Lots of things can go wrong in business, but for an established organization, it usually takes something really big. We saw the big US automakers all almost go out of business because they lost touch with their customers, and that’s unsurprisingly fatal.
Juice maker Odwalla almost went out of business because some E.coli got into their juice and killed some children. That’s also not a surprise that a major health issue could end a business life.
Companies have big issues and in a lot of cases, it’s how the company reacts to the problem that leads customers to decide whether they will keep buying the products or services of a company. Tylenol is probably the biggest success story when cyanide was found in some bottles, they immediately did a total recall even though we later learned that it was product tampering in stores that had nothing to do with Tylenol. But it sent a clear message to consumers that Tylenol cared.
This weekend Peter S. Goodman published this article about three companies that have really made a mess of things recently, namely Toyota (pedal sticking caused accidents and some deaths), BP (oil spill in the Gulf), and Goldman Sachs (selling things they knew weren’t great for their customers but were good for their shareholders). Goodman’s article is very thorough in explaining many of the things that make them case studies in what not to do, but I think he missed a fairly key point. He used the Tylenol example, and he also talked about the Audi acceleration problem in the 80s that essentially killed the Audi business in the US for 20 years even though Audi proved it wasn’t their fault. I think there is a common thread in all four of the failure cases that is a huge danger in a lot of organizations today, which is quite simply that they are selling to people who have a very different set of values, who come from a different culture and when responding to an emergency, you have to do it on their terms, not yours.
I will start with the oldest one.
1) Audi. It’s pretty uncontroversial for anyone who knows Germany to say that culturally there is a huge value on precision and facts and method. They are a lot less sensitive than Americans, which is neither good nor bad. Audi responded in a very German way when it very defiantly shared the evidence that they were right, when the American public just didn’t, and doesn’t respond to that sort of “in your face” discussion.
2) BP. Similar thing. England still has a much more pronounced class structure than we have in the US, so when their chairman pronounced, repeatedly that BP cares about the “small people” my guess is that a lot of english people would have been OK with that, but in the US it was far too condescending and adding a thick John Gielgud-like british accent on top of it didn’t help. They finally figured out that they needed some american voices behind the microphone, but that was too late for Tony Hayward, the CEO who made more than his share of gaffes, including wearing much too formal clothing at the scene of the spill, and saying things like “I want my life back.”
3) Toyota. Ditto. Goodman mentions this in the article, but I think he makes too light of it. The leaders of Toyota did what would be expected in Japan, to try to save face and try to find some other explanation. They should have looked at the Tylenol case to get a sense of what makes sense in the US consumer world, and they would have fared far better.
4) Goldman. This one may seem like the odd one out, but it’s actually pretty much the same, only this time the cultural difference isn’t a national one. Executives at Goldman know that their #1 goal is to deliver shareholder value, and they know that certain types of banking are really complicated. The average american doesn’t realize how complicated banking can get, and they also don’t realize that the #1 goal of companies not to deliver huge profits (if that were the case Microsoft stock would be doing a lot better), it’s to deliver shareholder value. Even though what Goldman did still seems pretty dodgy, they still delivered shareholder value. Their big mistake was not figuring out a way to communicate with the general public in a way that would resonate with them. They stuck with the Wall Street speak and that really got them in trouble.
So the big risk is that if you are selling to people who really come from a different culture or have a different set of values, when you make a mistake that effects them, your response has to be on their terms, reflecting their values and expectations or you could be in real trouble. It takes some real rethinking, but it’s worth it in the long run.
-Ric
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