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Samsung, Skeletons And Exploding Phones: Reputation In Tatters

Jane JordanGuest Post by Jane Jordan. Jane is Managing Director at Gaia Coaching Group.  You can connect with Jane on LinkedIn or Twitter.

Exploding phones. Doesn’t get much worse in a smartphone obsessed world, and particularly when it happens mid-air on a plane in the United States.

Samsung, the South Korean electronics company, is in trouble. Not only is its highly rated Galaxy Note 7s “blowing up” and causing injury, the company’s behaviour is, at best, questionable.

Business Insider has been blunt saying “Samsung’s reputation for quality is down the toilet.” The Guardian has reported that like VW, Samsung has attempted to withhold information and, worse still, has been threatening customers. Galaxy Note customers reported what looked like attempts to keep them quiet.

Why, why do organisations behave so badly in a crisis? Why do they think it’s good practice to bury bad news or attempt to hide the skeletons?

It’s a simple fact that skeletons always come out of the closet in a crisis – always! And in today’s lightning fast, news addicted world, where not only does news travel around the globe in seconds, whistleblowing is actively encouraged. Not to mention empowered consumers. Skeletons will jump out to bite you – very fast.

Samsung, it appears, has done its best to obfuscate. Again, a bad move.

According to The Guardian, Samsung decided to bypass official recall procedures, and “it took days for the company to work with the authorities and issue a strongly worded statement ‘asking users to power down their Galaxy Note 7s and exchange them now’.”

When the replacement phones began exploding, it again took the company almost a week to take action.

Apart from recognising that skeletons will always be revealed in a crisis, the other truism, indeed the first principle of effective crisis management, is to take responsibility and act fast – get ahead of the story. Clearly, the South Korean company has yet to adhere to this principle.

The problem for Samsung first emerged in September with sporadic reports of an unstable battery, but as of October 10, eight have hit the press: five in the US; one in Taiwan; and two in South Korea. Alarmingly, one of these incidents involved a 13-year-old girl – the phone melted in her hand; another set fire on a nightstand — hospitalising the owner due to smoke inhalation.

Samsung, desperate for win over Apple with its iPhone 7, launched the Galaxy Note 7s in August to rave reviews for the extent to which it pushed the envelope on what a tablet-sized smartphone could do. It shipped with wireless charging, a battery that lasted well over a day and charged to 70% in less than an hour, and a USB-C connector – Samsung’s first phone to use the next-generation port.

The Galaxy Note 7s was to be the company’s saviour. As Business Insider reported“Critics raved about the large-screened, premium device. After years of wobbly sales and falling profits, it looked like the company was finally onto a winner.

And even better: expectations for the iPhone 7, the then-upcoming new phone from Samsung arch rival Apple, were tepid. Only modest improvements — better camera, faster speeds, the controversial removal of the headphone jack — were expected, giving the Note 7s a real shot at being the smartphone of 2016.”

Then it started exploding. And the problems are getting bigger by the day.

First, it announced it would halt production pending an investigation but by Tuesday of this week Samsung, amidst mounting pressure, took the unprecedented step to permanently stop making the device.

Needless to say its share price has tumbled too. The (UK) Telegraph reported that “Samsung’s share price fell by 7.5 per cent on Tuesday morning, wiping 19 trillion Korean won (£13.8bn) off its value.”

Will Samsung survive this crisis? A moot point at this stage.

As a Samsung customer (and also a VW car owner, although not for much longer) I am less than impressed and as a student of crisis management somewhat horrified and perplexed that organisations like Samsung (and VW) think that they can “get away with it.” No you can’t!

So the lessons:

1.      Skeletons always some out of the closet in a crisis

2.      Culture determines response

3.      Consumers have the power (always have but far more powerful today)

4.      Treat your customers with respect

5.      Take responsibility and act fast

And always be ahead of the story. Always!