USA Today
January 3, 2007
Pg. 1B

Can Small Businesses Help Win The War?

Military studies their strategies to fight terrorists, insurgents

By Del Jones, USA TODAY

The U.S. military is studying small companies such as 24-employee Craigslist to see how the online bulletin board has all but terrorized the newspaper industry by siphoning classified advertising.

Such research may unearth ideas that will help the United States fight the war on terror.

It may seem a stretch that within the chaos of capitalism are the secrets to fighting al-Qaeda. But the military and business have long borrowed leadership lessons and competitive tactics from each other.

In the past, sharing between military and business has been largely a one-way street. The Art of War by the ancient Chinese general Sun-Tzu remains a must-read for corporate CEOs, and most great lessons have been learned the hard way on the battleground before migrating into commerce. For example, CEOs have come to embrace the idea that it's better to act quickly on an imperfect plan than to introduce a perfect plan too late, a lesson first learned the hard way in the fog of war.

But now the military is paying closer attention to business than business is paying to the military, because the world of geopolitics has discovered itself to be on the same road that business has been on for some time. That road is flatter, more networked and more decentralized than ever.

Large companies are groping for strategies to fend off disruptive competitors, including YouTube, Kazaa, Skype and Wikipedia, companies that are giving away video, music, long-distance and information while eroding the revenue stream of companies that charge for it. YouTube is a website where users swap millions of free videos. With fewer than 100 employees, it has created anxiety throughout the giant industries of film and TV.

The Wikimedia Foundation has no plans to bring Western civilization to its knees, but the organization that provides a free Web-based encyclopedia has done as much to Encyclopaedia Britannica. Some 100,000 readers comb Wikipedia entries for errors. Two of those volunteer editors wouldn't recognize each other if they passed on the street. But they are joined at the hip by an ideology and can inflict pain upon a company that has been around since 18th-century Scotland.

How large, traditional companies fare in this fight may prove invaluable in developing a strategy against al-Qaeda. That's why the military is going to school. A book making the rounds at the Pentagon is The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations. It was written for a business audience, but military strategists are saying, "This is the best thing I've read that applies to counterterrorism," says Lt. Col. Rudolph Atallah, a Defense Department director in international affairs.

The premise of The Starfish and the Spider is that centralized organizations are like spiders and can be destroyed with an attack to the head. Decentralized organizations transfer decision-making to leaders in the field. They are like starfish. No single blow will kill them, and parts that are destroyed will grow back.

When Starfish co-author Rod Beckstrom arrived at USA TODAY's suburban Washington, D.C., headquarters for an interview in November, he said he had just come from meetings with representatives at the Pentagon and elsewhere in the "intelligence community." He said he was contacted "out of the blue" in September by one of the highest-ranking officers in special operations, and more recently by a high-ranking special operations officer at Fort Bragg, N.C.

Next week, Beckstrom will present a "high-level briefing set up for a dozen members of different intelligence groups in D.C.," he said.

It's no coincidence that Osama bin Laden is the first leader of terrorism to have studied economics and public administration, nor that he cut his teeth on the family business in Saudi Arabia, says Bruce Hoffman, a professor of security studies at Georgetown University.

As disruptive as the Irish Republican Army once was, it had but "450 trigger pullers and bomb throwers, because (the leadership) couldn't control a larger number," Hoffman says.

But long before he became a household name, bin Laden was creating an organization so flat and decentralized that it can plot destruction from cells in about 65 countries no matter how deep its leader is pushed into the caves of Pakistan or Afghanistan.

He created a "terrorist sausage factory," in Afghanistan and then, like any good Silicon Valley CEO-geek, he attracted employees with an ideology and secured their dedication with vacations, airline tickets home to see the family, and death benefits, Hoffman says.

"Decentralized organizations can be more effective and resilient," says Craigslist founder Craig Newmark, who says he has come to the same conclusion that companies such as his have something in common with al-Qaeda.

Craigslist might be little more than an online bulletin board, but it gets 5 billion page views a month.

"People who are passionate and can work independently can get more done than a centralized organization," Newmark says.

Others have reached the same conclusion, although most companies declined interviews because they didn't want any part of the al-Qaeda analogy.

Many experts have identified terrorism as being hard to defeat because it is decentralized. But Beckstrom and Starfish co-author Ori Brafman, both with Stanford MBAs, hold out hope for victory. Beckstrom recommends three strategies against terrorism:

1 Change the ideology that fuels it. For example, he says the West should help fund public schools in terrorist hotbeds where parents now send their children to radical madrasahs because they feed and educate their children. For now, parents have no alternative.

School choice and other strategies aimed at the ideology take a generation or more, but Atallah says he, too, has decided that blunt military weaponry is not enough, and success depends on winning hearts and minds.

When Sandy Weill was CEO of Citigroup he took steps to decentralize a company that today has 300,000 employees in 100 countries by letting divisions compete freely against each other. To defeat terrorism, young people must believe they have opportunity in the world, or they will blow themselves up to get to the next, says Weill, who helped raise $100 million for victims of the 2005 Kashmir earthquake in Pakistan, a country known as a breeding ground for terrorism.

2 Centralize the decentralized opponent. An example of this would be to let Hezbollah go ahead and govern in Lebanon. Hezbollah is defined as a terrorist organization by the United States, Australia, Canada, the United Kingdom, the Netherlands and Israel. But it is more centralized than al-Qaeda and is funded by the centralized government of Iran. Centralized governments are easier to persuade and/or defeat than independent cells, Beckstrom said.

Google's decision in October to buy YouTube for $1.65 billion is the business equivalent. The move has already tamed YouTube into respecting intellectual property rights, because Google, with a $140 billion market value, has deep pockets and must worry about lawsuits. YouTube has purged copyrighted programs such as The Daily Show With Jon Stewart.

3 Decentralize yourself. The obvious military example here is to expand special operations and give small units the freedom to complete missions without oversight and second-guessing from command and control.

Of course, that has its downside as it does in business, says Robert Shillman, CEO of Cognex, maker of vision sensors that gauge, guide, inspect and count on the production lines of companies, including Ford Motor. When you give others freedom to succeed, you also give them more freedom to make costly mistakes, he says.

Were the military to become more decentralized with few orders other than to win, it would lead to greater success, Shillman says. But it also could cause a special-ops unit to destroy religious buildings if they were being used as havens by terrorists. Such tactics are necessary if the U.S. wants to win, Shillman says, because if bin Laden is decentralized, the U.S. military must decentralize to defeat him.

Bin Laden tells his fighters: "I want you to kill people and wreak havoc. Don't check with me, or they'll find me. We'll send money," Shillman says. "It's the same way Cognex runs our acquisitions. We hire smart people, give them cost guidelines and a reward if they succeed."

Even in business there has long been a love-hate relationship with decentralization. Sara Lee was little more than a group of independent, decentralized companies when Brenda Barnes became CEO in 2005. But with everyone acting independently, Sara Lee was unwieldy, losing volume discounts, and its computer systems were such a patchwork that employees couldn't communicate across the street.

Robert Nardelli reached a similar conclusion when he became CEO of Home Depot six years ago. Both he and Barnes have moved to centralize some aspects of their companies. Home Depot's stock was flat last year, and the jury is still out on whether Nardelli gained purchasing efficiency at the price of entrepreneurial spirit. Sara Lee's stock was down 16% last year while the S&P 500 index gained 14%.

"If you take decentralization to an extreme, you get chaos," Beckstrom said. But decentralization is winning, and he has yet to find an industry that isn't moving at least gradually toward decentralization.

Oversee.net, an online ad firm, has 150 employees. Companies that small have traditionally been managed top down. But CEO Lawrence Ng says he has already decentralized his employees into what he describes as SWAT teams and battalions.

"They know their goals. They don't have much intervention from myself or my senior management." Knowing what his teams are capable of accomplishing on their own, Ng imagines that it would be incredibly difficult for a centralized government to fight decentralized terror.

"How many cells are out there? All want to be successful and are coming up with their own strategy," Ng says.

Hoffman says no decentralized company thrives without strong leadership in the field, and the U.S. has probably avoided another attack after 9/11 by effectively taking out the second and third tier of al-Qaeda's leadership, including Khalid Sheikh Mohammed and Abu Zubaydah. The "decapitation approach" of killing bin Laden would have been less effective, he says.

On the other hand, the U.S. government has been unable to take advantage of one of its greatest areas of business expertise: marketing. Any first-year business school student learns that the first rule is to know the customer. Know the audience.

The U.S. marketing message has focused on freedom and democracy. A little research might show that "stability and justice are what people seek," Hoffman said.

Don Tapscott, whose book Wikinomics: How Mass Collaboration Changes Everything went on sale Dec. 28, says we've entered a time when people with no relationship other than a passion can come together to invent an encyclopedia or a computer operating system. California is thinking about using such collaboration to "wiki all school books," he says, which means using software that allows users scattered throughout the world to collaborate to create and edit.

There are 90,000 chemists online, 90,000 problem solvers, Tapscott says. Groups of strangers with an ideology a passion can "create a school book, a mutual fund, a motorcycle. They can also create terror."

It's unfortunate that the bad guys use the same tools as the good guys, says Craigslist founder Newmark. But the good guys have an advantage, he says.

"You can build a network around hatred that works in the short run. The way to disrupt a culture of hatred is to be noisy about a culture of trust. Until recently, the United States has stopped hatred from developing by standing up for our ideals," he says.