Monday, December 3, 2007

Crisis Management - A lesson to learn in Corporate Communication

All businesses mess-up on occasion

What to do when it (all) goes wrong?

  • Growing Up Is Hard to Do
  • Crisis need not strike a company purely as a result of its own negligence or misadventure.
  • Often, a situation is created which cannot be blamed on the company - but the company finds out pretty quickly that it takes a huge amount of blame to hit the ball in its response.
  • Clearing the Hurdles & Accelerating the Business

High-profile incidents in the bio/pharmaceutical industry

  • Product integrity is constantly challenged, from patent infringement to counterfeits to life-threatening side effects during first-in-human clinical trials.
  • Each step of the product life cycle, from idea inception to post-marketing surveillance and product retirement, raises potential legal, commercial, financial and ethical risks.
  • Product protection risks should be managed through an anticipatory, proactive approach employing mechanisms found to be successful in monitoring, controlling, and correcting vulnerabilities throughout the product’s life cycle.

Johnson & Johnson and Tylenol Poisoning

  • In 1982, Tylenol - 35 % of the US over-the-counter analgesic market - represented 15 % of the company's profits.
  • Unfortunately, at that point one individual succeeded in lacing the drug with cyanide. Seven people died as a result, and a widespread panic ensued about how widespread the contamination might be.
  • By the end of the episode, everyone knew that Tylenol was associated with the scare. The company's market value fell by $1bn as a result.

Cost and benefit analysis

  • The cost was a high one. In addition to the impact on the company's share price when the crisis first hit, the lost production (destroyed goods) and public law suits as a result of the recall were considerable.
  • Within five months of the disaster, the company had recovered 70% of its market share for the drug - and the fact this went on to improve over time showed that the company had succeeded in preserving the long term value of the brand.

What did the company do?

  • They acted quickly, with complete openness about what had happened, and immediately ordered recall from every outlet - not waiting for evidence to see whether the contamination might be more widespread
  • They showed themselves to be prepared to bear the short term cost in the name of consumer safety. That more than anything else established a basis for trust with their customers
  • Developed better product protection- tamperproof packaging that would make it much more difficult for a similar incident to occur in future.
  • They achieved the status of consumer champion.

What the company didn't do was to avoid responsibility.

Vital Communications: Internal & External

  • On all media interviews, expressed sympathy and regret for all those affected and immediately promised that the company would pay all medical costs.
  • Conducted regular company-wide conference calls on a daily basis, giving employees the chance to ask questions and get the latest information. This approach proved so popular that the practice of quarterly calls survived the crisis.
  • Within 24 hours, the company had an explanatory web site (its first) that received 20,000 hits in 48 hours. The company spoke to the press, appeared on TV and carried out direct advertising with the website address. All possible attempts were made to provide up to the minute, accurate information.
  • There were critics who refused to credit the company with any integrity whatsoever - but was considered that as an exercise in crisis management

What can other businesses learn from such a biotech blow-up?

  • Could J&J have done anything differently?
  • Present-day threats and potential costs associated with recalls have never been higher -- one recall can put you out of business. As companies seek to increase their control and in turn, minimize their risks, they discover that varied activities within and outside the organization must be considered, and operations up and down the supply chain must be addressed.
  • When potential issues are identified, you can quickly determine the underlying cause, make the necessary corrections, and provide supporting documentation.

Please share your thoughts over this case!

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