The Economist/Which MBA? “Pirate Copy”, November 7, 2010
www.aminarts.com domain name is registered in Scottsdale, Arizona. The website is in the Somali language. The cartoon characterizes the Somali Pirate Business Model which is becoming the envy of the business world.
PURVEYORS of management-speak are fond of quoting cod insights from military strategists. According to David James, a professor at Henley Business School, they would do better studying the management styles of some of those the armed forces are fighting, such as Somali pirates. Alongside Paul Kearney, a lieutenant-colonel in the Royal Marines, Professor James has been studying the operations of the pirates, as well as insurgents in Afghanistan and Iraq, to see if they have anything to teach legitimate firms.
The threat to life and liberty aside, Somali pirates’ business model is impressive. According to the professor, each raid costs the pirates around $30,000. On average one raid in three is successful. The reward for a triumphant venture, however, can be in the millions.
The organisation behind the pirates would be familiar to many ordinary businesses. For a start, they have a similar backend—including the kind of streamlined logistics and operations controls that would be the envy of most companies. Their success has even prompted one village to open a pirate “stock exchange”, where locals can buy shares in up to 70 maritime companies planning raids.
But Professor James believes that the most important lesson firms can learn is one of strategy. He teaches his MBA class that one reason for the pirates’ success is that they avoid “symmetrical” conflict—challenging their targets head on by, for example, lining up against the Western navies patrolling the waters—battles they would surely lose. Instead, they use stealth and surprise, attacking targets at their weakest point. In this way, with only a dozen-or-so sailors, they wrest control of huge assets, in the form of oil tankers.
This is a lesson that serves smaller companies well as they look to take bites out of larger rivals. It might be foolish, for example, for a start-up to take on one of the traditional banks head-to-head—only another large bank could afford the pyrrhic battle that would ensue from it protecting its market. But by picking a small, localised fight a start-up can make an impression before a bank has had time to react. An example, says Professor James, is wonga.com. It has taken market share by attacking banks’ inflexible lending policies by offering loans for the exact amount and length of time the customer wants. It processes the loans extremely quickly and customers can even get immediate approval using an iPhone app.
Sometimes such an asymmetrical strike can shift the centre of gravity in an industry. Nintendo, a computer-games firm, was competing, and failing, against two much better-resourced rivals—Sony and Microsoft—in a sector where it seemed the only way to be successful was to win an arms race of processing power and ever more sophisticated technology. Nintendo opened a new avenue of attack based on the idea that consumers would enjoy getting physically involved in video games, using a motion-sensitive controller to control the on-screen action. So, using relatively cheap technology, it invented the Wii, in the process opening up a whole new market for previous non-gamers.
That smaller, nimble competitors make stealth attacks on larger rivals is a well-known phenomenon. Nonetheless, the way that larger companies can defend themselves against attack is a matter of much debate. Professor James says that the key is to quicken decision making. In his analogy, by the time the captain of an oil tanker has spotted the pirates’ inflatables it is too late; big ships take a long time to turn around. Similarly, once a large business has gone through the traditional process of observing an attack, orientating itself, deciding what to do about it and then acting (what Colonel John Boyd, an American military strategist, called an OODA loop) it is too late, the competition is upon it.
To help companies understand the best way to speed up their reaction times, the professor turned to another unpalatable source: insurgents in Afghanistan. Despite stressing that he believes the outcomes of their strategies to be repugnant, he nonetheless says that he admires the management structures that makes them successful.
One of the main lessons he learned, and which he teaches companies on his executive-education programme, Corporate Insurgency, is that insurgent leaders don’t micro-manage. Leaders of such movements are, in Professor James’s words, “brand agnostic”—they allow their brand to be adopted by autonomous local cells with little central control. The mistake big business makes is to try to protect the brand by making decisions from its headquarters; better, he says, to allow local managers to respond quickly to local events.
He even goes as far as to suggest that companies set up “commando” forces; small units which work outside the traditional command structure of the company and which have a level of autonomy—“not holding the long committee meetings, not having the extended approval and budgeting process”. If a big business as a whole cannot act as a small, nimble player, these business units can.
Perhaps lessons for the U.S. Government can be taken from the Somali Pirate Model in regard to resurrecting the long dorman Letters of Marque and Reprisal to allow maritime shipping companies to arm their vessels and crew with small arms and light weapons to wage a private war on the pirates on the high seas and the the coastal towns of Somali. From www.TaylorMarsh.com April 10, 2009 is this article titled, Wanted: Private Pirates about the pirate attack on the M/V Mearsk Alabama. From that article is copied the insert of Competitive Enterprise Institute’s press release titled, CEI OFFERS POTENTIAL SOLUTION TO PIRATE PROBLEM: Congress Should Consider Empowering Private Action Against Thugs of the High Seas.
CEI Offers Potential Solution to Pirate Problem
April 09, 2009
CEI OFFERS POTENTIAL SOLUTION TO PIRATE PROBLEM
Congress Should Consider Empowering Private Action Against Thugs of the High Seas
Washington, D.C., April 9, 2009— News that Somali pirates had seized an American ship and, after being repelled, held her captain hostage drew a response from analysts at the Competitive Enterprise Institute: the United States should consider authorizing private parties to attack pirate ships under little used instruments called “letters of marque and reprisal.”
The letters, specifically authorized in the Article 1 section 8 of the U.S. Constitution, allow private parties to attack and seize the property of other parties that have committed violations of international law. Congress has the power to grant the letters. The United States made significant use of them during the Revolutionary War and the War of 1812 and never joined 19th Century treaties in which European nations forswore their use. The U.S. issued letters of marque to ships during the Spanish-American War of 1898; and a civilian operated airship, The Resolute, operated under a letter marque during World War II. The letters also have a long history prior to the establishment of the United States. Elizabethan-era explorer and adventurer Sir Francis Drake operated under a letter of marque.
“The world has changed a lot since nations last made significant use of letters of marquee and reprisal. If Congress were to decide to issue them, it would certainly have to revisit the concept,” said CEI Senior Fellow Eli Lehrer. “It’s the type of free-market solution to a real problem that Congress should consider but hasn’t in any serious way.” Lehrer added.
CEI policy analyst Michelle Minton agreed. “American citizens have the right to defend themselves, regardless of their location,” said Minton. “If international governing bodies fail at the task, which repeated pirate attacks seem to indicate, the US government should do something,” she said. “Issuing letters of marque are one way to foster the protection of American citizens abroad without requiring an American military presence in foreign territory.”
Again! This is appropriate subject matter for the NRA and other Second Amendment advocacy groups. The question here is whether they will step up and take on this subject matter in the name of freedom and our Second Amendment.