Crisis Communication in theYouTube age

The Asia Business Forum, March 24-25, 2008, JW Marriott, Kuala Lumpur, Malaysia

Presented by Julian Matthews, Director, Trinetizen Media

Crisis communications in the YouTube Age

Why you need to leverage on social media in your investor relations strategy

Case study 1: Dell laptop explodes at Japanese conference

By INQUIRER.net newsdesk: Wednesday 21 June 2006

An Inquirer reader attending a conference in Japan was sat just feet away from a laptop computer that suddenly exploded into flames, in what could have been a deadly accident.

Gaston, our astonished reader reports: "The damn thing was on fire and produced several explosions for more than five minutes"…

For the record, this is a Dell machine," notes Gaston. "It is only a matter of time until such an incident breaks out on a plane," he suggests.

Our witness managed to catch all the action in these amazing pictures….

Dell to recall 4 million laptop batteriesCNET News.com, August 14, 2006

Dell and the U.S. Consumer Product Safety Commission plan to recall 4.1 million notebook batteries on Tuesday, a company representative confirmed.

The recall affects certain Inspiron, Latitude and Precision mobile workstations shipped between April 2004 and July 18, 2006. Sony manufactured the batteries that are being recalled, the representative said.

This looks like the largest battery recall in the history of the electronics industry, said Roger Kay, an analyst with Endpoint Technologies Associates. "The scale of it is phenomenal."

Good news, get it out fast

Bad news, get it out faster

Sony delays response,problems deepen…

• Aug 15, 06: Dell recalls 4.1m batteries• Aug 24, 06: Apple recalls 1.8m batteries• Sept 15, 06: Virgin Atlantic, Qantas and Korean Air ban

use of Dell and Apple laptops on board its planes, unless the battery removed.

• Sept 28, 06:Lenovo/IBM: 526,000 batteries• Sept 29, 06:Dell increases recall to 4.2m • Sept 29, 06:Toshiba recalls 830,000 batteries

ThinkPad explodes in LAX airport

“So we're waiting for a flight in the United lounge at LAX, this guy comes running the wrong way, pushing other passengers out of the way and quickly drops his laptop on the floor. The thing immediately flares up like a giant firework for about 15 seconds, then catches fire…,” posting on Gizmodo.com, Sept 16, 2006

Crisis escalates, spreads virally

Sony finally responds…

Sept 30, 2006: Sony announces global recall of 9.6 million PC batteries. The recall and replacement would cost as much as 50 billion yen (about US$423 million).

Dell’s Response

1. Determines cause – battery supplier.

2. Works with U.S. Consumer Product Safety Commission to announce global recall of 4.1 million laptop batteries.

3. Sets up recall website for customers to check affected units.

4. Guarantees replacement batteries are safe.

Sony’s crisis post-mortem• Was slow to take blame, disclose information and

coordinate global recall

• Let clients make multiple announcements first, escalating crisis

• Only worked with US Consumer Product Safety Commission (and Japan’s Economy, Trade and Industry Ministry) to coordinate recall and replacements with clients, after clients did so themselves

Sony execs’ bow not deep enough?“We want to put this behind us. I take this problem seriously and I want to finish the replacement program as quickly as possible for the sake of our users and corporate customers,” Corporate Executive Officer Yutaka Nakagawa, Oct 24, 2006

Oct 26, 2006: Battery snafu leads to massive loss Sony posted a 94 percent loss for its July to September quarter. Net profit dove to ¥1.7 billion (US$14 million) from ¥28.5 billion (US$240 million) a year ago.

The Internet train has left the station

Social Media

Consumers = producers: Anyone can publish text, pics, audio, video and interact within that space

Many ways to snack: Blogs, podcasts, RSS, wikis, social networks, mobile networks, YouTube, Twitter.

Amplifies virally:Two-way, lean-forward media, searchable, archivable, infinite replay,timeshifting

Growing influence: 24/7, places higher expectations on speed, transparency and accountability

The Internet circa 1993

Internet in 2008

Case study 2: Kryptonite Bike Lock Fiasco

• Cyclist posts that circular bike lock that costs US$35 – US$90 can be easily picked with a ballpoint pen on bikeforums.net

• Manufacturer was silent online and ignored bloggers “because of higher priorities.”

• Bloggers rail at company until it finally announces replacements at the cost of US$10m – only 10 days later

Blogger posts video online

Mainstream media picks up story

Source: Fortune

Ingersoll-Rand Endures Kryptonite's US$10 Million Hit

OCTOBER 25, 2004, MONTVALE, NJ -- Kryptonite delivered a $10 million hit in unanticipated costs in the third quarter to the Security and Safety division of parent company Ingersoll-Rand.

Kryptonite's financial drubbing began in early September after Internet video clips demonstrated the apparent ease in cracking its tubular locks with the shells of ballpoint pens.

Kryptonite launched replacement programs for consumers and retailers, and accelerated retail delivery of new product. Those moves, however, hit the security division's operating margin.

"Operating margins of 16.5 percent (in the third quarter) declined compared to 2003, reflecting approximately $10 million of estimated costs related to Kryptonite cylindrical bicycle locks," the NYSE-listed company reported Oct. 21 in a filing with the Security and Exchange Commission.

Slippery slope of investor adulation

Eg. of local companies in crisis• Accounting irregularities: Transmile,

Wimems Corp, Megan Media

• Mismanagement: Proton, MAS

• Immigration snafu: Top Glove

• Health Ministry raid: High-5 bread factory

• Pollution: Carotech

Openly and quickly share available facts with the public, create crisis webpage and direct press there

Crisis management unit can use new media tools to engage affected customers, search for details, verify and counter allegations

Show you care online and accept responsibility when you are at fault

Managing a crisis in YouTube age

Feed the shark, before it feeds on you

Use social media tools• Blogs: Short for weblog, instant, push-button, self-

publishing system with increasingly powerful feedback features. eg: Blogger, Wordpress

• Podcasts: Pre-recorded audio or video dispersed through the Internet via subscribed feeds. eg: YouTube, vlogs, moblogs

• Social networks: eg: Facebook, Bebo, MySpace• Wikis: eg: Wikipedia, pbWiki

• RSS: Really simple syndication or rich site summary, a news feed of a blog or website

Blogs double every six months

Japanese and English, leading languages

Companies blogging internally or externally

HP IBM Intel LockheedMcGraw-HillMerrill Lynch Microsoft Mitsubishi Motorola New York Times NikeOracle

PepsiRadio ShackRaytheon ShellStarbucksSun Microsystems Texas Instruments Time Warner Toys R UsWells Fargo Yahoo!

Apple ComputerAvon Boeing Cisco CitiGroup Dell DisneyFedEx GM Google HalliburtonHitachi Data Systems

Dell sets up IR blog

Dell’s IR blog“We let the vast majority of posts through. We want this to be a free and open means of communication,” Dell's IR director Robert Williams.

Some of the news it shared:• conclusion of an accounting investigation.• a US$10B share repurchase plan.• new partnerships with retailers.

“We feel very strongly about the democratization of information, specifically financial information. The information should be out there, available and usable to all types of investors.”Link: http://dellshares.dell.com

Nielsen Norman survey of 20 sites by 42 users -- professionals ranging from financial journalists to individual investors:

• 35% couldn't find the companies' most recent quarterly reports

• 77% were unable to find the high/low stock prices for previous quarter.

Suggestions:• Update daily, start a blog and use RSS• Make it searchable, fast to download, accessible• Post quarterly, annual reports not just in PDF format• Simplify content, navigation, charts: Investors, reporters

want it in layman’s terms and easy to figure out.

Make your online IR section count

CEOs are blogging

Bob Lutz, GMhttp://fastlane.gmblogs.com/

Jonathan Schwartz, Sunhttp://blogs.sun.com/jonathan/

ROI of Blogging*

*Note: Forrester estimates that GM's Fastlane blog generated US$578,000 in value on an investment of US$291,000 in 2005

http://www.tengkuzafrul.com/

Blogging can be an IR tool• Understand how blogging works and its growing

influence

• Counter by starting your own blog eg. employee blog, customer blog or IR blog

• Show personal side, become a thought leader

• Can be powerful media and investor relations tool

Why blog?Opens line of communication, engages customers,

builds brand loyalty, encourages conversations

Provides insider views of company direction, promotes upcoming products/services

More personal, opinionated, flexible than press releases

Creates a knowledge database for staff, investors, suppliers, partners

“In the world of the Internet, you don't own your brand. Your customers and your users own your brand,”

David Sifry, founder Technorati, leading search engine for the blogosphere

Links: http://www.facebook.com/group.php?gid=4629441044http://www.shoesshoesshoes.com.my

Using Facebook to reach global customers, Personal Money Mag, March 2008

Ung Yiu Lin, shoe entrepreneur“Before Facebook I relied solely on emailing our catalogues…with files being too large and slow to download. We are start-up and we do not have a big budget for marketing. Facebook allows us to reach out to overseas customers for free.”

Jonathan Teoh, trulylovingcompany.com“Facebook allows people the freedom to voice their

suggestions and grouses, and we can respond to feedback in a transparent way. While this may sound

scary we gain immediate insights on the sentiments of our products.”

Chris Tan, lawyer, Chur Associates“Legal services are commoditised and as a small firm we need to stand out among the big boys. So we must be different. We use it to communicate our brand values in a personal way. ”

Summary: social media and IR

Opportunities:• Those who embrace change will thrive• Successful IR in the 21st century will require both online

and offline engagement • Go where investors are: Social networks, blogs, mobile

networks, video networks and build your brand and investor confidence there

Challenges: • Fear of change, individualistic nature of management• Lack of training in new media skills• Perceived lack of resources • Lack of management commitment, don’t see ROI