Crisis communications
in the YouTube age
By Julian Matthews,
Trinetizen Media
www.trinetizen.com
Nov 19, 2008
Case study 1: Kryptonite Bike Lock Fiasco
The power of video blogs
• A biker finds out that his
bike lock made by US lockmaker Kryptonite can be
picked with a Bic pen.
• He posts video online.
• Company does not react
after three days.
• Bloggers continue to rail at
the company until it finally
agrees to exchange the old
locks for new ones, at an
estimated cost of at least
US$10 million.
Kryptonite Lock Fiasco
Kryptonite Lock Fiasco 2
Mainstream media picks up story
Source: Fortune
Ingersoll-Rand Endures Kryptonite's US$10 Million Hit
OCTOBER 25, 2004, MONTVALE, NJ -- Kryptonite delivered a $10 million
hit in unanticipated costs in the third quarter to the Security and Safety
division of parent company Ingersoll-Rand. Despite the setback, IngersollRand enjoyed an overall 15 percent increase in third quarter revenue to $2.4
billion.
Kryptonite's financial drubbing began in early September after Internet
video clips demonstrated the apparent ease in cracking its tubular
locks with the shells of ballpoint pens. Kryptonite launched replacement
programs for consumers and retailers, and accelerated retail delivery of new
product.
Those moves, however, hit the security division's operating margin.
"Operating margins of 16.5 percent (in the third quarter) declined
compared to 2003, reflecting approximately $10 million of estimated costs
related to Kryptonite cylindrical bicycle locks," the company reported Oct. 21
in a filing with the Security and Exchange Commission. Its operating margin
in 2003 for the same period was 21.2 percent.
The company, founded in 1871, is organized in Bermuda with corporate
offices in Montvale, New Jersey. It has about 42,000 employees worldwide
and a current market capitalization of approximately $11 billion with annual
sales of more than $9 billion. The company trades on the New York Stock
Exchange under the symbol IR.
The Internet circa 1993
Internet in 2008
Blogs double every six months
Japanese and English, leading languages
Companies that blog
internally or externally
Dell laptop explodes
at Japanese conference
By INQUIRER.net newsdesk: Wednesday 21 June 2006
An Inquirer reader attending a conference in Japan sat
just feet away from a laptop computer that suddenly
exploded into flames, in what could have been a
deadly accident.
Gaston, our astonished reader reports: "The damn thing
was on fire and produced several explosions for more
than five minutes"…
For the record, this is a Dell machine," notes Gaston.
"It is only a matter of time until such an incident
breaks out on a plane," he suggests.
Our witness managed to catch all the action in these
amazing pictures….
Good news, get it out fast
Bad news, get it out faster!
Dell to recall 4 million
laptop batteries
CNET News.com,August 14, 2006
Dell and the U.S. Consumer Product Safety Commission plan
to recall 4.1 million notebook batteries on Tuesday, a
company representative confirmed.
The recall affects certain Inspiron, Latitude and Precision
mobile workstations shipped between April 2004 and July
18, 2006. Sony manufactured the batteries that are being
recalled, the representative said.
This looks like the largest battery recall in the history of the
electronics industry, said Roger Kay, an analyst with
Endpoint Technologies Associates. "The scale of it is
phenomenal."
Sony delays response,
problems deepen…
• Aug 15, 06: Dell recalls 4.1m batteries
• Aug 24, 06: Apple recalls 1.8m batteries
• Sept 15, 06: Virgin Atlantic, Qantas and Korean Air
ban use of Dell and Apple laptops on board its
planes, unless the battery removed.
• Sept 28, 06:Lenovo/IBM: 526,000 batteries
• Sept 29, 06:Dell increases recall to 4.2m
• Sept 29, 06:Toshiba recalls 830,000 batteries
ThinkPad explodes in LAX airport,
posting on Gizmodo.com, Sept 16
“So we're waiting for a flight in the United lounge at LAX, this guy
comes running the wrong way, pushing other passengers out of the
way and quickly drops his laptop on the floor. The thing immediately
flares up like a giant firework for about 15 seconds, then catches
fire….”
Charred remains of IBM
notebook on terminal floor
Crisis Escalates, Spreads
Like Viral Fever
Sony finally responds…
Sept 30, 2006: Sony finally announces global
recall of 9.6 million PC batteries. The recall and
replacement would cost as much as 50 billion
yen (about US$423 million).
…but profit plunges 94 percent
AP, Oct 26, 2006: Sony's profit plunged 94 percent for the JulySeptember quarter as a global battery recall and red ink in its videogame business hurt the Japanese electronics and entertainment
company.
Sony Corp.'s group net profit for the fiscal second quarter totaled 1.7
billion yen (US$14 million; euro11 million), dwindling from 28.5 billion
yen the same period the previous year, the Tokyo-based
manufacturer said Thursday.
Sony’s crisis post-mortem
• Was slow to take blame, disclose information
and coordinate global recall
• Let clients make multiple announcements
making crisis protracted and lingering in
public eye
• Only worked with US Consumer Product Safety
Commission (and Japan’s Economy, Trade and
Industry Ministry) to coordinate recall and
replacements with clients, after clients did so
themselves
Dell’s Response Post-mortem
1. Determines cause – battery supplier,
executes costly remedial action with safety
in mind.
2. Liaises with authority: Works with U.S.
Consumer Product Safety Commission to
announce global recall of 4.1 million laptop
batteries.
3. Used website: Sets up recall website
for customers to check affected units.
4. Assures safety: Guarantees
replacement batteries are safe.
Sony execs’ bow not deep enough?
“We want to put this
behind us. I take this
problem seriously and
I want to finish the
replacement program
as quickly as possible
for the sake of our
users and corporate
customers,”
Corporate Executive Officer
Yutaka Nakagawa, Oct 24,
2006
Slippery slope of customer adulation
'Alien' substance caused Dell
notebook battery to ignite
By Julian Matthews, ZDNet Asia October 23, 2000.
KUALA LUMPUR – An 'alien' substance was mixed into the
production process of the battery that caused a Dell customer's
notebook to burst into flames and prompted a recall last week.
"As a result of analysis, we defined the cause of the short circuit that
occurred in one cell was due to mixing of an alien substance at one
production process," said Yoshiyuki Arikawa, a spokesperson of
battery-supplier Soft Energy Company, a unit of Japanese
consumer giant Sanyo Electric Co Ltd.
In the e-mail response to ZDNet Asia, Arikawa did not define what the
'alien' substance could be or how it entered the production
process…
Arikawa added, "The defect rate should be very small since it’s a
specific occasion and (went through) normal inspection process
after. The defect is limited only to the 27,000-set lot to Dell."
Dell Computer recalled the 27,000 batteries with a promise to replace
them free of charge….
Review: Managing a crisis
in the YouTube age
• Set up crisis management unit, role-play
strategies for dealing with crisis scenarios
involving digital media – blogging, online
video, viral emails, rogue websites.
• Create crisis webpage and direct press there.
• Openly and quickly share the facts online that
you know with the public.
• Show you care, accept responsibility, tell
the truth when you are at fault.
The Old Media World
The New Media World
Press
Community
Investors
Customers
Employees
MESSAGES
Competitors
Prospects
Partners
Analysts
Consumer >> producer
Social Media in 21st century
Consumers =
producers: Anyone can
publish text, pics, audio,
video and interact within
that space
Many ways to snack:
Blogs, podcasts, RSS,
wikis, social networks,
mobile networks,
YouTube, Twitter.
Amplifies virally:
Two-way, lean-forward
media, searchable,
archivable, infinite
replay, timeshifting
Growing influence:
24/7, places higher
expectations on
speed, transparency
and accountability
Media Options
Then
• Word-of-mouth
•
•
•
•
•
•
Print
Mail
Telephone
TV/ Radio
Advertising
PR/Marketing
NOW
•
•
•
•
•
•
•
•
•
•
•
•
•
SMS, MMS
Email
Blogs, Microblogs
Social networks
IPTV, Online radio
IM, Chat
W2W
Online video
Podcasting
Websites, Wikis
SEO, Online ads
Product placement
Viral marketing
http://www.ideastorm.com
Dell sets up IR blog
Dell’s IR blog
“We let the vast majority of posts through. We want
this to be a free and open means of communication,”
Dell's IR director Robert Williams.
Some of the news it shared:
• conclusion of an accounting investigation.
• a US$10B share repurchase plan.
• new partnerships with retailers.
“We feel very strongly about the democratization of
information, specifically financial information. The
information should be out there, available and usable
to all types of investors.”
Link: http://dellshares.dell.com
CEOs are blogging
Rick Wagoner, GM CEO
http://fastlane.gmblogs.com/
Jonathan Schwartz, Sun
http://blogs.sun.com/jonathan/
Richard Edelman
http://www.edelman.com/speak_up/blog/
Bill Marriott
http://www.blogs.marriott.com/
http://www.tengkuzafrul.com/
Why blog?
 Opens line of communication, engages
customers, builds brand loyalty, encourages
conversations
 Provides insider views of company direction,
promotes upcoming products/services
 More personal, opinionated, flexible than press
releases, useful in a crisis
 Creates a knowledge database for staff, investors,
suppliers, partners
Tsunami: Dec 2004
Case study: Crisis blog
• In November 2004, Indrajit Samarajiva, a Canadian of Sri
Lankan descent was asked to speak at lunch gathering at
Colombo Regency Rotary Club, Sri Lanka to talk about
blogging
• A month later, when the deadly tsunami struck, the members
set up a blog reliefforsrilanka.blogspot.com and used it to
raise money + coordinate donation of shelter, food, medicine to
aid survivors
• "Our club has been successful because we have been able to
reach out to the international community through the Web site,"
said Chamila Wickramasinghe, who is the secretary of the club
and was its first president. "You've got to be open to new
technology."
Club receives award
Questions to consider:
• Can we contact web-designer and create an
update page immediately?
• Should we set up a blog to update stakeholders?
• Can we post updates regularly and can those
updates be read by an RSS reader?
• Can we counter negative video with a video of
our own?
• Can we set up a webcam to live stream an
unfolding event?
• Do we have a crisis communications plan in place?
• Have our employees been trained to face the media
during a crisis?