Disaster Management for Entrepreneurs
Disasters hover over entrepreneurs, like bees hover over honey. I doubt there is a single entrepreneur on earth (or heaven and hell) who has not encountered a business disaster. The question is: How do they manage?
I am inspired to present this important question to you, along with a few case studies and test your preparedness for business disasters:
Coke gets sued. By guess who?
23rd of April is a special day for me. That's the day my older daughter was born. But on the 23rd of April 1985, something else took birth. It was the launch of the “New Coke” by the Coca-Cola Company. The need to launch a ‘new flavor’ of Coke was driven by the declining share of Coke in the US market as compared to Pepsi. While Coke had a 60% market share after World War II, by 1983 that share had declined to just 24%, driven mainly by the incessant competition thrown up by the new, fresh, sweet tasting challenger called Pepsi.
Roberto Goizueta - the CEO of Coke at that time, was obsessed by improving his company’s market share and made it clear that he would do anything that was required, including changing the FLAVOR OF COKE to improve business.
After lots of research, lab R&D, consumer tests and surveys, a “New Coke” was launched.
Now, before you read on, put on your Entrepreneur Topi. Think of what you have just read; imagine the state of the mind of the CEO and his responsibilities to improve the fortunes of an iconic brand like Coke. Also consider that as humans, we are always taught sermons such as ‘change is a constant’; ‘if you don't change, you’re dead’, etc. This was a possible motivation to ‘change’ an old, pre-world war flavored drink with something new and with the times.
Once you have collected your thoughts, read on:
The “New Coke” after its launch was a complete disaster. It was and IS probably the greatest corporate disaster ever. Consider some of the events that occurred:
- Over 400,000 calls and protests were received by the Coca-Cola Company criticizing the change (this was before the era of the Internet; today, the volume of protests would have brought the world wide web down).
- Coke hired psychiatrists to listen to the calls. They reported that the calls from consumers, describing the pain they felt with the change in the Coke flavor resembled the pain that people shared when describing the death of their family members!
- A letter was addressed to the “Chief Dodo” of the Company (imagine you being called that by your OWN CONSUMER)
- Fidel Castro (yeah!!) and a long time Coke drinker protested about the change from Cuba! (If you are weak in history, you should know Castro was a sworn enemy of the USA).
To cap it all, a passionate Coke drinker filed a Class Action suit against the company for changing its flavor. Now, can you imagine getting sued by your own consumer for making a change in your own product?
In a couple of months, Coke hurriedly reverted to the old flavor and that was probably the best thing that could ever happen to the Company. Its market share more than rebounded and many new drinkers who had switched to Pepsi began gulping Coke. So dramatic was the increase in market share that some conspiracy theorists said that Coke had planned this all along, just to win back its sales!
Now why did I feature a business disaster from 1985, for readers, many of who were not even born at that time?!
Simply because this case teaches some classic lessons in business disasters for entrepreneurs and defines the rules of handling them:
i) Disasters happen to everyone. Be it the mighty Coke or be it you, the struggling cloud security startup.
ii) The consumer is ALWAYS right. Nobody, including God comes before the consumer. This teaches all entrepreneurs to cast aside their ‘gut’ and ‘insight’ when the consumer tells them otherwise.
iii) There is no EGO available in such matters. That commodity has zero supply. Entrepreneurs or CEOs have to become chicken and get ready to scurry around to rescue themselves and their companies or get beheaded.
I am sure you can think of many more lessons after you read up the case more carefully and determine your own personal takeaways.
Everything that flaps does not fly.
I am assuming you have played the highly irritating, obnoxious and impossible mobile game called ‘Flappy Bird’. If you haven’t, that's too bad. The game isn’t available anymore.
Flappy Bird, although short-lived, made history. ‘History’ for being the best example of a small entrepreneur committing public Hara-kiri.
Flappy Bird was first released as yet another game, by a Vietnamese gaming entrepreneur on the Apple iTunes store in May 2013. Nothing really happened to the game that year, but in early 2014 the game suddenly became extremely popular; and by February 2014 it had become the #1 free game on the iTunes store.
Now, as a gaming entrepreneur (with one game that also ranked #1), let me tell you that reaching that position is impossible. It’s ONLY a combination of luck, circumstances and an ‘unseen hand’ that propels you to that slot.
It was rumored that the Flappy Bird game was earning US$ 50,000 a day (Rs. 30+ lacs) and the world was going nuts playing it. At home, both of my daughters were huge fans of the game and I was being preached lessons such as, “Dad, this is the kind of game you should be making…”
All in all, Flappy Bird was “the” Bollywood version of ultimate success. A small-time entrepreneur with a simple idea strikes a big hit, earns global attention and millions of dollars.
What more could you ask for? Everyone I knew wanted to be him.
Then all of a sudden, the entrepreneur announced that he would be “pulling the game down” from the app stores! When I heard this, I LOL’d and thought this was just another PR stunt to get more downloads. But on February 10, 2014, the game was indeed pulled down.
The entrepreneur quoted vague reasons such as, “guilt for making a very addictive game”; “being frustrated with threats received from irritated players”, etc. The real reason why he pulled the game down remains unknown; although I suspect that it was because of intellectual property infringements of many games whose elements the entrepreneur had used to create this one classic game.
In this extreme case, unbelievable success became a business disaster for the entrepreneur!
Some of the lessons I learnt from this case included:
i) When overnight success happens, be prepared to handle public fury just as you would be prepared when you or your company have done something disastrous.
ii) Be open, transparent, public and HONEST in your position. Say “sorry” or “get lost” a million times if required. The Vietnamese entrepreneur did none of these things. He kept his reasons for pulling out vague and confused even his die-hard fans.
iii) When you become very successful, all the graves you have previously filled get dug out and examined. So be prepared for intense public scrutiny.
Some of the local examples of business disasters we have seen include how Vijay Mallya handled the grounding of his pet project Kingfisher Airways; the belligerent manner in which Subrata Roy treated government authorities that led to his arrest and insult to his reputation. I would also urge you to read up the recent cases of the BP Oil disaster and how Netflix tripped badly when it failed to read its consumer sentiments. In each of these cases, play the role of the entrepreneur and test how you would have reacted and the lessons you learn from these cases.
Business disasters test entrepreneurs like examinations test students. To pass is easy but to come out on top requires hard work, perseverance and most importantly presence of mind. As an entrepreneur, it is your job to be prepared. And always prepared for the worst even after you get ranked #1!
Also featured in the April 2014 issue of the Entrepreneur magazine (India):
I loved this article so much! Thanks Alok sir!
Really nice article Alok Sir.. Considering the point of COKE..do you think it was really a marketing gimmick by COKE?? because that could have even completely destroyed the brand had the New drinkers not shifted to COKE after COKE reversed back its flavour.
My son is happy that flappy is no more whatever be the reason for its pull down. But yes, for entrepreneurs the tag line should be "Success or disaster - never take it personally"