the company was hardly known.”
After his studies, Harpaz joined the company in the research and development (R&D) department. Had he ever envisioned being in the position that he is in today? Not really, he says, but he has always been ambitious: “I never thought I would work for Iscar for such a long time, nor be in the position that I am today, but I was ambitious and always aiming to achieve more; it was a big challenge to turn a very small company into the large one that we are today.”
When Harpaz joined the company in the early 1970s, 97% of Iscar’s sales were domestic. Today that is a mere 1%. The company has always remained privately held, and never publicly discloses its finances. Today, Iscar is the largest company in the IMC Group, which also has facilities in the US, Korea, Brazil, China, Germany, India, Italy and Japan.
The breakthrough came in 1982-83, when Harpaz became the Marketing Manager of the company. He realised that in order to be internationally successful, you have to think outside the box, travel a lot and work with local companies to actually tap into new markets.
“I realised that in order to gain people’s attention we needed a product that would be a breakthrough, something that people would ask for as an alternative to well-known names in the cutting tool business,” Harpaz recalls. “I think that R&D is driving the company and I can tell you that I am still the head of R&D, giving the guidelines not only for Iscar, but also for the whole IMC Group. You need to have a vision. I believe I have a feeling for what products can be sold in the market.”
You need your own people selling one product line
Harpaz travels a lot. The first time I met the man who became Iscar’s CEO in 1992 was at a seminar in Australia, a small market and quite far away; but he still insists on appearing there in person, and to have subsidiaries instead of distributors in all the different markets.
“You need your own people selling one product line, working for one company and not selling a basket of different products,” he explained. “In the early 1980s I started to open subsidiaries, but then I found it was hard to penetrate the Korean or Japanese markets and decided to work with a local company instead. Every time I started to work with a local company, it became an important part of us, and we ended up discussing an acquisition. It happened with Taegutec, Ingersoll, Tungaloy and many other companies that are part of the IMC Group today.”
In 2006, Warren E Buffett, the multi-billionaire investor, put up $4bn to buy 80% of the IMC Group of Metalworking Companies. In 2013, Buffett’s organisation Berkshire Hathaway completed the purchase of the IMC Group, paying $2bn for the remaining 20% of the Group. Harpaz emphasises that the acquisition never changed Iscar’s unique company culture.
But what is that often-cited unique company culture? Harpaz finds the question difficult to answer, but says that it’s an Iscar culture, not an Israeli culture.
“No matter if I am at Iscar Germany or Japan or any other subsidiary around the world I feel like I’m working here in Tefen; the way people are doing business is the same,” he explains. “We make everything easy, there is no Israeli culture as such, for us it is easy to adopt all types of cultures.”
Harpaz cultivates an open-door culture: “You will never see my door closed, it doesn’t matter how important the meeting is. Everybody can come in.”
He is a hard-working man, working at least 12 hours a day, six days a week. For him, to be successful you have to work hard and be good at what you do; and he expects the same from his managers and employees. And success proves him right. Almost all of Iscar’s managers have worked at the company for decades. They grew up together. They come, and they don’t go.