Crisis Time

What the Optus outage can teach us about the principles of crisis management.

Drew Lette

As we looked at our blank screens in yesterdays’ Optus outage (8 November 2023) we started thinking about how much we all depend on both the internet and our devices in the modern business environment. As media reports and commentary came thick and fast our thoughts turned to the how Optus was managing their second customer crisis in quick succession and what other businesses can learn from it.

Our dependence on connectivity is undeniable, and the implications of a service provider's network outage can be significant. To mitigate these risks, SMEs should consider backup solutions, redundancy options, and service level agreements with their service providers to ensure uninterrupted connectivity and remediation avenues are available once the crisis is over.

On Wednesday as Victoria's train network, the South Australian public service, hospitals, retailers, hospitality, consultants, eCommerce companies and many others found out the hard way how much a crisis at a supplier (not of their own making) can cost big time. It’s not just the inconvenience, the loss of turnover and the breakdown of our workday, it’s the way the supplier handles it that can make or break the trading relationship.  I feel it is best to keep my commentary to a minimum as to how poorly Optus have been rated for how they managed the day, but there is surely something we can all learn from this experience. What do we do if something similar happens within our business?  What do we do if our business experiences a similar situation? What are best practice principles?

At Marlton Capital Partners we have been fortunate in the past to work for businesses that embraced the old Scout’s adage “Be prepared.”  Here is a summary of the principles that we believe are fundamental to coming out the other side of a major crisis that has direct implications for your customers.

The Power of Transparency & Communication in a Crisis: Building Trust with Your Customers

Transparency isn't just a buzzword; it's a fundamental principle of effective crisis management for businesses. When the storm clouds of uncertainty gather, being open, honest, and communicating early with your customers can be the difference between maintaining their trust and losing it.

1. Information is Assurance:

In a crisis, customers want information. They're seeking reassurance that their concerns are being addressed and that they'll continue to receive the products or services they've come to rely on. By providing timely and accurate information, you offer a sense of security and control amid the chaos.

2. Building Trust:

Trust is the currency of business relationships. When customers see your communication as transparent, it fosters trust. They know you're not hiding anything, and that builds confidence in your ability to navigate the storm.

3. Honesty Is Appreciated:

Customers appreciate honesty. When a crisis occurs, acknowledging it and openly discussing its impact shows that you're not shying away from challenges. This honesty is often reciprocated with loyalty.

4. Reputation Management:

A business's reputation is a valuable asset. During a crisis, a transparent approach to addressing issues helps manage your reputation. Open and timely communication and an honest assessment of the situation are signs of a responsible business.

5. Long-term Partnerships:

Transparency isn't just about surviving the present crisis; it's also about preparing for the future. Customers who see you as a transparent business partner are more likely to maintain long-term relationships with you.

6. Competitive Advantage:

In a world where businesses are judged not only by their products or services but also by their values and integrity, transparency can be a powerful differentiator. It sets you apart from less forthright competitors.

7. Learning and Improvement:

Transparent discussions about a crisis are not just for your customers. They also benefit your business. They provide insights that can help you learn from the situation, improve processes, and better prepare for future challenges.

Best Practice Principles of Crisis Management:

Risk Assessment and Prevention:

  • Identify Vulnerabilities: conduct a thorough risk assessment to identify potential vulnerabilities in your operations. This includes evaluating supply chains, technology infrastructure, and financial stability.

  • Prevention Strategies: Implement preventive measures to mitigate risk. These may include diversifying suppliers, investing in cybersecurity, and maintaining adequate insurance coverage.

Crisis Response Plan:

  • Create a Crisis Management Team: Designate a team responsible for crisis response, comprising individuals with clear roles and responsibilities. For many of us, this may also require outside assistance, contact service providers from IT to logistics to know who, what, and how to contact them if and when a crisis occurs.

  • Communication Plan: Develop a comprehensive communication plan to ensure that employees, customers, and stakeholders are informed during a crisis.

Flexibility and Adaptability:

  • Agility: In a crisis, you must be agile and ready to adapt to rapidly changing circumstances. Flexibility in operations, staffing, and decision-making is key. You need to roll with the punches, dust yourself off, and tackle the problem.

Learning from Large Corporations:

Large corporations often make mistakes in crisis management. SMEs can learn from these blunders:

  • Ignoring Early Warning Signs: Large corporations sometimes ignore early warning signs of crises. SMEs should remain vigilant and responsive to emerging risks.

  • Inadequate Communication: In major crises, some corporations have failed to provide transparent and timely communication. SMEs must prioritize clear, honest, and consistent communication with stakeholders. 

  • Neglecting Employee Well-being: Corporations have faced criticism for neglecting the well-being of employees during crises. SMEs should prioritize employee safety and support.

Action Plan for Serious Service Disruptions:

When an SME faces a severe disruption in service provision to key customers, the following action plan can help mitigate damage and restore confidence:

  1. Assessment: Evaluate the nature and extent of the disruption. Determine which customers are affected and to what degree.

  2. Communication: Immediately notify affected customers about the issue, providing realistic timelines for resolution.

  3. Problem Solving: Engage your crisis management team to diagnose the problem and develop solutions. Seek external expertise where necessary.

  4. Customer Support: Offer exceptional customer support to affected clients. Provide alternative solutions or services in lieu or partial refunds where appropriate.

  5. Recovery and Learning: Once service is restored and you come through the other side, conduct a thorough review of the disruption's cause and your response. Identify areas for improvement to prevent future occurrences.

We can survive and even thrive by adopting best practice principles of crisis management. By learning from other’s mistakes and implementing proactive measures, you can navigate challenges successfully and emerge stronger. The key is to remain resilient, adaptable, and committed to your customers. Most companies only get one crack at getting a crisis right, customers can be unforgiving if they feel ignored and in a competitive landscape there are always alternative options.

Having still not had direct communication from my telco after yesterday I have added a new item to my to-do list this morning...

 

*Note- At Marlton Capital Partners we not only bring capital to the table as a value-adding investor, but we also bring experience in running successful businesses large and small to create value and guide growth.

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Disclaimer: This article serves as a guide and is not intended as financial or investment advice. Seek professional advice before entering into any equity partnerships.