Episode 35: On Crises
Out of crisis, comes opportunity. Sometimes. But better to avoid a crisis altogether if possible, and also better to have a plan (or even a first step of a plan) if you do face a crisis, as many entrepreneurs will. Prepare and predict. Do a pre-mortem. Mitigate risks. Activate your plan and if that fails, be nimble. Whatever you do, do the right thing to keep your customers, employees and those in the blast zone safe. Get that right and you may just save the business and live to fight another day. It’s boot camp time so jump on over to the obstacle course with Doug and Glenn for another episode of Conversations on Startups.
Transcript
Glenn Suart 0:00
The crisis was the tornado. If they hadn’t had that tornado, and they hadn’t sort of pivoted so quickly to be successful, you wouldn’t have Best Buy today. That whole kind of crazy marketing in the beginning was very successful for them, but only… they did it because they were facing a crisis.
Doug Ross 0:29
Welcome to Conversations on Startups, a podcast brought to you by Douglas Ross, author of the book, Spark Click Go: How to Bring Your Creative Business Idea to Life, and Glenn Suart, of Today’s Great Idea, a radio series featuring over 300 origin stories of businesses, brands and inventions that have changed the culture. Welcome to today’s conversation.
Doug Ross 0:52
Hey, Glenn, how ya doin’?
Glenn Suart 0:54
Great, Doug, how’s life in the US?
Doug Ross 0:57
It’s good, as long as you don’t read the news.
Glenn Suart 1:00
Well, it’s just one crisis after another.
Doug Ross 1:03
Yeah, sadly. So yeah, absolutely true. And that is the subject of our conversation today is… crises… On Crises. So, we’re going to talk all about these things. How to manage them? How to maybe predict or prevent them? Are there opportunities in crises? That kind of thing. How’s that sound to you, Glenn?
Glenn Suart 1:27
Sounds very good to me. I think last time I was telling you, we were talking about… Tylenol is the classic story they teach in… in business school about the crisis back in the early 80s when someone – they never really caught who it was – poisoned several Tylenol bottles and people died. And Johnson and Johnson faced a major crisis overnight. The way they handled it was… has become a textbook [case] for not only doing what’s right, but also saving and growing a brand.
Doug Ross 2:02
Amazing. So somehow they turned it into an opportunity.
Glenn Suart 2:05
Yeah, well, obviously… what the first thing they did was – and you think about this – the scale they had, they already were… had Tylenol bottles everywhere across the US. They literally pulled it all back, at a cost of hundreds of millions of dollars, then they had to dump all the product. And what they did, though, because consumer trust was so important, they redesigned the lids. So, you had these (now) protected lids that we are familiar with today, but 40 years ago didn’t happen. And so, when they took that off the shelf, people thought of… that was wonderful… and then… they believed in their products so much to protect their customers over profits. And then they, by introducing the safety cap, made sure that the customers weren’t going to feel anxious when they were taking the product again. And, of course, every other company went to the same thing after a while to protect their brands as well. So what a great story out of tragedy, fortunately.
Doug Ross 3:02
So they took a large short term financial hit in order to maintain trust.
Glenn Suart 3:08
Yeah, very much so.
Doug Ross 3:09
Yeah, something that’s… can be undervalued [yeah]. You take it for granted that you’ve got trust until you lose it… oh, my God, do you feel it then.
Glenn Suart 3:17
It’s interesting because obviously that was a crisis that was not… they had no control over it… was totally unexpected, nobody would could have predicted it very easily at the time, and of course usually a crisis is unpredictable. But sometimes it can be predictable. I got a story for you. Let’s see if you can guess which brand I’m talking about.
Doug Ross 3:38
Okay, great.
Bridget 3:41
You’re listening to Conversations on Startups with Doug and Glenn. Thanks for joining us. Let’s get back to the show.
Glenn Suart 3:47
So, August Horch, lived in…
Doug Ross 3:53
Excuse me? Say that again.
Glenn Suart 3:56
August Horch, is the guy’s name. In Germany. He started a company to build cars. But he named the company of course after himself, Horch Automobile…and… Automobil-Werke[s]. And things started off okay. But then he had a falling out with the other owners and left to start a new competitor that he wanted to name after himself, of course, because that’s his name.
Doug Ross 4:19
Absolutely.
Glenn Suart 4:20
But you can imagine he was suddenly in a crisis because his previous partners were not too pleased. He was going to try to use their name again. And so they went right to the German Supreme Court. And that Supreme Court sided with the partner saying that Horch was now a registered trademark, you can’t use that. So one day while he was arguing over possible names with some close associates in his apartment – and they couldn’t agree on anything – the son of one of his associates, who was doing his Latin homework in the corner, heard what was going on and said Horch roughly means to listen or to hear in German, so maybe use the Latin equivalent, to listen instead. So use the Latin version of his name. [Ok] Well that stuck, and today, over 100 years later, the automotive… company that August Horch named after that Latin version of his last name is one of the most recognized and valuable brands, not just automotive brands, but brands worldwide. And it’s more fun to say that I drive a Horch.
Doug Ross 5:25
Sometimes you shouldn’t use your last name for your brand name…
Glenn Suart 5:29
… no….
Doug Ross 5:31
….so [he got] lucky here…
Glenn Suart 5:32
There you go. So what company do you think it is?
Doug Ross 5:34
Well, I’m thinking it’s not BMW, and it’s not Mercedes, since Mercedes predated these automobile makers. They’re the originator of the automobile… I’m thinking Audi.
Glenn Suart 5:47
Audi. Latin for, listen. Audi, audio, you know, type of thing.
Doug Ross 5:51
Yeah, makes sense.
Glenn Suart 5:51
It makes very good sense. So here’s a guy, for whatever reason, the falling out – don’t know who’s responsible for it. But suddenly, you’re about to start something new and you face a crisis, because you can’t brand the way you were wanting to brand, you’ve got to come up with a whole different approach, you know, obviously wasn’t that terrible, but it was like, you have to do something pretty serious. Sometimes crises are small, or they can be dealt with, other times like the Tylenol thing, it’s a natural disaster. We’ve talked about Best Buy before. And Best Buy was born out of a tornado that struck the Sound of Music Store Company, in Minnesota, and wiped out their main store. And so they had a Best Buy weekend sale, which whatever they had leftover and did really, really well. And so they changed the name to Best Buy. The crisis was the tornado. If they hadn’t had that tornado, and they hadn’t sort of pivoted so quickly to be successful, you wouldn’t have Best Buy today. That whole kind of crazy marketing in the beginning was very successful for them. But only… they did it because they were facing a crisis.
Doug Ross 6:59
Well, and of course, also with this crisis that we’ve been living with, the COVID 19 crisis [Yeah], there’s been a lot of innovation there as well. So we record these conversations on Zoom, as an example. Zoom was around for quite a long time before 2019. I’m not sure when but I would place it around 2014, something like that, and [Zoom] was used a lot by the tech sector. But the huge adoption of it came during this crisis when we had to become inventive. And I think I quoted you a figure [>20x] recently about how quickly companies… people have adopted technology in this crisis. So there’s… there are opportunities in crises, there’s no question about it. But you know, Glenn, you’ve mentioned that you can’t necessarily predict crises, something like the one that happened to Best Buy – I’ll grant you that not the specific one – but you could think of these sort of what have been called, I think they’re still called, acts of God – you could think, well, What if an act of God happens? What do we do? And then you can come up with a solution, at least maybe a financial one, like insurance as an example. But if you’re a startup, you’re the founder, you’re getting going what other kinds of things can you think about? What would your buckets be where crises can come from?
Glenn Suart 8:23
If you think about it, there’s lots. The crisis is your… your partner… your founder, a critical employee gets hit by a bus, obviously, or you have a fire, or your product which is coming over on a container falls off [the] side of the ship. All these things you would never predict sometimes, but you can think about them. And then you think how you react. But boy, oh, boy yeah, that would be tough. What about you? What do you think about when you think about crisis that you might face?
Doug Ross 8:23
Some of those. I would think another one would be an investor either fails to continue investing or fails to honor a commitment, cashflow crises in general could certainly occur, you could lose a big customer or demand could suddenly dry up, you know, these are some of these sort of predictable things. You could have a product quality issue that… you’ve got a lot out there, a big installed base of whatever it is that you make, and suddenly there’s a quality problem or, you know, a safety problem that comes up. You mentioned Tylenol before. Certainly a big example recently was Boeing, and that jetliner they had that they put in the air.
Glenn Suart 9:35
737 Max.
Doug Ross 9:37
Right, exactly. Which, whenever I fly with my wife, we look in the seat pocket in front of us and she says, Isn’t this that plane that had that issue? And this is where I do Oh no, honey, this was not it, that was another one. Even though I’m thinking yeah, 737 Max, not good.
Glenn Suart 9:58
To that point, we sort of touched on a little bit, but what do you do if you’re trying to deal with these?
Doug Ross 10:04
Well, so I think what would be very useful for people to do that are running startups is to have… and it’s tough to do because you’re thinking about your product, your customer, you’ve got the cash, you’ve… you’ve got the day to day and it’s a big challenge, there’s always something. But it does make sense to have a little bit of a blue sky session, or some people call these pre-mortems.
Glenn Suart 10:26
Oh, good idea, yeah.
Doug Ross 10:27
And you think about what the possible risks could be. You and I just brainstorming came up with half a dozen or more. And so you come up with your list and then you go from there and you talk about what you would do to potentially avoid this risk, or What’s my plan if this happens? So for example, let’s take the one you mentioned about fire. Certainly that can happen. Okay, so fire can happen to anybody. What kind of mitigations could you think of… like off the top of my head I would say, well, let’s not put all of our inventory in the same place. Let’s put it in two places. Suddenly, we’ve cut the risk in half. But it’s not really, to me, the importance of the answer, it’s more the importance of thinking about what these possible risks are, and then how to mitigate them or what your plan is that you’re going to implement when you’re in the middle of this risk [crisis]. Just sticking with that fire metaphor, the time to put a smoke detector in a place is before a fire occurs not after as human nature is… is want to be.
Doug Ross 11:39
Hey podcast listeners, we’re gonna take a short break now. If you’re enjoying the show, feel free to invite your friends, remember to subscribe, and if you want to help spread the word leave us a review on Apple Podcasts or your favorite podcast app. Each episode of Conversations on Startups focuses on a single topic. If you want to comment on something you’ve heard on the podcast, or suggest a topic for us to cover in a future episode, send an email to: go@todaysgreatidea.com or douglas@sparkclickgo.com. Glenn and I appreciate you and hope you find our uncut and unrehearsed stories, perspectives, and tips helpful. Speaking of helpful stuff, let’s pick up where we left off.
Glenn Suart 12:24
Ironically, you just mentioned the smoke detector, and I don’t have the full details here, but I did a story on the smoke detector.
Doug Ross 12:31
Oh, is that right? Okay. What’s the origin story there?
Glenn Suart 12:34
Well, this origin was… it was born out of a crisis for the founder himself. He was trying to create this device – it took him 10 years to figure this out to do something else – he happened to… he put his whole financing into this business, it wasn’t going very well, and his house, everything. And then he had a technician with him and the detector seemed to go off every time the guy was exhaling… smoking a cigarette. He’s going What the hell’s going on? And then he realized, here’s an opportunity. It wasn’t a fire that created [the] smoke detector, it was just a crisis for the guy himself.
Doug Ross 13:07
Oh, that’s a good one. I’ve got another fire related one. And this is how businesses can sometimes start. So it’s a fire. It was a New York City fireman and he had an horrific fire that he and his… multiple crews, it was a five alarm fire something like this in the Bronx. And it was a special kind of fire, a wind driven fire that happens if you’ve got a window open on one side of the building and another window on the other side creating this sort of draft. And so the fire was drawn into the building really quickly through one apartment where a guy left his cigarette burning, and that’s where the fire started, but a woman at the opposite side of a hall – this is a… picture a very long, a third of a football field length hallway or something like that – she steps out on her… in front of her door because [of] the smoke alarms, and she is engulfed in flames and smoke. So, he sat back after this and said What can I do? And [he then] created a product, which he called the KO Fire Blanket [Curtain], I believe it is? I might have the initial wrong there. But he saw a problem and came up with a solution, which is many of the things that we talk about… you see these issues, How can I prevent something similar in the future? Okay, I got a skill testing question for you, Glenn.
Glenn Suart 14:29
Yep. I’m ready.
Doug Ross 14:30
All right, here we go. What do these companies have in common? Microsoft, Uber, iRobot, Square, General Motors, and WhatsApp have in common?
Glenn Suart 14:42
Well, they’re all technology companies. They all rely on the internet.
Doug Ross 14:45
Indeed, true. [Not really] Five points for that. The other thing they have in common is that they were all born out of a time of crises. So General Motors around the First World war. Some of these other ones, Microsoft, 1975, post OPEC. Uber, ’09, right around the Great Recession, time. WhatsApp, same sort of time period. And it’s again, just illustrating that things can seem bad, but there’s almost always an opportunity in those times. One other company, and I’m gonna send you this as well for Today’s Great Idea, Have you ever heard of the game called, The Farm Game?
Glenn Suart 15:28
No.
Doug Ross 15:28
Okay, so this is a game created by a farmer in bad times. Crop prices went to zero… and this is the ’70’s as well, I believe, and he was in Washington [State]. And he’d just purchased a large farm. Why? Because it was great farmland, all of that, they get no rain, speaking of crises, prices go down for these crops, and you can’t even produce the crops. And so he thought, what can I do? I can create a game about the farming life. And he called it The Farm Game. And it’s sold hundreds of thousands of games.
Glenn Suart 16:03
Wow.
Doug Ross 16:03
Yeah. So out of crisis is born… is born a new idea. We’ve talked about preventing these, coming up with opportunities in times of crisis, and some really interesting stories. But if you’re actually in a crisis, you haven’t done this preventative stuff, or you thought about it and [now] you’re in an actual crisis. Any thoughts there [on what to do]? You had the Tylenol example, which was a good one. Make sure you put safety first and haul this thing off of the market. So that could generalize. Do whatever you need to maintain trust. What other things should you be thinking about doing in a crisis, do you think?
Glenn Suart 16:39
Well, it all comes down to… to exactly… protect your customers, as best you can. You protect your employees and partners as best you can. And then you work out from there. Whatever it is, it sounds goofy a little bit, but a window closed is a door opened, or whatever, the vice versa. These things happen, you don’t know what the outcome will be. But you deal with it as best you can to protect your customers, employees, your investors. But make sure that you get everything right and then come to figure out how [what] the business [warrants / needs]. When we were talking about Whole Foods and [the time] they had that fire when they were just one store. The whole community rallied around them to restock and get them back up in 30 days. Perfect example of doing the right thing. You can’t do it all yourself, you need help and people are willing to help, so be open to that. I guess that’s one of the things in a crisis, be open to help. You still gotta make decisions, though. How you make those decisions is really important.
Doug Ross 16:40
Yeah, I think you have to be quicker on the decisions. And you may need to centralize things… create a kind of a… command center [yeah], as it were. So you’ve got communications coming in, going out to the necessary parties, and decisions are made quickly and as transparently as possible with these things in mind – safety for customers, employees… it’s really survival of the business in many cases [that’s right], and then you put your head up and think about where your future is going forward. And maybe you do some things differently. Maybe you pivot, maybe… maybe you just go back to the same things. Who knows? And you think about how you can protect your business from other such threats.
Glenn Suart 18:25
The one thing I was gonna say is, besides taking action, communicate. That’s the other thing, like Johnson and Johnson was very open with their communication, as an example. They weren’t just pulling stuff off the shelf. They’re telling everybody, we think this is the right thing to do. We’re a big company, we’re going to lose money, but essentially the message was You mattered to us more than money. [Yeah} That communication was important. So communication during crisis – very important.
Doug Ross 18:52
I love that. And the kind of communication that expresses that care is not [the] covering up kind of thing, a close sort of communication style. It’s more frequent than what you normally do. I think that can just pay massive dividends for you. You should be telling your customers well, let’s say it’s a supply problem for safety or for some other reason – your boatload of products sunk in the in the Pacific Ocean – okay, so you say, Well, look, this is the crisis right now, here’s what we’re doing, here’s when we expect to be through this, maybe a suggestion as to what people should do in the interim, all that kind of stuff and make it readily accessible [anything you recommend] .
Ben 19:35
You’re listening to Conversations on Startups with Doug and Glenn. Thanks for joining us.
Doug Ross 19:43
Okay, Glenn, great. So, any last words on crises and crises management?
Glenn Suart 19:48
No, I think we’ve summed it up reasonably well. I think you’re absolutely right, first thing if you can, try to prevent a crisis or deal with it ahead of time – anticipate what you would do if something bad happened, like 911, or you had a fire, or whatever. Just the act of thinking that through will help you prepare for something that’s unexpected.
Doug Ross 20:12
Yeah, absolutely. So then when you’re in that crisis management room, you say, Okay, guys, let’s implement what we thought. Does it apply? Yes, no. And if it doesn’t, then you’ve just got to be agile, and on your feet. We had a person, when 911 happened, we had a number of customers… speaking of customers, we had a lot of customers down in Manhattan. And, actually I’d been there until a couple days before as well [but] I had to go back to Toronto. And we had someone on site who was our travel person who had arranged travel for these, let’s say it was, 50 customers that we had with us down there, and she, as soon as this happened, immediately booked people not on planes, because she knew that that was just going to be a non starter, but on trains back up to Toronto. And then we, at the other end, receiving them at Union Station in Toronto, we met these customers of ours with some food [and] with transportation to wherever they were going. We made a command and control room, we made a list of everybody that we had there, Do we have everyone (?), all of those things also happened, and that was managing a crisis. And we came out of that… nobody was injured. Actually, these customers were doctors, and a lot of them volunteered to go and help out when 911 happened [of course, of course] they were not needed, because unfortunately, a lot of people that perished in that crisis… in that attack, they just perished.
Glenn Suart 21:39
Yeah.
Doug Ross 21:39
And so they didn’t need that medical attention. But anyway, coming out of that, I think those people that were a part of our… they were customers of ours, felt that we cared about them. And that was the right thing to do and helped a lot with the relationships as we… as we moved forward. So Glenn, okay, so that’s On Crisis.
Glenn Suart 21:39
Right.
Doug Ross 21:41
This is our penultimate conversation for the series. We’ll regroup, decide if we’re going to do more beyond this series, but for this particular series – this is episode 35 – and we’re going to have our final one, episode 36… next time [when] we are going to talk about Standing Out. So how to Stand Out. I think, very topical, given that in most areas there’s a plethora of choice for people out there. So, How to Stand Out is going to be the topic for our next conversation. We hope you’ll join us.
Glenn Suart 22:39
Absolutely, it’s a hard thing to do, but you gotta try. So, I’m Glenn Suart in Calgary.
Doug Ross 22:45
And I’m Doug Ross in Boston. We’ll see you next time.
Doug Ross 22:57
Conversations on Startups is a production of Glenn Suart and Douglas Ross. We hope you’re having fun listening but mostly that you take action on your business idea. For more inspiration visit our websites: todaysgreatidea.com and sparkclickgo.com. Another episode of Conversations on Startups will drop soon, or is already available to binge. Thanks for joining us, and remember to subscribe and invite your friends. See ya next time!
Transcribed by https://otter.ai