Crisis communicationsin 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 lock-maker 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, Ingersoll-Rand 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).

AP, Oct 26, 2006: Sony's profit plunged 94 percent for the July-September quarter as a global battery recall and red ink in its video-game 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.

…but profit plunges 94 percent

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

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.

Dell’s Response Post-mortem

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….

• 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.

Review: Managing a crisis in the YouTube age

The power of social media in Malaysia

The Internet train has left the station

Rise of broadband in Malaysia

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1,000,0001,200,0001,400,0001,600,0001,800,000

2002 2003 2004 2005 2006 2007 2008

Broadband Subscribers in Malaysia

Note: Internet penetration est. 59%, about 14.9m, Source: Internetworldstats.com/MCMC

More mobile than fixed

0

20

40

60

80

100

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Fixed line HandphonePENETRATION RATE: MalaysiaUp to Q2, 2008

The Old Media World

The New Media World

Investors

Customers

Prospects

AnalystsPartners

Employees

Community

Press

MESSAGESMESSAGES

Competitors

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

NOW•Word-of-mouth

Then•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

•Print•Mail•Telephone•TV/ Radio•Advertising•PR/Marketing

Media Options

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 CEOhttp://fastlane.gmblogs.com/

Jonathan Schwartz, Sunhttp://blogs.sun.com/jonathan/

Bill Marriott http://www.blogs.marriott.com/

Richard Edelmanhttp://www.edelman.com/speak_up/blog/

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 mediaduring a crisis?