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.