crisis-review-part-2This week’s posts cover crises that went from Rio to Silicon Valley to Canonsburg, Pennsylvania.  Strap on your seat belts for another ride through our Chronicle of Crises 2016.

 

Ryan Lochte’s Olympian Fail

It’s tough to envision a time when a gold medal would attract the kind of negative fall-out that Lochte’s did.  Since his claim that he was “robbed at gunpoint” was debunked, Lochte has lost roughly $1 million in endorsement deals.  Among those leaving skid marks, distancing themselves from him are Speedo USA,  Ralph Lauren, Syneron Candela and Airweave.

 

Here’s a brief reminder of the story: Lochte and three other American swimmers claimed they were robbed at gunpoint after his gold medal win.  The story caught fire in an environment that was rife with allegations about Rio being a dangerous place for both Olympians and spectators at the games.  The story that’s closer to the truth is that Lochte and his teammates vandalized a gas station in Rio during the Olympic Games, causing the appearance of the gun.  Lochte’s original version of the story was even confirmed by the U.S. Olympic Committee spokesman; covered by NBC in an exclusive interview and, of course, furthered by Lochte’s own twitter posts.  As we all know now, the most charitable view of the event is the Lochte “over-exaggerated” what happened.  The worst case view is that he lied to everybody from his mom to Brazilian police and members of the United States Olympic Committee.

 

There are a number of lessons here for businesses: 1) Look deeply into a celebrity spokesman before making the choice (this isn’t the first time Lochte’s mouth has gotten him in trouble); 2) Stories that fit with our existing view of the world (i.e. “Rio is a dangerous place”) easily gain traction and 3) Never lie to your mother.

 

Samsung Sets the World on Fire with Its Galaxy Note

What started out as an embarrassing product fail in August smoldered throughout 2016 up until the company’s announcement in October that they were halting production of their Galaxy Note 7.  The debacle is reported to have impacted Samsung’s bottom line to the tune of a $5.4 billion loss.

 

When the first reports of the device’s catching fire surfaced, crisis managers gave Samsung big props for their immediate recall of the product.  After the world’s top smartphone maker offered replacements for the fire-prone Galaxy Note 7 device,  PR Week called it a “An exercise in bold and brilliant crisis management.”

 

The company quickly recalled some 2.5 million of the devices worldwide and blamed faulty batteries for the problem. Unfortunately, when the replacements also started catching fire, they attracted the attention of everyone from late night comedians to the airlines (which forbid people from taking them on their planes).  Then there was the matter of a misdirected text from a Samsung representative that went public with his suggested response to customer’s threat to take legal action: “I can try and slow him down if we think it will matter, or we just let him do what he keeps threatening to do and see if he does it .”

 

Given the size and repeated product and communications fails here, is there anything businesses can learn from this one?  Yes and it goes beyond the financial.  It’s about the loss of trust.  Brands that spend billions cultivating trust for years can undue it in a matter of months.  Who doesn’t still have lingering questions about the safety of all Samsung products?  I’m finding myself looking skeptically at the laptop on which I’m writing this column.  Frankly, the last time I noticed the manufacturer was when I purchased it.  It’s served me faithfully for years, but now I’m wondering if I’d buy another laptop from them.  Clearly, they had a production issue with the Galaxy Note.  But even more clearly, I’m seeing a pattern of incompetence, lies and downright lack of caring that worries me more. If they couldn’t get the product and support right for their “flagship device” (with an accompanying substantial price tag) how can the company expect me to trust it to build any product safely?

 

EpiPen – The Shot Heard Round the World

Nothing represented corporate greed better in 2016 than the EpiPen disaster.  Who even knew the name of Mylan before August?  That’s when the company came to the attention of lawmakers (and presidential candidate Hilary Clinton) for its dramatic price increase on its lifesaving EpiPen.  The cost of this anti-allergic reaction device has increased 400 percent since it was acquired in 2007 by Mylan.  By September, members of the House Oversight and Government Reform Committee publicly grilled Mylan’s CEO Heather Bresch, about the profit margins of the device.  Then the company’s celebrity spokeswoman, Sarah Jessica Parker, publicly bailed.  As a parent whose child needs the device, she was appalled by Mylan’s price gouging.  She expressed her anger with a post on Instagram.  That was only part of the social media fall-out.   Things got so bad that the incident got its own hashtag – one that ended with the dread word “gate”, as in #Epigate.

 

The company attempted to mitigate the crisis by doing what it called “taking immediate action” to help consumers manage the increase.  They tripled the value of their savings card and doubled the eligibility for their patient-assistance program. A few days later, the company went even further, announcing plans to introduce a generic, half-priced version.

 

So, what are the business lessons here?  Act quickly, substantially and compassionately.  Mylan’s initial reactions to the crisis were to avoid addressing the issue of the price increase directly and blame the insurance companies and the health-care system.  A personal reaction by CEO Heather Bresch would have gone over better.  They do, however, get plaudits for Bresch’s assumption of public responsibility for the issue and making herself accessible to the media.

 

On the other hand, the crisis had been simmering since July 6 and the company did nothing to address it until August 25.  That’s lightning speed in the corporate world.  But in the social world, it’s slow enough to set itself as a target for online protests by parent and advocates, online petitions to Congress, celebrity pile-on and buzz on Twitter Facebook and Instagram.  To quote my crisis guru, Richard Levick: “Companies can and need to sense when these trends are brewing and not wait until they erupt. Ideas become movements, by definition, only by shining a light on their activities. The antiquated notion of surprises is today’s buggy whip. In the digital age, social responsibility means social listening.”

This is part of a three part series to view Part 1 click here.

Stay tuned for the final installment of our Chronicle of Crises 2016 featuring Delta Airlines and Chipotle.

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