Will Samsung survive the exploding Galaxy disaster? This crisis expert weighs in

A burnt Samsung Galaxy S7 phone.
Source: YouTube
A burnt Samsung Galaxy S7 phone.

The Samsung Galaxy 7 has vanished from the marketplace almost as quickly as it entered, and the business pundits are grabbing their megaphones and invoking "transparency" as the solution, the surefire sign that they've got no answers.

Some of the most idiotic advice given to Samsung by professional kibitzers goes like this: The company should have immediately recognized the extent of the problem, recalled it and apologized the way Johnson & Johnson did during the 1982 Tylenol crisis, when seven people died after taking cyanide-laced capsules of the painkiller Extra-Strength Tylenol. J&J recovered, rolling out tamper-proof packaging just a few months later. The Tylenol case happened before the inherently unforgiving internet, which is now usually the first place that a crisis starts to play out. The call for instant miracles in the Samsung case ignores the practical realities of the brutal conditions in which today's conglomerates operate.

Yes, the Samsung affair is a mess, but damage control is, too, so let me offer a glimpse into what it's like to get caught up in a runaway crisis, a phenomenon that I refer to as the "fiasco vortex."

The first thing that happens in a crisis is nothing. People underreact. Early-stage crisis management is fraught with both denial and naiveté often anchored in the sheer hope that the problem will just go away. Everyone assures everybody else that, to quote Dustin Hoffman in Wag the Dog, "this is nothing, this is nothing!"

"Companies are set up to make and sell stuff, not to manage crises, so when one actually hits, I find myself advising a collection of highly capable amateurs primarily motivated by stopping the intense pain they are feeling."

At the outset of a crisis, problems are often downplayed and sanitized so that management rarely even knows the extent of the hazard. This isn't a conspiracy as much as it is the human tendency to find both delivering bad news and the possibility of unknowns painful.

My experience has been that companies often don't even know what is causing a problem despite the tendency for journalists and consumers to believe all hazards are not only fully understood but covered up with malice.

A corporation isn't a monolith — it is a collection of thousands of individuals, loose confederacies and decentralized components that have some attenuated influence, but not raw power over one another. Accordingly, the first version of events that I hear is rarely the same as the second and completely different from the twentieth.

Here's the thing about underreacting: Problems often do go away after the first catalyst so sometimes downplaying the chances of a full-blown crisis are rational responses to initial fact-finding. But sometimes, as with Samsung, they don't go away, and this depends upon whether there is a genuine hazard or just motivated adversaries hell-bent on destroying a target as there were in the Toyota and Audi "sudden acceleration" crises, which were driven by media hysteria.

Samsung, in fact, did take major actions after the initial reports of phone fires turned out to be signs of a larger problem: In September, the company announced it would replace all of the 2.5 million phones that had shipped to date. But in the fiasco vortex, nothing is ever enough.

The second stage of the fiasco vortex is sheer chaos and terror. Companies are set up to make and sell stuff, not to manage crises, so when one actually hits, I find myself advising a collection of highly capable amateurs primarily motivated by stopping the intense pain they are feeling. Much of this pain is caused by journalists promising that "If you just come clean, this whole thing will go away."

No, it won't. Besides the company doesn't even know enough to come clean with.

Brutal coverage tends to start with online reports of dangerous products, then the "old" media rain down a cascade of allegations including some form of optical validation in the form of video footage either of a malfunctioning product or disturbing interviews with that product's victims.

Next comes a tsunami of hostile inquiries from investigative media, government agencies, activist NGOs and short sellers. The plaintiffs' lawyers file suit.

Then come the cavalcade of "experts" who take to the airwaves to declare the crisis to have been botched by the company, after all, producers don't like to book guests who'll say the company is doing the best they can, all things considered. The demand for the CEOs scalp soon follows, and the deathwatch begins.

The company's stock then plummets, and every vendor and employee that has even the most tangential link to the controversy — of which there may be hundreds — hunker down, raise the drawbridge and lawyer up. Social media goes metastatic.

This is about the time pundit flacks begin invoking the shibboleth of "transparency," an impossibility given that the landscape has degenerated into warring fiefdoms that resemble "Game of Thrones," dragons included. That buzzing in the CEO's ears is the sound of a congressional subcommittee sharpening it's carving knives.

The beginning of the crisis' resolution comes once the company determines the extent to which it has a tangible problem versus the misperception of one. Samsung, by most reports, has such a problem: Its phones are catching fire and there are videos online that appear to show this. This is not a "communications problem," some kind of misunderstanding that can be resolved via a digital age charm offensive.

Job one right now is to fix the phone and get a really good one that doesn't catch fire back onto the market. Then there is the casserole of other damage control elements: firing bad actors; reshuffling management; reorganizing the supply chain, settling some lawsuits while fighting others; offering consumer rebates; executive apologies; mortifying congressional hearings and paying government fines; expensive marketing campaigns; charm offensives with shareholders, employees and vendors; and, of course, blue-ribbon panel investigations where something — and someone — is blamed for the fiasco.

Despite its out-of-the-gate stumbles, Samsung's decision to kill the Galaxy Note 7 was bold and shows that the company is willing and able to take the risks necessary to save its mobile enterprise not to mention its corporate reputation. Odds are that the current doomsaying will fade. Good companies like Samsung survive their crises all the time and even roar back as Toyota did in the wake of sudden acceleration, as did J&J after dozens of withering recalls in recent years.

So when will Samsung's crisis end? Here's a clue about when the beginning of the end will come: Media coverage of the BP oil spill dropped off a cliff the moment the company plugged the leak — and the camera on the ocean floor stopped filming the gusher. Nothing makes a crisis go away faster than fixing the problem.

Commentary by Eric Dezenhall, CEO of Dezenhall Resources, a crisis-management firm in Washington, DC. He is also the author of "Glass Jaw: A Manifesto for Defending Fragile Reputations in an Age of Instant Scandal." Follow him on Twitter @EricDezenhall.

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