A Big Swing and a Miss…

Saturday, October 26th, 2013

There’s no other way to characterize Toyota’s response to the curveball it was thrown regarding its massive automotive recall issues. Toyota failed to step up to the plate by initially ignoring the problem, apparently hoping it would all go away. Then the company failed to step outside the batter’s box and look at the situation from a fresh perspective. Those are just two problems that instantly come to mind. As time goes on, I’m sure we will all be able to come up with more. What’s already clear, however, is that this event in Toyota’s corporate history is truly an epic international whiff.

In business schools, Johnson & Johnson is the golden standard for crisis management and brand protection. In years ahead, Toyota is likely to become the standard for brand damage.

—The Sydney Morning Herald, Oh, What a Failing

But it could be that there’s more to this strike out than just bad management.

[It] is obvious that crisis management does not seem to be Toyota’s strong suit. This is as much a cultural issue as anything, notes Kingston, director of Asian Studies at Temple University Japan. His book Contemporary Japan: History, Politics and Social Change is due out in September.

“Over the past two decades, I cannot think of one instance where a Japanese company has done a good job managing a crisis. The pattern is all too familiar, typically involving slow initial response, minimizing the problem, foot dragging on the product recall, poor communication with the public about the problem and too little compassion and concern for consumers adversely affected by the product,” he notes.

Japanese companies in Japan don’t pay much of a price for negligence and that’s part of the problem, he adds. In Japan, compensation for product liability claims is mostly derisory or non-existent. In a nutshell, “producer interests trump consumer safety,” in Japan, he says.

—The Globe and Mail, Crisis Management Not Toyota’s Strong Suit

I didn’t address cultural factors in the book, but there seems to be something to this notion that they may impact how companies and people deal with curveballs.

What do you think?

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How to Hit a Curveball Gets Thrown a Curve

Friday, April 2nd, 2010

Imagine writing a book over the last two years, getting ready for its official sale, and finding out the morning of its launch that Amazon has picked a fight with your publisher by removing the purchase button from the Kindle version of your book. Well, that’s what happened to me… Yesterday!

While Amazon has not officially responded to Apple’s iPad, its response to Apple’s iBookstore looks like a series of brush back pitches thrown at book publishers. Apple is offering book publishers an agency arrangement in which the publisher retains the right to price its e-books for the iPad, while Apple receives a percentage of those sales.

The agency model is defined as projects funded as a fee-for-service by clients, who either use or re-sell the content. Apple uses the “agency model” now with the App Store, taking a 30 percent cut of whatever the developer charges for an app.

—The Apple Core, ZDNet.com, Apple pitching its agency model to book publishers

Amazon, on the other hand, has been pursuing a wholesale model for its Kindle bookstore.

The wholesale model, on the other hand, is when the publisher “sells” the book to an intermediary (i.e. Amazon, Borders, B&N) based on the publisher’s established retail price and a discount schedule, typically around 50 percent. Then the purchaser resells that e-book at whatever price they like.

—Apple Core, ZDNet.com, Apple pitching its agency model to book publishers

Publishers believe that selling their books through Apple’s iBookstore for a commission will be more profitable than selling them through Amazon at a discount. And their response to this new arrangement with Apple has been to push Amazon to do something similar. This curveball thrown at Amazon’s business model led it to react.

Amazon first hit back at Macmillan when the publisher asked Amazon to raise its e-book prices from the $9.99 discount price on much of the products in the Kindle store. In January, Amazon temporarily removed Macmillan books from sale on its site, although it allowed them to continue to be sold by third parties.

—NYTimes.com, Amazon Pulls Macmillan Books Over Pricing Rift

After about a month Amazon backed down.

“We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles,” Amazon said in a statement. “We want you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books.”

—BayNewser, MediaBistro.com, Amazon Standoff with Macmillan Over; Amazon Blinks

But now, on the eve of the iPad’s debut, Amazon has responded similarly after not being able to come to an agreement with Penguin on the pricing of e-books (yes, How to Hit a Curveball is published by Portfolio, a Penguin imprint). Penguin sent out an email to agents and authors explaining the situation.

“Your newly released eBook is currently not available on Amazon, but all of your eBooks released prior to April 1st are still for sale on their site. We want to also assure you that all of your books are available through other e-tailers and at bricks and mortar stores everywhere–from the large chains to the clubs to the independents and on their respective websites…. In recent weeks we have been in discussion with our retail partners who sell eBooks, including Amazon, to discuss our new terms of sale for eBooks in the U.S. At the moment, we have reached an agreement with many of them, but unfortunately not Amazon—of course, we hope to in the future.

—GalleyCat, MediaBistro.com, Breaking: Penguin Has Not Reached eBook Agreement with Amazon

While the ultimate outcome of this latest development isn’t yet known, it is obvious that even a firm as cutting edge and visionary as Amazon reacts to curveballs not all that dissimilar to the way many of the rest of us do: by resisting change and not stepping up to the plate.

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iPhone Curveball Thrown at AT&T

Friday, March 26th, 2010

Since its introduction in 2007, Apple’s iPhone has been the driving force behind AT&T’s domination of the smart phone business in the United States. If a consumer wanted an iPhone, he or she had to sign up with AT&T.

The success of the combined effort has been somewhat marred by constant consumer complaints about the poor quality of AT&T’s service in a number of major metropolitan areas, most notably New York City.

With the pending release of its iPad seeming to dominate the media attention, stories suddenly began leaking that Apple will soon be offering a version of the popular mobile communications device that works on CDMA networks, like that which is used by Verizon. The news has to have been a disturbing curveball for AT&T.

For AT&T, the Apple relationship has been crucial, helping to make the carrier the U.S. leader in lucrative smart-phone market share. According to comScore Inc., AT&T has over 43% of all U.S. smart-phone customers, compared with 23% for Verizon. These customers are especially attractive because they generally pay higher monthly rates for data plans.

For several quarters, AT&T’s growth has come almost single-handedly from the iPhone. In the fourth quarter of 2009, the carrier said it activated 3.1 million new iPhones. In comparison, it counted only a net total of 2.7 million new subscribers as some customers moved from other phones to iPhones.

“You’re not going to lose the iPhone [exclusivity] and make up growth somewhere else without bearing the cost,” said Sanford C. Bernstein & Co. research analyst Craig Moffett.

—The Wall Street Journal, New iPhone Could End AT&T’s U.S. Monopoly

It will be interesting to see how AT&T responds to this curveball. According to reports it has been working overtime to improve its service to be a in a better position to compete when its exclusive deal with Apple runs out.

In mid-December, AT&T executives set up a 100-day plan to dramatically improve the company’s network in densely-populated cities, according to people familiar with the plan. Since then, AT&T has added new network spectrum to better handle traffic, repositioned antennas to improve reception in office towers and wired more neighborhood cell towers with faster connections.

—The Wall Street Journal, AT&T Prepares Network For Battle

But as AT&T prepares its response to the looming curveball, its competitors might do well to watch out for curveballs of their own.

AT&T “is managing volumes that no one else has experienced,” said John Donovan, the company’s chief technology officer. It has improved service in big-city markets and expects “continued improvement in those markets in the coming months,” he said.

For example, AT&T said when iPhone customers started checking their email and surfing the Web from their high-rise offices, AT&T repositioned its cellular antennas to point up, instead of down. Rivals will start the process of making the same changes only after the phones hit their networks, it said.

The iPhone taught AT&T other lessons its rivals will discover through customer trial-and-error. Before the iPhone, it used to be able to accurately forecast to the minute the type of phone usage each new customer would add to its network based on basic demographics such as age and income levels. The forecast always held true across cities and towns.

—The Wall Street Journal, AT&T Prepares Network For Battle

With the increasing pace of change and the consumer’s ever growing demand for more and better features as well as performance, the smart phone business looks like it will be the scene for many years’ worth of unexpected changes.

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