Want To Build A Trade Network? Go Dutch!

James Marland

Any company that’s looking to build a network on blockchain can learn from the Dutch East India Company, the most successful company. Ever.

If you are from the Netherlands, happy Koningsdag. Let’s celebrate by asking: “What have the Dutch done for us?” Well, apart from the obvious—windmills, cheese, and the Dutch auction—how about the fact that they created the first global trading Web?

At the recent SAPAriba LIVE event in Amsterdam, SAPAriba president Barry Padgett alluded to the Dutch East India Company in his opening remarks. I dug a little deeper, and it turns out to be a very interesting story and a great parallel for those trying to build a trade network in the modern age.

First, just how big was the Dutch East India Company? It was the Apple or Google of its day, but more successful and profitable. It paid, on average, an 18% dividend for almost 200 years. Adjusted for inflation, it had a market cap of over $7 trillion (in today’s money), making it perhaps the most valuable company in history. That would be like Apple, plus Google, plus Amazon, plus Saudi Aramco, plus the whole of the DAX.

Still, it wasn’t the obvious horse to back, as the Spanish, Portuguese, French, and British seemed to be ahead in the game of “civilization” at the start of the 1600s. So how did the Dutch do it?

Technology

The Dutch did not invent the compass, but they mastered its use. In addition, they led incremental improvements in ship technology.

Invest in people

The Netherlands, with its system of guilds, invested heavily in an apprentice system at the shipyards. It also developed a very efficient system of sharing information that enabled ships’ captains and pilots to find optimal trade routes.

Financial innovation

The Dutch East India Company was the first public company to issue negotiable shares. It also improved letters of credit and introduced the promissory note, allowing remote traders to obtain credit with Dutch banks. This was necessary at a time when journeys took two years. (Talk about inventory turns!)

So any company that is looking to build something similar—perhaps on blockchain—can learn from the Dutch, with their focus on mastering technology with incremental improvements, enabling teams, and innovating with new financial models. (But let’s not push the parallels too far; you probably don’t need warships and forts.)

Of course, 200 years is a long time, and the Dutch were eventually eclipsed by the Brits. In a famous trade, they traded Pulau Run, which they believed was the most valuable of their spice islands. The British held this speck of land, which is so small it does not register even on most modern maps. What to swap for this goldmine? How about an undeveloped swamp island in the Americas with no spices at all, which the Dutch called New Amsterdam. The Brits ended up changing its name to New York.

The key takeaway? If you’re trying to build a global trade network, focus on technology, people, and financial innovation.

For more on financial leadership, see The CFO’s Strategy Playbook: 7 Key Elements.


James Marland

About James Marland

James is responsible for defining and rolling out strategies for the Network with particular focus on Europe. He joined Ariba at the launch of the Ariba Network in 1998 after previously being a Solution Consultant at SAP America. In addition he has held the position of Director of Algorithms at Vendavo, an SAP Partner in the area of Pricing. He has a Bachelor of Science degree in Mathematics from Southampton University. Follow James's twitter feed at @JamesMarland