corporate-comms-disaster

The biggest corporate comms disasters – 2016 edition

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It’s been a big year for corporate comms disasters.

There’s a lot to learn from how a company manages a crisis. Whilst crisis management isn’t something that we do here at TLP, it’s very closely aligned great CEO and corporate communication. It’s a pressure cooker, where the consequences are huge and everything simply must go right.

This list collects some of the big examples where everything hasn’t gone right and there’s been compounding communications failures. It’s the instances where a bad situation has been made much worse by the failure of communication.

Here’s five disasters from 2016 (included with a range of links to read more):

1. Bellamy’s – Revenue, margin and management credibility all downgraded in one day

Releasing a really bad result to market is bad enough. But being deliberately vague about the implications, and even whether it represents a downgrade made the issue much, much worse. Compounding the issue, both the CEO and Chairman have recently been selling shares on market, pocketing $2.4m and 2.9m respectively.

See also Bellamy’s great China moderation

Update 14-December-2016: Bellamy’s shares have been suspended from trade. A big and ugly reset of investor expectations is about to happen.

Update 19-December-2016:  The AFR is reporting that “Maurice Blackburn is meanwhile investigating a potential class action claim against Bellamy’s following its share price plunge and suspension.” http://www.afr.com/business/retail/fmcg/bellamys-shares-suspended-amid-fears-on-china-trade-20161214-gtat4x

Update 22-December-2016: Bellamy’s has extended the voluntary suspension of its shares until January 13 to “continue negotiations with key suppliers and manufacturers“. It’s unclear what the underlying issue is – but it’s unlikely to be good news. The only positive at this stage is the company has resisted making more promises without understanding the full picture – which is a good start in rebuilding credibility.

2. Slack validating the competition

Microsoft announced their competitor to Slack in Microsoft teams. Slack responded with a full page New York Times advert, which validated and turned the launch into a real news item. This would otherwise have gone largely unnoticed by those outside the tech community.

3. Ignoring the crisis management team at Ardent Leisure / Dreamworld

In ignoring the advice of crisis managers, Ardent Chairman Neil Balnaves turned a tragic accident into a communications disaster. The company initially responded legally, and was on the back foot chasing to media coverage from a very early stage.

The issue was made worse by a vote on the CEO’s bonus, that went ahead just days after the incident.

See also Dreamworld accident: How to avoid a PR disaster

4. 7-Eleven “still don’t get it”

The 7-Eleven wage scandal didn’t turn into a crisis of confidence until the company transitioned (‘sacked’) the Alan Fels led independent board – charged with investigating and righting widespread wage abuse. Fels subsequently spoke out publicly, stating “7-Eleven still don’t get it”.

See also 7-Eleven creates new public relations disaster

5. Seven West Media following the Tiger Woods ‘arc’

After it was widely reported that Seven West CEO Tim Worner had an affair with an assistant at the company two years ago, the company went into lockdown, saying the issue is a personal matter for the CEO and refusing to comment.

The share market clearly disagreed, with shares down nearly 10% in the first few hours of trading post announcement. Many sources say that the company has played legal hardball and tried to shut-down the story, making the issue an even bigger rabbit chase for journalists.

Update 19-December: This is likely to get a lot worse for Seven West before it gets better – only great crisis management from this point forward is likely to save Worner’s job.

Update 20-December: New revelations today of up to four more affairs, drug use, and payment of an indirect bonus by Worner to Harrison. The CEO is mentioned in the press as a “serial sexual exploiter” of staff. The Board is likely to have their hand forced at this stage. Worner appears very unlikely to make it to Christmas.

Reports: Seven CEO Tim Worner Outed By Former Lover

Update 22-December: There’s some big challenges now for the Seven Board. Worner must go, but the Board have known in full for 2 yrs. It’s very hard to take the moral high ground now without Board change (which in itself is difficult in a family company). Today the Board has announced an “Independent Enquiry”, whilst announcing ongoing support for Worner (see also Seven West Media board missed the change in corporate culture).

It’s going to get much worse before it gets better, with journalists digging into credit card spending, the irregularities of the initial dismissal and Worner’s denials of widespread drug use. Given the typical Tiger Woods arc of denial, minimisation, resignation and repent – it’s likely that there’s still more to play out.

It will be interesting to see how long the Board continues to attempt to minimise the damage, before recognising that their only job right now is to rebuild trust and credibility with shareholders, employees and the general public.

 

 

 

The marketing arms race (for board directors)

By | Content marketing, Marketing strategy, Thought leadership, Uncategorized | No Comments

There’s a bunch of analogies between non-executive directors and venture capital firms. But the most important one is for a long time they’ve both succeeded on a “rich get richer” model.

The ‘rich’ get ‘richer’ in both venture capital and board directorships

Ben Horowitz is a founder of Andreessen Horowitz (US venture capital firm). He’s also broadly recognised as one of the most influential people in technology right now.

In 2015 Horowitz gave an influential lecture at the Stanford Technology Ventures Program. In the lecture Horowitz talks about this idea that for a very long time in venture capital there were five leading firms. And those five firms got richer and richer by the year. Because the more deals they were involved in, the more deals came to them.

Like venture capital, the way you get elected to a board hasn't changed for a long time. A rich get richer effect means the more prestigious boards you currently sit on, the more attractive you are as a candidate

Like venture capital, the way you get elected to a board hasn’t changed for a long time. A rich get richer effect means the more prestigious boards you currently sit on, the more attractive you are as a candidate

The analogy to non-executive directors is pretty clear. For a director, the more prestigious boards you sit on, the more attractive you are as a board member. So the ‘rich’ get richer and secure the most exclusive non-executive director jobs.

That’s all very interesting, not entirely unexpected and completely unhelpful. What is very interesting and helpful is how Andreessen Horowitz broke this model and built the most influential venture firm in less than 5 years.

Andreessen Horowitz broke the rich-get-richer model in venture capital with a marketing ‘arms race’

As a venture firm, Andreessen Horowitz did something that no-one else had ever done in venture capital. They started marketing. And in a market where nobody has ever done marketing, that gets amazing cut through.

This strategy wouldn’t work today, because it’s now the default that every venture capital firm markets as aggressively as Andreessen Horowitz. So the strategy took them to the top of the market, and then closed up behind them.

It was basically the great marketing arms race in venture capital. Hear Ben Horowitz describe what happened at 33:15 of this lecture. 

My analogy to non-executive directors is pretty clear. If you want to get on boards, there’s a real opportunity to get cut through by marketing your opinions, your skills, your thought leadership. Almost nobody is doing this today. This will be hugely effective whilst there’s hardly anyone doing it, moderately effective when a few people start doing it actively, and then will be required ‘price of entry’.

As a non-executive director, you can either choose to lead or follow into the marketing ‘arms race’

As a potential non-executive director, you get to choose if you lead or follow into the marketing arms race. If you lead, you will get disproportionate rewards – in a similar way to Andreessen Horowitz in venture capital.

There is real first mover advantage in play with non-executive director marketing. As more and more NEDs start copying, the likelihood of your opinions standing out decreases. It’s your choice when to start – but have no doubt that In 5 years time all NEDs will be actively marketing what makes them different, unique and expert.

How to predict the future of your industry (and why it matters)

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No, I'm not really sure what it is either...

This friendly looking contraption was seen as the future of oceanography in 1963.

One of the hard truths about thought leadership is that it requires you to either predict, or create the future.

That doesn’t mean repeating the same ‘bold’ ideas that everyone in your industry already accepts as “the next big thing”.

For example: in technology today you can’t build thought leadership today with the idea that cloud computing is the next big thing. There’s no ‘leadership’ in that opinion, because 99%+ of the market already believes it to be the case.

Industry leadership requires you to generate opinions about the future that are differentiated. Your opinions must go above and beyond what most of your industry believes to be their future.

Takeaway 1: Thought leadership requires predictions about the future

Takeaway 2: Thought leadership requires predictions that aren’t already believed by a majority of your industry

That’s a short introduction into why thought leaders must predict the future. Now let’s talk about how you do it, with five big ideas to help you craft predictions about the future of your industry:

1. Just start (predicting what might happen in 10 years time)

The most important thing about predicting the future is to start doing it. Forget about some of the more detailed methods we’re going to talk about below. Just get into the habit of saying “In ten years time I think…” 

Takeaway 3: Start by predicting at a 10 year horizon.

Start by forcing yourself beyond the traditional 12 month forecasting window, and remember this quote when you think you might be overdoing it:

“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”
– Bill Gates

It’s really hard to get started, but there’s definitely a snowball effect. Once you start thinking at this timeframe, it gets much easier. You’ll quickly start connecting the dots around your predictions for the future.

Takeaway 4: The more prediction you do, the easier it becomes. 

Deal with the fact that you will be wrong about some things. That’s ok. Over a ten year window even the most experienced predictors will be wrong about many things.

But being wrong over the long term is less relevant that how well you establish the inevitability of the change. Because the 10 year future is most powerful as a catalyst for shorter term action. If the 10 year future comes with inevitability, the buyer may as well take action now – because they will have to at some stage in any case.

Takeaway 5: Accuracy matters. But inevitability matters more.

2. Extrapolate on patterns you already recognise

I was recently reading the fantastic Moonwalking with Einstein – It’s a NY Times bestseller about competitive memory championships by Joshua Foer.

It’s a great read. The author starts out reporting on the US memory championships, and gets sucked deeper and deeper into the world of competitive memory – eventually winning the US championship.

In the book, there’s a particularly interesting section talking about how experts become experts. Did you know, that in every chess grand master’s development, there’s a point at which memorising the board becomes effortless? It becomes so easy for the budding chess master to memorise the board that they can play multiple games, straight out of their memory.

But an amazing thing happens if you arrange chess pieces on a board in a completely random fashion, in a pattern that could never have happened during normal gameplay. When the pieces are random, chess grandmasters has practically the same memory for the board as anyone else – completely hopeless.

Identifying the patterns of gameplay (each seen thousands of times) that allows such impressive and quick memorisation. In fact, MRIs of expert players show that the main part of the brain accessed during a chess game is long-term memory, not analytical reasoning (which is the case for beginners).

 

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An expert beats you because they’re better at pattern recognition. Not because they’re smarter.

The grandmaster doesn’t beat you because they can think ten moves ahead of you. She beats you because she can immediately identify the analogy to millions of previous games played.

This goes much further. In just about all fields, experts don’t win because they’re smarter. They win because they’re better at recognising patterns.

Takeaway 6: Expertise is pattern recognition

To connect back to thought leadership, I’d argue that every CEO and senior executive satisfies the criteria as an “expert” in their field. So if we buy into the idea that you’ve reached the top – not because you’re smarter – but because you’re better are recognising and acting on patterns, what does this mean?

In this case, building predictions isn’t about reasoning. It’s not about analysis. It’s about connecting the dots between the different patterns that you know to be the case. Once you’ve started there, it’s easy to take the next step and start identifying new patterns.

The first step is consciously realising the patterns that you already recognise. What are the big ‘patterns’ that sit underneath your expertise?

“It is said that the present is pregnant with the future. “

Voltaire 

3. Go from first principles

In How Google Works, Larry Page explains: “When I was younger and first started thinking about my future, I decided to either become a professor or start a company. Either option would give me the freedom to work from first principles. This autonomy of thought is behind almost everything we do at Google, behind our greatest successes and some of our impressive failures.”

Peter Thiel says in Zero to One: “The paradox of teaching entrepreneurship is that such a formula necessarily cannot exist; because every innovation is new and unique, no authority can prescribe in concrete terms how to be innovative. Indeed, the single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas.”

Takeaway 7: Pull your industry back to first principles. What widely accepted truths does this call into question?

4. Predict from history. Past cycles will repeat

History has a way of repeating itself. As George Santayana famously said:

“Those who cannot learn from history are doomed to repeat it.”

There are many patterns in every industry that have happened over and over again. There are lessons that have been learnt many times. Find the patterns within your industry from the the 60s, 70, 80s, 90s. etc.

Many, but not all of these patterns and cycles will repeat again in the future. The technology may have changed. But human nature has not.

Takeaway 8: Previous cycles within your industry will repeat. The technology may have changed. But human nature has not.

5. Learn from research and start with the outside view.

The latest research on forecasting shows that the best forecasters regualarly use something called the “outside view” when predicting the future.

This is a great quote from the Freakonomics podcast on “How to be less terrible at predicting the future” :

“One of the more distinctive differences between how superforecasters approach a problem and how regular forecasters approach it is that superforecasters are much more likely to use what Danny Kahneman calls the outside view, rather than the inside view. So, if I asked you a question about whether a particular sub-Saharan dictator is likely to survive in power for another year, a regular forecaster might get to the job by looking up facts about that particular dictator in that particular country, whereas the superforecasters might be more likely to sit back and say, “Hmm, well, how likely are sub-Saharan dictators who’ve been in power x years likely to survive another year?” And the answer for that particular question tends to be very high. It’s in the area of 85, 95 percent, depending on the exact numbers at stake. And that means their initial judgment will be based on the base rate of similar occurrences in the world. They’ll start off with that and then they will gradually adjust in response to idiosyncratic inside-view circumstances.”

Takeaway 9: Start with the outside view.


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