… and the bartender said, “Hey, I haven’t seen you in a while. What happened? You look terrible.”
“What do you mean?” said the pirate, “I feel fine.”
“What about the wooden leg? You didn’t have that before.”
“Well,” said the pirate, “We were in a battle, and I got hit with a cannon ball, but I’m fine now.”
The bartender replied, “Well, OK, but what about that hook? What happened to your hand?”
The pirate explained, “We were in another battle. I boarded a ship and got into a sword fight. My hand was cut off. I got fitted with a hook. But I’m fine, really.”
“What about that eye patch?”
“Oh,” said the pirate, “One day we were at sea, and a flock of birds flew over. I looked up, and one of them shit in my eye.”
“You’re kidding,” said the bartender. “You couldn’t lose an eye just from bird shit.”
“It was my first day with the hook.”
Be prepared for the unexpected. The moral of this story is that even seasoned business warriors have to deal with the new now and then and that hanging onto old habits can have serious results for your welfare.
No doubt this pirate was affectionately referred to as ‘Lucky’ by many of his crewmates, though others might have been less charitable and muttered “Belum Dodol!” (Don’t forget he was still functional with a good leg and a good arm and a wicked left hook.) But in one sense he was probably fortunate; it could have been a lower clothing readjustment taking his urgent attention instead of a shitty eye problem.
Pirating was (and still is) definitely a business. Pirates needed a market niche – ships with booty. Definitely not ships with lots of guns. Pirate ships and tools were specifically designed for the job, so pirates usually had a clear competitive advantage in terms of fighting capabilities, and they marketed themselves so well that often their ‘customers’ hove to willingly to keep their lives (the ‘what’s in it for me?’ benefit.) Business lesson: a smart logo like the skull and cross-bones that clearly communicates your brand promise is worth a thousand extra (s)words.
BTW, most passengers on these ships in the past were wealthy and had high value as an unmolested kidnap victim for ransom, but we hear more of the much less frequent savage side of these encounters. Put that down to flagrant emotional counter-marketing.
Pirates generally had a Plan!
They didn’t wander aimlessly over the oceans but did their market research. Their spies told them which ships of value were due to sail when and they realized ships traveled best on trade-wind routes. They targeted like a rifle, not a shotgun.
Most pirates also had a distribution channel for their ‘sales’ to convert goods and passengers into gold. They had a money-laundering system, except it was a goods and golden objects laundering system. Only short-time operators were stupid enough to bury their loot. The smart ones used some of their wealth to influence local government to their advantage and to enhance their security. Nothing has changed, has it? They didn’t use the terms lobbyists or patrons or research foundations but the outcomes were similar.
Standard Business Goals
Pirates generally ignored some standard business goals because of their business model. Most were not interested in maintaining long-term client relationships – life-time value of a customer could be very short indeed. Sounds like the approach of some business operators in Bali tourist towns?
But some pirates did utilize an additional market niche: under-defended towns along the coasts, a market known to the ancient Norse as being a regenerating source of wealth as opposed to one-off opportunities that you either towed away or sunk. Business Lessons: spread your source of income to minimize your earnings risk, and seek customers with a longer lifetime value. Harvesting versus Plundering.
In summary, pirates usually had all the necessary ingredients to run a successful business.
- They had a well-honed business model that had legs.
- They had the technical skills necessary to win over their customers.
- They had great marketing – brand promise, supporting logo, market research.
- They had an efficient administration – staff benefits including allocation of the profits based on shares, a clear command, and control structure, suitable financial management, and revenue conversion.
- They had great operations capabilities that got them where they needed to be with all the resources necessary to co-create value with their customers.
- They had a healthy environment to work in and polluted it as little as possible – the odd plank walker, the odd badly damaged hulk.
- They had a social life!
Can your business say as much?
What about modern-day pirates from Somalia? Their business model has been successful too. And it’s not about a few guys in a little boat taking on a big ship. An official study shows the piracy business begins, like any other business, with venture capital. Around $250,000 will get a pirate group set up, and this money is provided by business people, usually outside Somalia. The pirate needs boats, weapons, phones, catering for pirates and hostages, and good intelligence to know which ships are worth boarding. It’s still also about the ransom value of the crew, which varies according to the country of origin.
Once the ship is seized, the negotiations begin. The shipowner hires a professional negotiator and so does the pirate; a BBC example had the pirates’ negotiator (speaking English, a lawyer and educated in the US) starting with a $7 million figure that eventually came down to somewhere between 1 and 2 million. So you have more than got your return on your investment on the first pirating. For the crews, the general rate of pay is around 17 times what they could earn in the average day job if you could find one, with less risk than just getting by on land in war-torn Somalia.
Average Ransom Payments
In 2010, the average payments were $5.4 million, according to the One Earth Future Foundation. The disbursements in a typical piracy operation: the original investor gets 30% off the top, expenses including payroll take 50%, local elders take 5 to 10% (anchoring rights), and bribes to other officials take 10%.
Counter-measures have included combined navies patrols, onboard private security, an air strike on the main pirate dens (nobody was killed) and these have been successful in severely restricting the rate of ships taken around Somalia. In 2011, according to EU Navfor Somalia, there were 151 verified attacks on sizable ships around Somalia, with 29 vessels being successfully pirated. In 2012 the number of attacks shrunk to 31, with just four ships hijacked.
Like any successful business model, this one has been copied and is now used on the west coast of Africa on vulnerable oil tankers. ICC International Maritime Bureau global figures for first quarter 2013 had 76 pirate attacks and 4 hijackings.
Successful Business Model
As with any successful business model, you can see a swarm of related market niches being exploited too: venture capitalists, food caterers, arms suppliers, private security firms, consultants on best management practices for both sides.
The pirates’ business model is vulnerable to a more powerful business model (navies with reach) but this counter-measure is only effective so long as a navy is in place. The business model will continue to be used because financial barriers to entry are very low (especially compared to the naval competition) and the return is high with minimal risk to the main players.
Is there is any aspect of developing a successful business you would like me to write about?