Most organizations would be happy to last for centuries, as the Venetian Republic did. From 697 to 1797 AD, Venice’s technological acumen, geographic position, and unconventionality were interlocking advantages that allowed the Most Serene Republic to flourish. But when change comes suddenly, it can turn strengths into weaknesses and sweep away even thousand-year success stories.
Venice’s military technology and the city’s pivotal location on the main trade routes of the time gave Venice several strong, mutually reinforcing advantages.
The Arsenal, an advanced naval munitions factory that anticipated by several centuries the production-line method of manufacture, was the beating heart of the Venetian naval industry. From the thirteenth century on, the Arsenal nurtured creativity and spurred innovation and entrepreneurship in the construction of its galleys.
The city’s geographic location helped it to defend itself from both land- and sea-based invaders. This location, consisting of a series of islands in a marshy lagoon, also pushed it to develop a (then unusual) trading and moneylending economy, since there was little land to support agriculture. And its position at the top of the Adriatic Sea allowed it to become a vital trading hub, connecting the East with the West via the Mediterranean.
If, as Michael Porter wrote, competitive advantage stems from how “activities fit and reinforce one another….creating a chain that is as strong as its strongest link,” then strategic fit is something that the Venetian Republic had in spades.
But, like a lot of successful entities, Venice reached a point where it focused more on exploitation than exploration: Venetian traders followed existing paths to success.
Tag Archives: Innovation
Innovation is one of the driving forces in our world. The constant creation of new ideas and their transformation into technologies and products forms a powerful cornerstone for 21st century society. Indeed, many universities and institutes, along with regions such as Silicon Valley, cultivate this process.
And yet the process of innovation is something of a mystery. A wide range of researchers have studied it, ranging from economists and anthropologists to evolutionary biologists and engineers. Their goal is to understand how innovation happens and the factors that drive it so that they can optimize conditions for future innovation.
This approach has had limited success, however. The rate at which innovations appear and disappear has been carefully measured. It follows a set of well-characterized patterns that scientists observe in many different circumstances. And yet, nobody has been able to explain how this pattern arises or why it governs innovation.
A recent wave of high-profile cyber-attacks — with objectives ranging from disrupting critical infrastructure to influencing the US presidential election — has heightened attention around the need for stronger security and governance measures in the public domain. Technological advances have also facilitated a significant uplift in industrial espionage, which could grow further in an era of state-sponsored use of cyber technology. Meanwhile, the future weaponization of AI and robotics by rogue states or terrorists and the scope for hacking global satellite systems are also firmly on the radar of security specialists.
As businesses embrace innovation, they also take on new risks. Not only are companies buying and employing technology that creates new exposure, their IT systems are becoming increasingly connected to those of other companies in their value chain, such as suppliers, customers and utilities. Additionally, more IoT devices are being deployed to improve productivity or increase safety. This expanding interconnectedness, often facilitated by devices with limited security, creates additional points of vulnerability to cyber-attack and makes assessing the risk permutations that much more difficult.
Other innovations in the technology landscape, such as the migration of data and software to the Cloud and the use of AI and robotics in commercial applications, are also shifting the nature of cyber risk. At the same time, companies implementing innovations may be assuming, through legacy contracts, new liabilities where legal precedent is embryonic at best, along with vulnerabilities they will find challenging to mitigate or transfer into insurance markets.
Cross-border data flows are being slowed by a rise in government intervention. Some measures are aimed at consumer protection. For example, the European Union’s General Data Protection Regulation (GPDR) is driven primarily by privacy concerns on personal data. Other initiatives are aimed at state protection, driven by heightened security concerns. These measures enforce a range of protectionist policies, including prohibitive technical standards, censorship, surveillance and data localization. China, for instance, has joined Russia in tightening the requirements placed on foreign companies to store information within national borders. Increasing regulation is complicating the space for business to work in and aggravating “splinternet” tendencies.
These trends may present significant challenges for businesses. Compliance with new regulation could be costly, and failure to comply could result in significant sanctions. Restricted access to digital supply chains and markets will create complexities for firms with global operating models. In an era of heightened nationalism, this direction could threaten open global competition.