In the first article of this series, we explored the video game origins of tall vs wide leadership strategies to grow an organisation. The objective of both strategies is the same, growing an organisation, and obtaining more resources to gain a decisive advantage over the competition. However, both strategies use different means. Tall growth will focus on long-term gains and compounding these gains through continuous investments and incremental improvements. Wide growth, on the other hand, focuses more on aggressive expansion, taking risks to gain material advantages and focusing on quantity as opposed to quality.
In this second article, we will explore how tall growth led to the rise of a now forgotten superpower and see which lessons modern day leaders can derive from its history.
The rise of a tall superpower – The Republic of Venice
The definition of a superpower according to the Oxford English Dictionary is “a very powerful and influential nation”. From the 11th century until the 16th century, the Republic of Venice met this definition. Back then, it was the economic superpower of the Mediterranean and a crossroad for trade in spices, sugar and silk. Before the age of explorations, all trade from Asia to Europe had to go through the Mediterranean. Merchants could make huge profits by shipping exotic goods coming from the Silk Road, Black Sea and the Levant to consumers in Western Europe.
While many nations attempted to capitalise on this lucrative opportunity, Venice was the most successful one by far through a combination of factors. Firstly, the city’s position in the middle of a lagoon made it easy to defend and allowed Venice to focus resources on naval development. Secondly, Venice leveraged its naval might to extract favourable trading arrangements with other countries such as the Byzantine Empire. Thirdly, the city particular institutions and power vested in merchant families created a climate that was highly favourable to innovation. We owe many discoveries and innovations in banking and banking to Venice. These innovations include banking itself, double-entry bookkeeping, mortgages, debt markets, bankruptcy law and even business education.
Venice’s huge wealth played a huge role in the dismantlement of the Byzantine Empire through the Venetian engineered diversion of the Fourth Crusade to sack Constantinople. It is additionally very interesting to observe that Venice reinvested a lot of its wealth in itself. Some of these reinvestments led to the rise of new industries such as glass making and sugar plantations in Cyprus. However, one piece of Venetian reinvestment stands out above all others, the creation of the Venetian Arsenal. The Venetian Arsenal employed industrial assembly line methods to produce ships and ships parts such as pulleys and could produce a ship every day in the 16th century. In many ways, Venetian shipbuilders of the Renaissance were 300 years ahead of their competitors!
The gradual decline and fall of Venice
Despite all of the advantages mentioned above, Venice entered a prolonged period of decline from the 16th century onwards and eventually ceased to be a superpower. For all their wealth and innovations, the Venetians lacked the territorial and population base of rival powers. While the city of Venice was amongst the largest and the richest in Europe. The Republic territories outside of Venice consisted of Cyprus, Crete and other possessions in the Adriatic. In short, mere specks of lands throw around the Eastern Mediterranean. At its peak, the Republic only had around 2 million inhabitants against 6 million for Spain and over 12 million for its Ottoman rival.
An important factor in Venice’s decline was the opening of direct trade routes between Europe and Asia going around Africa. Initial voyages by Portuguese explorers paid themselves severalfold, leading others to follow them and a decisive shift in the trade dynamics of Europe from the 16th century. Slowly but surely, the nexus of Europe’s trade moved away from the Mediterranean and into the Atlantic. Surely but surely, Venice was bypassed and cut out from its role as a middleman for trade between east and west. Venice nevertheless remained wealthy but changes in institutional governance stifled innovation and economic growth. Eventually, rising powers replicated Venetian innovations and Venice lost what remained of its competitive advantage.
I mentioned in my previous article that “tall empires are more vulnerable to aggressive neighbours with larger armies” and that a small territorial loss can be a tragedy for a tall empire. The rise of the Ottomans put Venice in this exact situation as more and more resources were diverted towards defence. In the end, the huge walls and fortresses built in Cyprus and Crete weren’t enough to prevent the loss of these wealthy and strategic islands to the Ottomans. Bereft of its overseas possessions, out-innovated and out-manoeuvred in trade; Venice entered a spiral of decline that culminated with the city’s conquest by Napoleon in 1797.
Lessons from the rise and fall of a tall superpower
Venice’s eventual decline and inherent weaknesses as a small but tall superpower, begs the questions – Did growing tall fail Venice? What can we learn from its rise and fall?
The answer to the first question is both yes and no. Yes, in the sense that had Venice controlled more lands in northern Italy, the country could have substantially bolstered its resource base. Expanding into the Western Mediterranean and conquering Genoa its rival, may even have put in a better geographical position to exploit Atlantic trade. However, engaging in wars of expansion could have risked the conquest and sack of the city itself. Had this happened, it would have ended its dominance at once. On balance, therefore, growing tall served Venice well given the circumstances it was in and its geographical position.
One leadership lesson from Venetian history is that growing tall, focusing on quality as opposed to quantity and constantly reinvesting profits to grow taller and stronger still can be a very powerful strategy. This lesson can be summarised in this quote from the co-founder of multinational retailer Carrefour, Denis Defforey.
Size doesn’t give you strength but strength can give you size.
Something linked to this is the power of compound interest and constant reinvestment in oneself and one’s base. The merits of Venice’s approach of incremental growth and innovation can never be overstated. An organisation growing by 1% every month will double in size in only 5 years. If you are good at something. Don’t seek to become better at something else and merely keep doing what you do well and strive to do it better. After all, as someone once said.
What is the worst that could happen?
If you feel that nothing can happen and change the status quo, think again. If you believe that nobody will do things better than you, stop believing this now. If your feel like Venice old doges from the 16th century that the current status quo will last forever, then you’re wrong. Success is never guaranteed to last until you dare to do the impossible and …
Think the unthinkable