Friday, December 04, 2009

The real problem

"It's not the problem that's the problem, it's how you handle the problem that's the problem."

An old truism, which I've been preaching to colleagues and clients for as long as I can remember. I believe it's one of the most important rules in business.

An example. I worked for a hotel group and was in a restaurant of one of our hotels when a waiter slipped and tipped a drink over a customer.

The manageress immediately hurried over with a clean, dry cloth and gave it to the customer. She apologised, said his meal would be on the house, asked him to drop the suit off at Reception, it would be dry-cleaned at no cost and returned the next day.

In a few seconds a possible problem was replaced by a positive outcome. The customer would only remember the drink spilling in the context of how well the hotel had handled the incident. A plus for the brand.

The most important thing you have in business is the brand.

It's hard work to build the brand image and its positioning, to instil a good feeling about it in the mind of users and potential users.

But to damage or destroy it is the easiest thing in the world.

There's a fairly recent absolute classic of how quickly a brand can be destroyed, which gave rise to the phrase 'Doing a Ratner'.

Gerald Ratner was CEO of a successful family chain of discount jewellers in the UK. Discounted but believed to be good value for money. A good brand image.

Then he made a speech to the Institute of Directors, which was picked up by the media.

He said the brand's products could be sold at low prices because 'it's total crap' and he went on to say that some items were 'cheaper than a Marks & Spencer prawn sandwich but probably wouldn't last as long'.

Damage to the brand? The share value fell by about half a billion pounds Sterling, the company almost collapsed. Share price had been at a high of 400 pence went as low as 9.5 pence, sales plummeted, investor dividends disappeared.

Gerald Ratner went but the damage was done. He'd been in charge for 25 years but destroyed it all in a few minutes.

I relate these stories because we currently have two examples of damage to a previously strong brand running in the media.

Very different stories but the difference demonstrates the truth of the saying and that it applies to any brand, whatever the business.

The subjects of course are Tiger Woods Brand and Brand Dubai.

Tiger Woods Brand is worth a huge amount of money, a large amount of its value based on a perception of perfection, unrealistic but that's what people tend to do.

After the row with Mrs Woods and subsequent minor car prang the damage to the brand began.

He hired a criminal attorney, refused to talk to the police and made no public statement.

The rumour mill went into overdrive, in the mainstream media and the blogosphere, and those actions added to the rumours. I haven't heard any jokes but I'm sure there must be hundreds.

He stayed silent for several days, and by the time he eventually made a statement the damage was already done.

The problem was the way the problem was handled.

Dubai World, although a very different story, is a similar example of the real problem being the way the problem was handled, which has resulted in damage to the brand.

I've already posted about the mishandling.

Brand Dubai has been built for decades on the basis of being a great business centre, perfectly located and commercially astute. A city with a long and succesful commercial history, a place where it was safe to do business, where the business people really knew how to run successful companies. Brand Dubai meant successful, safe investing.

As a result of the mishandling of Dubai World's debt restructuring and how it was announced we're now seeing things like this said in the world's media about Dubai:

"Dubai default...Dubai debt meltdown...Dubai financial crisis...bloodbath...risked triggering the biggest sovereign default since Argentina...city is now so swamped in debt that it's asking for a six-month reprieve...shock announcement that a debt-laden Dubai state corporation was unable to meet its interest bill...Dubai cast adrift as credibility crumbles...Dubai's financial health is under scrutiny"

OK, it was inaccurate, it was unnecessary blind panic, it was a misunderstanding of the status of Dubai World, it was lack of knowledge of how much debt was the subject of the announcement, of how much it was relative to the amount of debt in the world. But those reactions were caused by the mishandling of the situation in Dubai. Had the old saying been remembered the fallout would have been very different and without damage to Brand Dubai


If you are a potential investor, publicity like that will make you pause and rethink. If you are a financial institution you'll look much more carefully at Dubai companies requesting loans or offering bonds. There are plenty of other places around the world competing for your investment and loans.

However successful you are, however well you've built your brand, however long it's taken to build it to where it is today, make a mistake in handling a problem and you can damage it instantly. It can take years to regain the reputation and it can even end up as permanent damage.

12 comments:

Anonymous said...

well said.:)

As you are a been living in dubai such a long time,would it be wise for anyone move to Dubai or is it a bad idea?

Seabee said...

Anon@2.16, it depends entirely on the individual and the circumstances.

As always in Dubai, which is a very transient society, people are leaving and people are arriving.

Anonymous said...

I enjoy reading your blog posts, thank you and keep up the good work !

-M

Anonymous said...

Ok ,i born in Dubai and we lived through the recession and seen people come and go.then we left in 2001.Went every year back to Dubai and the urge to return back is so in me .I am 25 and love Dubai life style ,most importantly i wanna save enough money for rainy days ahead.LOL
.I am sensible person

Seabee said...

M, thank you.

Anon@3.27, you make an interesting point about having lived through a recession here. I've heard people saying that Dubai doesn't know how to deal with a recession because it's never been through one. Not true of course, for example I remember a bad downturn in the early eighties.

You know the place, you like the lifestyle, so if you can get a well-paid job that will last so that you can save for the rainy day then this is probably the place for you.

Like everywhere else there have been companies closing, companies reducing staff, a general downturn in business. It was more marked here than in many places because construction/real estate was so large and that sector has been hit hard.

But even construction companies are re-hiring and as the world's economy picks up in general ours will too, meaning that there will be more employment opportunities.

Anonymous said...

BTW,i am a regular reader of your blog for the past 2 years,every time i miss Dubai,i read your blog and it keeps me updated with whats going on .some bad and some good stuff and their jungle laws .lol.
I surely book my flight out this month,i wanna start a new page in my life.

thanks for replying maybe we can meet up someday.

Take care

Seabee said...

Anon@4.20, I try to tell it as I see it, the good the bad and the ugly. The things I think are done well, the things I think need improving or just everyday stuff I come across.

Good luck with the move.

Nikhil said...

Very Well said. I follow your blog and i really appreciate your effort.True Dubai could have handled this better, i hope and pray this damage is temporary not permanent.

Emjay said...

Since you missed all the Tiger Woods jokes, here ar the top 10.

Top 10 Tiger Woods jokes on the web

One:

Apparently, the only person who can beat Tiger Woods with a golf club is his wife

Two:

What's the difference between a car and a golf ball? Tiger can drive a ball 400 yards

Three:

Tiger Woods was injured in a car accident as he pulled out of his driveway early Friday morning. It was Woods' shortest drive since an errant tee shot at the US Open.

Four:

What was Tiger Woods doing out at 2.30 in the morning? He'd gone clubbing

Five:

Tiger Woods crashed into a fire hydrant and a tree. He couldn't decide between a wood and an iron

Six:

Perhaps Tiger should be using a driver?

Seven:

This is the first time Tiger's ever failed to drive 300 yards

Eight:

Apparently, Tiger admitted this crash was the closest shave he's ever had. So Gillette has dropped his contract.

Nine:

Tiger Woods wasn't seriously injured in the crash. He's still below par though

Ten:

Tiger Woods is so rich that he owns lots of expensive cars. Now he has a hole in one.

Doug said...

You left out that we should now call him 'Cheetah' instead of Tiger....

Anonymous said...

Hello,

Well said!

So how would you have handled the situation? To communicate the news and not harm the brand?

Thankssss

Seabee said...

Anon@4.35, a brand management/PR advisor or company would produce a huge report to answer your question, it's far too big and complex to answer here.

In very simple terms to summarise some of the points:

The situation should never have been allowed to arise in the first place. From the way the group was set up to the short-term loans to fund the excesses to the reassuring statements by high officials, the stage was being set over the past several years for what happened.

I have to wonder where the advisors were, whether they gave the right advice and whether it was ignored.

However, having done all those things wrong there was really only one course of action.

Talk to the investors privately, tell them the truth, in full, as far ahead of the December 14 due date as possible. Negotiate with them over debt restructuring. I have no way of knowing what the outcome of those talks would have been, but whatever it was the rest of the business world had to then be informed.

To inform the business world, and the public, there should have been not a terse written statement at close of business the evening before a ten day holiday. There should have been a press conference weeks earlier with highly placed officials. They should have explained the commercial nature of the companies, confirmed that their debts were not guaranteed by government, made clear the difference between commercial and sovereign debt.

They should have given accurate figures and dates for loan repayments, reported on the outcome of the talks with investors. They should have been available to answer questions over the subsequent days and weeks.

The PR machine should have been prepared and ready to issue background facts and figures, putting the DW issue and amounts into context with what's happening around the world and reinforcing the information given at the press conference.

In other words, honesty and transparency. That's what international business, markets, investors need.