This is opportune considering how publicized corporate failures have become in recent years. From BP's deep horizon oil-spill in 2010 to Toyota's catastrophic incident and subsequent mega recall in 2010. Currently we are witnessing Samsung inspire memes from the Galaxy note 7 fall out.
The year was 1982, the end of September and a few strange deaths rock Chicago. The media sensationally connect the deaths to Johnson and Johnson's highly popular OTC painkiller, Tylenol. As of 1982, Tylenol had a market share of 35%, making it a market leader. In a few weeks that market-share would tumble dramatically to below 10%. There had been 7 strange deaths and all were linked to Tylenol. Johnson and Johnson's was in trouble.
At the time Jim Burke was at the helm of the company and his decisions at the time would be hailed as heroic. As soon as the story hit the press, Jim Burke formed a 7 member strategy panel to oversee the company's reaction. The critical insight here was that Burke recognized that the danger to the public and their reputation was a strategic issue rather than a PR issue. This was not all, the company went public to warn the public not to use their products and in a few weeks made the unprecedented decision to recall all the Tylenol in the market. This was a bold move. To allay public concerns within days of the crisis going public, the company started toll free lines for the public and the media. The crisis ended when the FDA discovered that the deaths were caused by cyanide poisoning as a result of product tampering.
The critical insight here, was that Burke recognized the danger to the public and their reputation was a strategic issue rather than a PR issue
Johnson and Johnson's would absorb about $100 million in losses but over a few months Tylenol would regain 70% of its market share and in a bit longer it would become a market leader again. The company was seen as heroic in the way they dealt with the crisis. The Washington post would go on to write, "Johnson and Johnson's has effectively demonstrated how a major business ought to handle a disaster".
The impact of the Tylenol disaster of 82 was huge. Tylenol introduced tamper proof packaging when it was relaunched and this went on to become an industry standard in the Pharmaceutical and food industries. In 1983 the US Congress passed the 'Tylenol Act' which effectively made product tampering a felony crime.
The hallmark of effective leadership by Burke during this crisis is the openness and speed with which Johnson's responded. The root of this had to be a culture that placed a high value on public safety. The company and its leadership took every opportunity to communicate to the public. John Burke even took interviews with media at a very heated time. Contrast this with the downplaying we have seen in recent Crisis. In the first stages of the deep Horizon crisis, BP went to the press saying the spill was around 1,000 barrels a day. It turned out the reality was five times the amount, but even then the company downplayed the figure.In fact Samsung also made this classic mistake they alleged that Note 7 incidents reported in china, were faked. This later came to bite them somewhere else.
Though companies usually make mistakes during crisis, the leaders usually exacerbate the situations. Case in point was Tony Hayward, the CEO of BP who remarked to the media how he wanted his life back despite the loss of life and the impact on people's livelihood. The essence of a leader in crisis is to set the tone and inspire people to be selfless in handling a situation that is usually outside their scope of work.
At the time of writing this, Samsung is in the middle of a very embarrassing crisis. A lot may be said about the handling of the crisis but one thing has stood out, Samsung despite early gaffes like claiming faking in china, has taken charge. Ending the Galaxy Note 7 has been a very bold decision. After a bungled recall their credibility had taken a beating. In ending the Note 7 they were cutting their losses before they got too big, which is highly admirable. To me, the big Mistake Samsung made was trying to rush to a solution and get over with it. Initially Samsung concluded that the issue was batteries made by one of its subsidiaries Samsung SDI and they deemed units with batteries from a third Party manufacturer Amperex technologies to be safe. Consequently Samsung recalled the Note7 and released 'safe' devices with the different batteries. This was despite the fact that Samsung Engineers up to the point of writing this article had not replicated the incidents affecting the device. This means Samsung had rushed to solve a problem despite no confirmation of the cause. This obviously backfired and they have had to write off a device that was hailed as the best Android device ever made.
The impact on the Samsung brand at this point, is hard to quantify. I think their bold decision to pull the plug is what has made an enduring impact of me. I wish Samsung had been more forthcoming with information but I still think that if they come clean on everything, it will be a great reinvestment on the public's perception of them. Crisis is something that eventually comes, what makes sure a business survive is the capital of preparation and values that they have accumulated. Crisis test a venture's core character, if that is wrong it will be sifted like grain. If you are successful enough to have reputation threat, its because you are already great. Question is, is your greatness only skin deep?
Article by Phil Kimani.
philkimani@live.com.
