The Top 15 Crises Of 2017: Part 1 Of 3

1. Apple Slows Its Old Phones

Last December, not long after rolling out its $1,000 iPhone X, Apple fessed up to what iPhone users long suspected: its software slowed down older phones. The company refuted consumer charges that doing so was a ploy to drive new phone sales. Rather, it said, the slowdown was designed to counteract battery problems in older iPhones that could send them crashing.

Within a few days, Apple issued a heartfelt online apology, vowing to never forget or take for granted its customers’ “faith and support.”  The tech giant offered customers a deal, slashing the price of replacement batteries from $79 to $29, with the promise that a new one would get that iPhone 6 or later up to speed.

Consumers, however, didn’t buy it. The first class-action consumer fraud lawsuit was filed in Illinois less than a week after Apple’s admission.  “For everyone who had a conspiracy theory about what was happening, they are feeling vindicated, like they have been right all along,” said Carreen Winters, MWWPR’s chairman and reputation and chief strategy officer. “And to some degree they are.”

Winters said Apple could have weathered such criticism better, had its response been “quicker, more transparent and more personal.”

“For years, people have been saying when a new phone comes out (their old one gets bugs) and Apple has pooh-poohed that,” she said. “The fact that they were not particular truthful about that until now is problematic,” Winters said.

The response also suffered from bad tone, she said. Anonymous online apologies simply don’t cut it with loyalists whose history with Apple dates back to Steve Jobs’ mea culpa-style ways.  “The personal connection and ethos in the era of Steve Jobs feels very different than what we are seeing from Apple right now,” Winters said.

On top of that, Apple should have risen to the occasion by giving away replacement batteries rather than simply reduce the price. “When you make a mistake, you should fix it on your own dime, not the consumers’” she said.

Apple’s response also failed to acknowledge the context in which the crisis occurred — amidst the launch of the iPhone X, which, is not only Apple’s most expensive iPhone ever, but doesn’t necessarily qualifier for phone service providers’ discount plans.

Because Apple enjoys “bulletproof customer loyalty,” and has been “brilliant” in developing its cross-device iOS platform, Winters doesn’t expect the company to take too big a hit from this most recent episode.

“They have pretty much not had to worry about whether they had a misstep along the way,” Winters said. “But If you make enough of those missteps … and if they come at a time when the price of your phone goes from having two zeroes to three zeroes … eventually it becomes a problem.”—DM

2. Equifax Data Breach

It seems as though every crisis list in recent years has included at least one data breach story (last year we featured Yahoo!) and among this year’s bumper crop Equifax was the standout, not only in terms of size (143 million Americans were effected) but also in terms of the way in which it was handled (a six week delay before acknowledging the issue, no direct outreach to those affected and a website that didn’t work, charging people to freeze their credit, and more).

Little wonder then that PR professionals were more or less united in their harsh words for the company’s PR response.

“The Equifax data breach… was one of the worse data breaches ever, and the company’s response may be one of the worst crisis management reactions ever, or at least in recent times,” said William Comcowich, founder of CyberAlert and now a director at successor firm Glean.info.

Thom Weidlich, chief content officer for CrisisResponsePro, added: “Equifax has constantly been reacting to backlashes because it hasn’t thought through how its response and its policies would be received…. The [initial] press release contained the basic facts… [but] made almost no attempt to connect with consumers.” In an accompanying video statement, Wellich complained, “Smith drones on in a monotone while reading from a TelePrompTer. He appears completely bored.”

Perhaps Smith’s boredom can be explained by the fact that consumers have virtually no control over the company’s access to or use of their data. As Bruce Schneier, lecturer at the Harvard Kennedy School and a fellow at the Berkman-Klein Center for Internet & Society, explained: “The market can't fix this. Markets work because buyers choose between sellers, and sellers compete for buyers. In case you didn't notice, you're not Equifax's customer. You're its product.”—PH

3. Bell Pottinger Tarnishes PR’s Image

For a few weeks late last summer, PR became the story. The inglorious collapse of the once-legendary Bell Pottinger dominated the headlines and ushered in (we hope) the start of a new, more ethical era in public relations – or at least one in which ethics are a minimum requirement rather than an option.

Things were always going to come to a head at the firm eventually, after years of questionable boundaries and self-confessed “dark arts” tactics with some particularly controversial clients. Finally, in August 2017, South Africa’s opposition party, the Democratic Alliance, raised a complaint with UK professional body the PRCA over Bell Pottinger’s racially-divisive work for Oakbay, owned by the Gupta family, allies of President Jacob Zuma. It was the catalyst for the PR firm’s ultimate demise.

The PRCA’s professional practices committee concluded that Bell Pottinger was in breach of its code of conduct, and the agency duly appealed. Then CEO James Henderson, who had promised a new start when he had taken over the leadership, and had finally managed to part ways with founder Lord Bell just 12 months earlier, resigned.

But even this high-profile scalp was too late. On 4 September PRCA CEO Francis Ingham announced the expulsion of Bell Pottinger from its membership, the first time the organisation had ever thrown an agency out, saying it had “brought the PR and communications industry into disrepute.”

The move was widely cheered, with Edelman CEO Richard Edelman saying it was “a proud moment for the PR industry”. Expelling Bell Pottinger from the PRCA was in theory nothing more than a “red flag”, but from that moment the firm unravelled quickly, going into administration just a week later.

Brendan May, chairman of sustainability advisory firm Robertsbridge, says of the case: "The main surprise in the reputational and then commercial collapse of Bell Pottinger was that anyone was surprised. To say this was a company that had ‘previous’ is something of an understatement.”

And he adds: “Schadenfreude on the Bell Pottinger case could prove premature. For who can really believe it to be an isolated case? There are firms all over the world working for wealthy clients who would not get any share of voice at all were it not for their capacity to pay for PR consultancies to act as their mouthpiece, deploying underhand tactics and generating misleading content. To suggest this is a one off is woefully optimistic.”

As my colleague Arun Sudhaman pointed out in his excellent piece during that week in September, when le tout PR was talking about the case, this was not really a moment to crow. It was, after all, merely the rather explosive start of weeding out further unethical practice in the PR industry, not an end in itself. The reputation of the reputation-makers still requires work.

May says the lesson for the communications industry is to have meaningful standards, ethics and risk procedures in place: “If you don’t have real values, define them clearly, and practice them in your day-to-day operations, you put your future existence at risk. Things to which many once turned a blind eye are no longer tolerated. Not by a new generation entering the job market, not by agency leaders, nor by clients. Moral bankruptcy is as old as the PR industry. Commercial bankruptcy is now as big a risk."—MPS

4. Aldi’s Food Safety Issues

Last year’s big European food safety crisis was egg shaped. Millions of eggs produced on Dutch farms were blocked from sale in early August after some were found to contain high levels of the toxic insecticide fipronil, which is banned from use in the production of food for human consumption.

The authorities acted swiftly, shutting about 180 Dutch farms, with the European Commission saying: “The contaminated eggs have been traced and withdrawn from the market and the situation is under control.”

The following day, Aldi announced it was pulling all Dutch eggs from its shelves in Germany, and said it was making the move “purely as a precaution”.

On the face of it, this was textbook food safety crisis management: fast, comprehensive, and putting the customer first.

MSL Germany CEO Wigan Salazar, who heads up crisis management for MSL clients across EMEA, said Aldi’s move was effective, but also shrewd: “Demand for eggs had gone down significantly as people just stopped buying them in Germany, so Aldi would not lose much in terms of sales by withdrawing the Dutch eggs. I work a lot on crises and issues where companies do bear the financial brunt, but in this case Aldi could afford to take a stand.”

Salazar points out that although traces of pesticides in eggs were clearly not ideal, the risk to human health was actually not huge; the World Health Organisation says the insecticide concerned is considered “moderately hazardous”.

“What Aldi was really addressing was the classic German reaction to a health scare. They were well-attuned to German consumers being hyper-protective. It was a smart move, but there was also a populist element to it. After all, Aldi itself was not under any particular pressure: it wasn’t the subject of the crisis and was not the target of any wrath.”

But Salazar said on balance Aldi did a good job as part of the retail ecosystem, where the supply chain is always hard to control: “What I liked about it was that in its comms Aldi said it needed clarification on the situation before they started to sell eggs again. It reassured consumers that they would be prudent and ensure everything was OK with the supply when they did reintroduce Dutch eggs.”

Aldi’s quick response also ensured the crisis did not run and run: after the supermarket’s announcement, there was barely any further coverage in the trade or mainstream media.—MPS

5. EY’s Awards Debacle

In an interesting example of how not to handle a conflict of interest, accounting firm EY appeared to kill off its own EY Business Journalism Awards in New Zealand last year, after it disqualified an entry that was critical of one of its clients.

The awards were intended to raise the profile of business journalism in helping to build trust and confidence in the markets. But one entry, a piece of investigative journalism in leading New Zealand publication National Business Review by journalist Karyn Scherer, exposed questionable sales tactics and dodgy accounting at photocopier and printing company Fuji Xerox New Zealand— a firm audited by EY.

EY disqualified the piece, prompting one of the independent judges to resign, and in a display of solidarity, other journalists and publishers withdrew their own entries from the awards. It was a short step to the awards being cancelled altogether.

Karyn Arkell, MD of Auckland reputation management specialist Grace, says: “When the conflict became apparent, EY failed to handle this adequately (some would argue ethically) and the integrity of the awards was therefore totally undermined. The media – the participants in the awards – voted with their feet. EY took the egg on its face.”

Arkell says the issue became significantly worse when EY failed to respond to the criticism that ensued or to manage the issue. “The core issue, while uncomfortable, is often a long way from representing a lethal blow. It’s the decisions that are taken next which determine the real impact to reputation.”

For a global professional services company such as EY there will always be many of areas of risk; the awards were perhaps not the best vehicle for EY in the first place, says Arkell: “As soon as you align your brand with an initiative that highlights excellence in any area, you are inviting scrutiny of your own credentials. For the partnership to make sense, you want to be certain of your own values, actions and track record, and what action you would take if you were surprised in this regard. As soon as you invite attention in this country, you have to be prepared for positive and negative attention and have a clear strategy for both.”

Best practice would have dictated that the EY representatives on the judging panel removed themselves from judging as soon as the potential conflict emerged.

Arkell concludes: “I would have personally loved to see Karyn Scherer’s work honoured, if it deserved it, with someone from EY handing her the award themselves and in doing so facing its potential critics square on to acknowledge that the award highlighted why we have never needed a strong independent business media more, and even its own business was learning important lessons through this process.”