What Can the Venetian Empire Teach Us About Innovation

Aside from being the inspiration of a hotel and casino in Las Vegas, the Venetian Empire controlled a great deal of world trade and lead the Western World in technological innovation.  It was, if you will, the Silicon Valley of its day.

The Harvard Business Review has an insightful article on what the Venetian Empire’s rise and fall can teach us about innovation.

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Rise

Venice had a few things going for it.  Chief among these are its unique geography and the city went beyond “a culture of innovation” into an “ecosystem of innovation.”   The land, while terrible for farming, was easy to defend and at a critical juncture of East and West.  Trading for good became a way to survive.  Hardiness against attacks let to accumulation of resources.  These resources were then leveraged to support more trading, which then lead to more accumulation of wealth.  This lead to development of naval technologies that assisted in expansion and defense of trade routes.  This in turn lead to more profits and more advanced naval technologies. And so on and so on.

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.

Fall

However, all good thing come to an end and the Venetians “focused more on exploitation than exploration: Venetian traders followed existing paths to success.” From the article:

Entrepreneurs chose not to move away from traditional pathways. Established practices and preferences became more popular than exploration and speculation. Merchants and traders played the game of incremental innovation by focusing on efficiency and optimization. Determined to grow their own fortunes rapidly, they pressed their feet to the accelerator rather than charting new courses.

But toward the end of the 16th century the world was changing in ways that would make Venice less relevant. The Arsenal’s focus on galley ships made sense when the Mediterranean was the most important trading waterway. Alessandro Barbero, professor of medieval history at the University of Eastern Piedmont, in Italy, notes that the galley remained for a long time the favorite vessel of Venetian navigators. But the invention of seafaring galleons allowed countries bordering the Atlantic to set up new trade routes that did not flow through the Adriatic.

These galleons were able to spend months at sea and advances in navigation technology meant that it was possible, and eventually feasible, to find another route to the resources of the East.  In fact, finding an alternate route to India and China lead many other European powers to finance their own expeditions.  The Venetian lock on the market inspired others to innovate.  Also, at least according to some historians, their arrogance aggravated and motivated other leaders to avoid them and knock them down a peg or two.

Lesson

The lesson here is that companies, entrepreneurs should always innovate and stray off the well worn paths.  Today’s profit streams are sure to expire one day from either competition, new advances, or any other number of changes that can’t be predicted.

The lesson here is keep on striving and arrogance rarely, if ever, suits anyone’s best interests.

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