It's going to be a case study in business schools. It's also going to set the standard for things that can go wrong for a business. The habit of Samsung's Galaxy Note 7 smartphone to spontaneously combust is about as bad a situation that a company can face. Dramatic, dangerous and potentially affecting millions of people, the Note 7 was a supreme test for the company's crisis management team.
They didn't get it completely right but they didn't get it completely wrong either. What they did do was give all of us a lesson in dealing with our business nightmares.
The basic process of crisis management is to: 1. Identify the problem; 2. Fix the problem and compensate the victims; and 3. Make sure it doesn't happen again. And the company has to do all of those things publicly while showing concern and communicating that it cares.
Samsung dropped the ball at the first step. The company failed to identify the problem with its batteries. It switched a supplier and rolled out a recall and replacement that it thought had solved the problem.
If that replacement had worked, the story might have ended there. Samsung would have taken a hit to its reputation but people would quickly have moved on. But the problem was much deeper and more likely to have been the phone's slim design that brought the positive and negative electrodes together. So the replacement phones also went up in smoke, including one that caught fire on a plane.
Now Samsung had two crises: customer purchases that could burn down their homes; and company replacements that could bring down a plane.
At first, Samsung's reaction to the recall problem was slow and clunky. It looked confused. But it soon got things right. The company sent customers fireproof return boxes, complete with protective gloves, that they could use to send their phones back safely. And it killed the phone completely, a decision that wiped as much $17 billion off the company's market value and left the field open to its competitors.
But it was the right decision. Compare that move with Toyota's attempt to hide its gas pedal problem that was blamed for uncontrolled acceleration. The car company tried to blame floor mats even as fatal accidents continued to happen. It was eventually fined $1.2 billion and had to recall more than 8 million vehicles... but only after as many as 89 people had died.
Owners of small businesses are less likely to face disasters the size of those that afflicted Samsung... or Toyota. But we do sometimes get things wrong and a one-in-a-million chance of a problem sounds fine until you sell a couple of million units. The most important lesson to take away from Samsung's actions is first to make sure that you identify the problem quickly and accurately. Then take all the steps you need to fix it, even when those steps are expensive. It might cost a lot of money in the short term but it will save money in the long term and might just save the company.