Wednesday, November 17, 2010

Lessons from Pirates and Insurgents for Business Management

economist.com/whichmba

Schools of management often cite and draw lessons from battle field strategists. But University of Reading’s Henley Business School professor David James thinks management styles of pirates of the Somali coast and insurgents in the mountains of Afghanistan have invaluable insights for modern business management.

Somali pirates’ business model is impressive and their strategy is worthy of critical analysis. For instance, the pirates avoid “symmetrical” assault. They employ stealth and ambush, attacking their victims at their most vulnerable point. It is not surprising that a mere half a dozen sailors easily wrest control of gigantic oil tankers. This is a lesson that smaller companies that seek to take on large entrenched businesses could learn from.

Professor James cites the example of wonga.com. Wonga.com 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 rapidly and customers can obtain approval using an iPhone application.

That smaller, nimble competitors make stealth attacks on larger rivals is a well-known phenomenon. However, large companies are too slow to respond. For instance, by the time a captain spots the pirate’s inflatable it is too late because it take as large vessel too long to turn around. Lessons on rapid response can be learnt from the Taliban insurgents in Afghanistan.

Insurgent leaders do not 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 or “central command”. But a corporate insurgent, like the Taliban allows allow local managers (militias) to respond quickly to local events.

Professor James 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 militias or business cells can.

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