The Eli Lilly and Co. Case – Innovation in Diabetes Care: What Went Wrong? Why? and What Should the Next Step be?


The Eli Lilly and Co. Case – Innovation in Diabetes Care: What Went Wrong? Why? and What Should the Next Step be?

            As a company, Eli Lilly may have achieved more success had they read chapters two and nine of  Adams’ “ A Good Hard Kick in the Ass: Basic Training for Entrepreneurs.”

 

Background

            Despite efforts of high investment to maintain it’s dominant position as an insulin manufacturer, the company began to see it’s worldwide position weaken. To add to the devastation, Lilly missed several waves of innovative opportunities within the diabetes care market. At the time of the case, Lilly was engaged in a determined effort to strengthen it’s position in insulin and grow beyond that single product, exploring alternative products and services (Unger, 2012).

 

Mistakes

            Eli Lilly dropped in overall market share in diabetes care from 1980 to 1995 (Christensen C.M., 1996). What mistakes did Lilly make in its product and service initiatives, and why did this happen? Is Eli Lilly & Co. talking to the right persons or groups to determine what product features or advancements would be most appreciated by the “diabetes related market?”

            Lily launched three innovative insulin products: the “Insulin pens”, “Match” and “Humulin,” all priced premium in comparison to your traditional insulin and/or insulin delivery syringes (HBS, 2004). Unfortunately, Lilly’s tendency to invest significant amounts of funding into commodities proved to be one of leading factor in Lilly’s decreasing market share. Usually, a customer will become more price sensitive if satisfied with a certain commodity; therefore, the buyer is less likely to purchase the product without some sort of substantial gain (Anthony Romano, date).

            Additionally, Lilly and Novo launched several of the same products simultaneously in a race to place first in the market. This marketing assault of new products outweighed customer demand, presenting yet another downfall (Christensen C.M., 1999).

            Lastly, the behavior of a majority of the patient population towards the treatment and care of their diabetes shifted, becoming substandard by patients determining their own ways of therapy. In order to utilize insulin pens, patients must effectively monitor and administer multiple insulin shots daily. Though it may be an arduous and lengthy process for all parties, putting forth efforts that will change the behavior of this majority could prove successful in repairing the damage that has been done.

            Lily appears to avoid speaking or listening to the appropriate group of individuals that can significantly improve their positions by determining products and featuring advancements.

 

Lessons Learned & Next Steps

            What should we learn from this case? Should Adams’ way be our model?

 

Lesson Learned 1: The Shifting Basis of Competition – Develop a Sense of Pain

            While other companies are constantly developing and introducing new products and services, along with making incremental improvements to existing ones, Lily refuses to play on on a static competitive space.
Adams, discussing “customer pain,” suggests that Lily ought to put themselves in the shoes of potential customers to “develop a sense of their pain” (Adams R, 2002). This way, Lily can obtain the knowledge necessary to release products that are of high customer demand.

            Lily should be looking for wicked, brutal, vicious, hideous pain amongst potentials – the type of pain that makes people want to fix their situation immediately.

            Lily should ascend the market-validation pyramid by practicing the following, step-by-step: Lily must lay down the groundwork by: verifying the pain around the problem, along with a likely market, using secondary research (i.e. the internet, analyst reports, the industry press) in order to discover market data, market size, and direction of market trends.

Stages:

ñ  Stage 1Explore the pain. Use questionnaires to do quantified market research which will in turn uncover the target market. Then:

    Perform customer interviews to locate the greatest pain.

    Create a heat map to visually represent where the worst pain lies.

    Generate several hypotheses about target markets.

ñ  Stage 2Envision the solution. Test the target market hypothesis found in Stage 1 against a set of quality influences. Then:

    Develop and sharpen a presentation and product prototype.

ñ  Stage 3Establish credibility. Evoke excitement in leverage influencers (thought leaders, analysts, consultants, and editors) about your company, product, and prospects.

 

Lesson Learned 2:  Explore new opportunities

            Undoubtable are the difficulties that may arise if Lily were to change their way of thinking, transcending normal patterns of thought, as they have historically been consistant in their ideas about what can be made possible. This fact makes reaching that place in Lily’s imagination in which they hold the power to predict customer desires, but, despite this obvious hurdle, understanding of potential clientele allows for successfully understanding the products in which they need to deliver.

 

“Discovering what has been discovered: What Job was your Product Hired to Do?” (Christensen C.M., 1999b).

            As much as Lily ought to know what the customers are demanding, they must follow out these steps in order to be successful:

ñ  Step 1: Watch and ask actual customers the way in which they use the product, what their values consist of, and what they prioritize, starting with the most important aspects, in the product.

ñ  Step 2: Ascertain the advantages of alternative products that customers could have opted for. This will help to identify the competition and open up different social and emotional dimensions of the customer experience.

ñ  Step 3: After product requirements have been identified, back track to the lower left-hand corner of the Exploration Space Matrix because solutions and improvements need to be based on what is possible (Christensen C.M., 1999b).

 

Lesson Learned 3:  Validate Markets

            Lily only has a one-time snapshot. Losing your edge is the first step to becoming dead meet, so one must keep implementing effective ongoing strategies for assessing customers and their needs in order to validate the market again and again. Never stop focusing on the customer!  (Adams R, 2002).

 

Reference

Adams R. (2002) A Good Hard Kick in the Ass: Basic Training for Entrepreneurs New York: Random House/Crown Business

Christensen C.M. (1996) Eli Lilly and Company: Innovation in Diabetes Care Harvard Business School Publishing, Boston, MA 02163

Christensen C.M. (1999) Innovation and the General Manager Boston, MA: McGraw-Hill Irwin. Module 2 – Finding New Markets for New and Disruptive Technologies. (pp. 95-102)

Christensen C.M. (1999b) Innovation and the General Manager Boston, MA: McGraw-Hill Irwin. Section 2.3 – Discovering what has been Discovered: What Job was your Product hired to do? (pp. 169-178) (eReserve)

HBS 9-696-077 (April 2004). Eli Lilly and Company: Innovation in Diabetes Care.

Anthony Romano, (date), Eli Lilly and Company: Innovation in Diabetes Care

Unger. (2012). Lecture 3, course MET AD 741, Boston University

 

Eric Tse, Richmond Hill, Toronto
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Sands

 

Table of Contents

Pelican Sands. 1

Table of Content 2

Non-Critiquing Evaluation. 3

Critique Evaluation. 6

Action Plan (Fixing the Problem) 9

References. 12


Pelican Sands

            Often, different executives express different opinions about the same incident. Usually, they all make good points, since they are experienced professionals. This paper will focus on differing executive responses to a critical situation: the wrong dispatch of produce. (Please refer back to the simulation for this incident)

The Wrong Dispatch of Produce

A logistical problem can lead to a wrong dispatch of produce, which then results in an operational crisis that requires immediate attention. Different executives have diverse solutions to this problem.

Observations

Table 1

Opinion from different Executives

Executive Choice Resulting Newspaper Story Cost
COO Recall some produce and reroute the rest. The best option is rerouting the shipments. Although it may be time-consuming and costly, this is the best way to keep our daily delivery promise. If we accept this idea, I can implement the plan within two hours. CVN leaves some stores off its routes. Uneven availability at CVN stores leaves customers annoyed. 2.15M
CFO

 

Allow the franchises to decide. Financially, it is best to trust our franchises and let them decide to sell or withhold the produce. This way, we will minimize our losses without either ruining the delivery schedule or the breaking the promise of freshness.

 

What’s up at CVN? Why is CVN letting your vendors sell rotten fruit? 0.91M
CRO

 

Recall the produce. The risk of not recalling the procedure is too large to go through; it would compromise both the promise of daily delivery and the produce’s freshness. This will be expensive, but experiencing one day’s loss is better than compromising our brand image.

 

No delivery at CVN stores. Empty shelves mock waiting customers. 0.63M
N/A Do nothing. N/A 0 M

 

 

 

Analysis

Table 2

Analysis from different Executive Opinion

Executive Solution Major Issues of Concern Strengths of the Solution Possible or Actual Advantageous Results
COO

(0.91M)

Recall some produce and reroute the rest. Retain delivery promise. Minimize the effort required to implement a solution. It is easy to implement, and it costs less money than some alternatives.

From an operations perspective, our most important concerns are operation effectiveness, the supply chain, and customer happiness.

With this solution, we can still accomplish most of the deliveries, although some will be inconvenient. This solution also tries to mitigate our losses.

Although the customers may be slightly upset, they will remain content overall if they still receive their deliveries.

CFO

(0.63M)

Allow the franchises to decide. Reduce losses and save money. This is the most cost-effective solution. This solution allows timely delivery and could preserve the food’s freshness.

From a CFO’s perspective, costs and profits are the most important concerns.

This solution mitigates current losses and minimizes the expenses otherwise needed to respond to the crisis. Consider how much the other approaches will cost and how much profits they will sacrifice.

The customers will still be content, because they will still receive their deliveries.

CRO

(2.15M)

Recall the produce. Protect the brand image. This solution best protects the brand’s reputation. Organizational reputation and product brand name influences overall corporate value (Carroll 2012a).

From an integrated risk management point of view, overall brand value is relatively more important than anything else (Barton 2007).

This solution will save the brand. It could even generate positive public relations; customers will think we are willing to sacrifice our earnings in order to protect our brand’s reputation.

 

The rest of this paper will assess the COO’s suggestion—recalling some produce and rerouting the rest. This solution is easy to implement and relatively inexpensive. Further, it keeps the delivery promise, at least partly, and it avoids wasting food.

Critique Evaluation

 

 

 

Table 3

Critique from Different Responses

  Solution Ignored or trivialized considerations that limited or flawed the solution Ignored or underrepresented risk-related groups and possible impacts Origins and validity of primary concerns Flawed perspectives or directions
COO

(0.91M)

Recall some produce and reroute the rest

(Selected Decision)

 

– Overall company risk

– Marred brand image or reputation

– The impact of criticisms from the press and mass media

– Loss of food freshness after the reroute

– Retention of long-term customer satisfaction

– Market risk

– Supply chain

– Brand image and reputation

– Public relations

– Operation silos (not integrated)

– Customer satisfaction and loyalty

– Overall company value

– Market risk: Freshness and quality are marketing variables

– Press or mass media speculation: Exaggerations could ruin the company

– Customer satisfaction and loyalty: Customers could feel slighted and refuse to buy the brand anymore

The COO merely considered operational ease, financial factors, and accounting indicators, ignoring the fact that market value and customer satisfaction play important roles in the company’s overall value. The COO emphasized a short-term turnaround, forgetting about the long term.
CFO

(0.63M)

Allow the franchises to decide (This decision was not selected, but some of its points are also valid for the selected decision)

 

– Overall company risk

– Operational effectiveness (it is unwise to ask local franchises to execute decisions without centralized facilitation)

– Long-term customer satisfaction and retention

– Same as above

– Financial silos (not integrated)

– Press speculation: The media could call the food rotten, and the whole company could lose value

– Customer satisfaction: People could say the company values its profits over its customers, even compromising product quality

– Public respect: People could think the company lies to the public in order to evade problems

The CFO merely considered financial and accounting indicators, ignoring the fact that market value and customer satisfaction play important roles in the company’s overall value.

The CFO emphasized a short-term turnaround, forgetting about the long term.

CRO

(2.15M)

Recall the produce – Financial feasibility – Have taken considerations of financial situations, but still cannot overcome overall company lost

– Risks are somewhat integrated

– Responsibility: The company is willing to accept its responsibility, regardless of profits lost when solving the problem.

– Customer and service quality: The company cares

The CRO targeted long-term mutual benefits between the company and its customers by accepting a short-term financial loss.

 

 

Although Table 3 describes many important points, the following sections will focus on three of its most important concepts.

Enterprise Risks vs. Silos Risks

Each of these organizations (finance, operations) is responsible for a focused risk area, essentially working from the bottom upward. Senior management is responsible, from the top down, for all corporate risk issues.Enterpriserisk management (ERM) differs from the traditional, siloed approach to risk; it views risk holistically. ERM incorporates risks from all sources, including anything that could affect strategic objectives, operational goals, and financial targets. It then creates a common risk management strategy, which coordinates individual risk elements into a cohesive approach. ERM is impact-based, targeting a threat against pre-defined objectives (Carroll, 2012b).

Brand Value and Company Reputation

The value of an enterprise has two forms: tangible assets and intangible assets. Intangible assets include expected profits from operations, intellectual property, brand equity, and reputation. These assets are major contributors to the value of the enterprise, and they could be regarded as tangible assets when determining company value (Carroll, 2012a).

To illustrate the importance of reputation or brand equity, consider the impact of brand value on retail value. Customers can buy a two-liter bottle of generic soda for $0.99, but they must pay $1.59 or more for a brand name such as Coca-Cola or Pepsi. This price difference is largely due to the brand’s value and the company’s reputation, not the costs of production. (In fact, the opposite is probably true; Coke and Pepsi products are likely cheaper to produce, considering the companies’ large product volumes, than products of lesser-known brands, which are produced at smaller volumes.) There may be a difference in taste, but, often, this factor alone does not justify the price (Carroll, 2012a).

Brand and reputation equity are paramount for the modern corporation. This axiom has been amply illustrated by the trials and tribulations of the Lehman Brothers, MF Global, Martha Stewart, Marsh, Arthur Andersen, and numerous other companies whose reputations have been dealt severe blows during recent years. Many of these companies have never recovered (Carroll, 2012a).

Marketing Factors

Pelican Sands targets the organic food market. Consequently, marketing segment variables include quality of food, freshness, and organic status. Customers buy Pelican Sands’ products because they think that these products are higher in quality than regular fruits and that eating organic fruits can help them maintain better health. After the crisis, it would appear that Pelican Sands does not, in fact, sell high-quality foods. As a result, the customers would no longer feel that buying Pelican Sands food makes them special. If the company does not handle its public relations carefully and consequently loses its brand value, then customers will turn away from Pelican Sands.

Action Plan (Fixing the Problem)

Table 4

Convince Executives to Take Risk Management Approach

Choice How would you convince senior management that they are not out of the woods as yet and in fact may be in deeper? What evidence would you use to bring this forward? How would you explain the success(es) cited in #1?

 

Recall some produce and reroute the rest

(Selected Decision)

 

I would enumerate all possible risks and their impacts.

What if the press said, “CVN leaves some stores off its route; uneven availability at CVN stores leaves customers annoyed”?

Or, what if the press said, “What’s up at CVN? Why is CVN letting your vendor sell rotten fruit”?

What if the supply chain problems continue happening on a recurring basis?

Even though the company did not violate any laws, the public might accuse the company of dumping substandard produce.

Customers will not be satisfied, and sales will decrease over the long term.

Some people might even suspect a conspiracy. Consumers on the street may continue to be wary of CVN for some time.

Brand and reputation equity are paramount for the modern corporation, as demonstrated by the trials and tribulations of Lehman Brothers, MF Global, Martha Stewart, Marsh, Arthur Andersen, and many other companies that have marred their reputations during recent years. Many of these companies have never recovered (Carroll, 2012a).

I would emphasize that the current tactic is focused only on the short term; it does not provide any strategy for the long term.

I would gather and cite past studies, stories, lessons learned, and experiences.

I would note the sales figures of similar case studies after a brand image has damaged. The sales may rise in short run but will decrease in the long run.

I would, again, emphasize that the current tactic is focused only on the short term; it does not provide any strategy for the long term.

I would hire an external expert to convince the others that we need to do more.

I would collect public opinions about the company’s image after the crisis.

I would gather and cite past studies, stories, lessons learned, and experiences.

 

Table 5

Action Items

Action Description Target Goal
Create a public administration program When a crisis strikes, it is important to maintain consistent communication from the affected organization to the public. The corporate communications department should document all communications to outside parties (e.g., the press) and should disseminate this information to every individual in the organization, thereby ensuring a consistent message. Reverse and supplement
Fix the supply chain The supply chain bears the initial costs of any shipment mistakes. We need to avoid repeating the same mistakes. At the very least, we should ensure that similar mistakes will not reoccur often. Prevent
Ask the franchises to dump all the food It is too late to ask the end retailers to return the delivered food, but you can tell them to dump the food themselves. Ask them to dispose of any foods that have known or visible problems. If they cannot determine whether certain foods have problems, they should dump them as well. Reverse

Public Relations Program

Crisis media training best practices. The public administration program described in Table 5 needs further elaboration. To run the program successfully, the communications personnel should follow a few public-relations best practices (see also Lerbinger, 1997; Feran-Banks, 2001; Coombs, 2007).

1. Avoid the phrase “no comment”; people think it means the organization is guilty and is trying to hide something

2. Present information clearly by avoiding jargon and technical terms. A lack of clarity makes people think an organization is purposefully confusing its customers in order to hide something.

3. Appear pleasant on camera by avoiding nervous habits, which people often interpret as signs of deception. A spokesperson needs to maintain strong eye contact, limit disfluencies such as “um” and “uh,” and avoid distracting nervous gestures, such as fidgeting or pacing. Coombs (2007) reports that speakers will be perceived as deceptive if they avoid eye contact, use many disfluencies, or display nervous gestures.

4. Brief all potential spokespersons on the latest information about the crisis, focusing on the key message points that the organization wants to convey to its stakeholders.

Public relations program composition. Most organizations, of all sizes, have public relations or corporate communications persons or teams to address public-relations issues. Absent this, someone—typically a senior manager—should be deemed a liaison to the public. After this spokesperson is selected, no one else from the organization should communicate on behalf of the organization, in any form. In fact, no one should communicate publicly at all; whatever is communicated will be interpreted as representing the viewpoint of the organization. Consequently, this is a role best handled by professionals.

This endeavor requires significant planning, which is the responsibility of the continuity professional. The company should establish a formal communications program that identifies internal and external organizations, agencies, and media groups. This program should craft a defined crisis-communications plan for all communications with authorities (local, regional, etc.) and with those affected by the organization’s success during the crisis (e.g., employees, customers, and shareholders).

Written plans are essential; they provide a guideline or structure for ensuring that the public relations program addresses all parties consistently. However, any given crisis may require distinct and specific communications activities, depending on the situation; hence, following a written plan exactly is not always optimal. Nevertheless, a plan provides a framework that can be adjusted for each situation. Without a pre-established plan, the public relations personnel are unprepared, and they must make up the process as they go along.

Like all dimensions of continuity planning, this area should be tested, either as a separate and distinct crisis test activity or as part of an overall continuity and recovery test. Commonly, organizations test their public relations plans via mock crises that actually escalate into full-blown business continuity and disaster recovery tests.

Supply Chain

A flaw in the supply chain is one of five threats that could destroy a company (Vinas & Jusko, 2004). When facing a problem in the supply chain, a company must consider what can and cannot be controlled. The company can control what products it makes, where it stores those products, and how the products are shipped, for example. To operate properly, an organization must be competent in these areas. For example, it must maintain its inventory well, keeping the right products in stock at the proper levels and at the right times. Making the wrong products, shipping products late, or sending products to the wrong markets will obviously have a negative impact.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


References

Barton. (2007). Making enterprise risk management pay off.

Carroll. (2012a, spring). 01 MET AD 610, week 1 lecture notes.

Carroll. (2012b, spring). 01 MET AD 610, week 2 lecture notes.

Coombs, W. T. (2007). Ongoing crisis communication: Planning, managing, and responding (2nd ed.).Los Angeles: Sage.

Fearn-Banks, K. (2001). Crisis communications: A casebook approach (2nd ed.).Mahwah,NJ:Lawrence Erlbaum.

Lerbinger, O. (1997). The crisis manager: Facing risk and responsibility.Mahwah,NJ:Lawrence Erlbaum.

Vina and Jusko. (2004). 5 threats that could sink your company. Industry Week, 253(9), 52. ABI/INFORM Global.

 

Eric Tse, Richmond Hill, Toronto
Tse and Tse Consulting -Security, Identity Access Management, Solution Architect, Consulting
http://tsetseconsulting.webs.com/index.html
https://tsetseconsulting.wordpress.com/
http://erictse2.blogspot.com/

CISSP:

CISSP:

CISSP:  Choose/identify a regulation, standard or certification that has ‘potential’ business continuity ramifications. Write a structured, detailed, well-researched and well supported synopsis on how this requirement came about and where this applies (and doesn’t apply).

Eric Hiu Fung Tse- AD 610- Week5 –  Assignment

Table of Content

CISSP: 1

Table of Content 2

CISSP (Certified Information Systems Security) 3

What was the catalyst or need identified that gave rise to this requirement? What agency or body monitors or oversees this?. 3

Is it direct or indirect (or both)? If indirect, what makes it necessary or applicable?. 4

What is the risk associated with non-compliance?. 5

What is the potential impact or limitations associated with this requirement?. 6

Potential impact 6

Limitations. 6

What are the cost factors associated with compliance or non-compliance? Where do you see this going in the long-term (other industries, countries, etc.)?. 8

Reference. 9

 

 

CISSP (Certified Information Systems Security)

 

I would like to talk about CISSP certification. It is one of the certificates related to my profession.

 

What was the catalyst or need identified that gave rise to this requirement? What agency or body monitors or oversees this?

 

Certified Information Systems Security Professional (CISSP) is an independent information security certification governed by International Information Systems Security Certification Consortium (ISC)². (ISC)² is a self-declared Non-profit organization ((ISC)², 2009) but is not a Charitable Organization under the applicable Internal Revenue Service Code.

 

In the mid-1980s a need arose for a standardized certification program that provided structure and demonstrated competence. In November 1988, the Special Interest Group for Computer Security (SIG-CS), a member of the Data Processing Management Association (DPMA), brought together several organizations interested in this. The International Information Systems Security Certification Consortium or “(ISC)²” formed in mid-1989 as a non-profit organization with this goal. (Harris, Shon, 2010)

 

 

 Talking about Cultural BCM differences, there have been a number of specialist areas incorporating business continuity into their own disciplines. The first to do this was information security, which led to confusion between business continuity and IT backup and recovery. This confusion was formalized to some extent by its inclusion in the BS 7755 Information Security Standard, which eventually became the ISO 27001 standard. As this standard has been widely adopted in such places as India, Japan, and Korea, the first references to BCM many people experienced came as part of information security. This misconception then became incorporated into many education and certification programmes such as CISSP. (Hiles, 2007)

 

 

 

 

 

Is it direct or indirect (or both)? If indirect, what makes it necessary or applicable?

 

The below describes the outline of business continuity and disaster recovery planning knowledge domain. It would give us a better idea on how this requirement came about and where this applies. (Miller & Gregory, 2010)

 

  1. 1.      Defining Disastrous Events
1.1 Natural disasters

1.2Man made disasters

1.3 How Disasters affect

  1. 2.      How BCP and DRP Work Together
2.1 COOPeration is the key.
  1. 3.      Understanding BCP project Elements
3.1 Senior management support

3.2 Senior management involvement

3.3 project team membership

3.4 who brings the donuts

  1. 4.      Determining BCP Scope
 
  1. 5.      Conducting the Business Impact Assessment
5.1 Perform a Vulnerability Assessment

5.2 Carry out a Critically Assessment

5.3 Determine the Maximum Tolerable Downtime

5.4 Establish recovery targets

5.5 Determine resource requirement

 

  1. 6.      Identifying the Elements of a Business Continuity Plan
6.1 Emergency response

6.2 Damage assessment

6.3 Personnel safety

6.4 Personnel notification

6.5 Backups and off-site storage

6.6 Software escrow agreements

6.7 External communications

6.8 Utilities

6.9 Logistics and supplies

6.10 Fire and water protection

6.11 Documentation

6.12 Data processing continuity planning

  1. 7.      Developing the BCP Plan
7.1 Making your BCP project a success

7.2 simplifying large or complex critical functions

7.3 Documenting the strategy

  1. 8.      Implementing the Business Continuity Plan
8.1 Securing senior management approval

8.2 Promoting organization awareness

8.3 Maintaining the plan

  1. 9.      Disaster Recovery Planning – Developing a Disaster Recovery Plan
9.1 Preparing for emergency response

9.2 Notifying personnel

9.3 Facilitating external communications

9.4 Maintaining physical and logical security

9.5 Personnel safety

 

  1. 10.  Testing the Disaster Recovery Plan
10.1 checklist

10.2 structured walkthrough

10.3 Simulation

10.4 Parallel

10.5 Interruption (or cutover)

 

           

 

What is the risk associated with non-compliance?

 

BCP and DEP work hand in hand to provide an organization with the means to continue and recover business operations when a disaster strikes. BCP and DRP exist for one reason: Bad things happen. Organizations that want to survive a disastrous event need to make formal and extensive plans – contingency plans to keep business running and recovery plans to return operation normal.

 

So the risk associated with non-compliance is, if the company does not following the rules and procedures, they may not be able to keep their operation running or return operation normal when disasters happen. They do not have all the documented procedures and processes, or those procedures and processes are not tested, practices, assessed carefully etc.

 

I am wondering if there is any legal risk involved. There are other regulations such as SOX that operations have to follow. I am not sure if CISSP would directly related to legal regulations, but many enterprise security policies and mandate are quite similar with this. 

 

What is the potential impact or limitations associated with this requirement?

 

Potential impact

 

The CISSP business continuity framework provides a concise view of what IT security professional has to do with business continuity. Comparing the breadth and depth of the content against the “Definite Handbook of Business and Continuity Management“, the CISSP BCP scope is like the tip of the iceberg. Of course business continuity is only one of the many topics in information security that they cannot be as comprehensive as the ones with BCI (Business Continuity Institute).

 

For the positive impact, CISSP BP does recover concepts like project initiation and management, continuing visible support, risk evaluation and control etc.

 

Limitations

For the limitations, CISSP BCP assumes all the BP works are done by a team CISSP professionals. BCI methodology is much more comprehensive. They assume there are separate internal multi-disciplinary organizations and people.  They have a two modes paradigm. They have an extensive corporate recovery team. They have HR interactions.

According to Business Continuity Methodology (BCM), the internal organization responsible for development, oversight, etc. of all business continuity planning should follow the plan (Organization chart) as above.

 

1) Two modes: development and operation (maintenance)

There are two effectively two areas of business continuity, one is the development or implementation teams, the other one is operation support teams. Since they belong to enterprise risk management and they have to be visible enough to get enterprise support, they are reported to CRO (Chief Risk Officer), who is reported directly to CEO or board of directors.

 

2) Extensive corporate recovery team

Corporate recovery teams: During recovery from a disaster or event, the business units within an organization will need to concentrate on restoring their own environment and become productive again. The technology support staff within an organization will be focused on providing a restored technical environment so that the business units can access their systems and data and become productive again. Therefore it will be necessary to create overall corporate recovery support teams that are activated during recovery procedures, These teams are comprised of company’s decision-makers who have the authority to declare a disaster status on behalf of the organization, as well as the authority to declare a disaster status on behalf of the organization, as well as the authority to release funds from the organization, deal with insurance companies, the press and process any employee personal claim or pay issues. (Hiles. 2007).

HR involvement

The human resources/personnel/training department of an organization must play key roles in installing appropriate training programmes for employees of an organization.

 

3) Interactions with External Organizations

For most organizations this is one of the weakest areas in the planning process (but it is getting better). In general, coordination between the private and public sectors has been a real challenge. This has improved significantly since 9/11, but there is still room for major improvement.

Procedures need to be in place for informing and communicating with public authorities during a crisis. Typically this involves the fire and police departments, but may involve other organizations, such as the Federal Emergency Management Agency (FEMA) and others. Plans should identify key contacts within these organizations and procedures for informing and communicating with these groups. Exchanging business cards or home phone numbers shouldn’t be an activity during time of crisis.

It isn’t enough, though; simply to know who the local authorities are and inform them of the situation. Depending on your situation, environment, etc. there may be specific agencies (e.g., EPA) or laws that govern your situation. The process and requirements for communicating with these agencies should be clear. Management needs to conform to these requirements. There are an untold number of cases where the proper authorities were either not informed or not informed on time during a crisis. The results for the organization can be devastating.

External agencies can and often do assist with actual exercising/testing. This is highly recommended, since it validates your actual processes and provides for a better public/private partnership. Agencies are typically very willing to become involved in organizational exercises and can often bring a level of credibility and realism to any exercise. Like any exercise, results should be logged with actions and dates for resolution agreed.

 

What are the cost factors associated with compliance or non-compliance? Where do you see this going in the long-term (other industries, countries, etc.)?

 

When you implement the Business Continuity department using projects, there are costs incurred for with compliance. You may think about being non-compliance can save you a lot of money. But if you spend this money, it would greatly increase your business to keep operating or recover to operations when disasters happen. Imagine how much money if you are going to lose if your operations are down or not running. How much money per each hour?

 

Although the CISSP BCP is not as comprehensive as BCI methodology (BCM) for now, I can see things will get converge together in the long term. The (isc)?2 will incorporate the knowledge body of BCP from BCI since they are the expert. Eventually, the gap would be narrowed.

 

Please identify all sources (minimum 3) for your work.

 

(Note: Feel free to select from the list provided or research your one on your own, but make sure your choice is not a topic we have already addressed in course (i.e, don’t do HIPAA, Sarbanes, etc – recommend you check with your facilitator before starting).

 

 

 

Reference

 

(ISC)². 2009. “About (ISC)²”, Retrieved November 23, 2009.

 

Harris, Shon (2010). All-In-One CISSP Exam Guide (5 ed.). New York: McGraw-Hill. pp. 7-8. ISBN 0071602178.

 

Hiles. (2007). The Definitive Handbook of Business Continuity Management 2nd edition

 

Miller & Gregory. (2010). CISSP for Dummies 3rd Edition.

 

Eric Tse, Richmond Hill, Toronto
Tse and Tse Consulting -Security, Identity Access Management, Solution Architect, Consulting
http://tsetseconsulting.webs.com/index.html
https://tsetseconsulting.wordpress.com/
http://erictse2.blogspot.com/

Virgin Records:

Virgin Records:

Write 700 – 1000 word fictional (but critical) essay of the use of Halo effect using a known organization or brand that has been extended into other areas? Why did they do it? What are the risks affecting this venture and possibly tarnishing the halo that is being extended? Can you think of any situation that could cause a negative halo effect?

Eric Hiu Fung Tse- AD 610- Week4 –  Assignment

Table of Content

Virgin Records: 1

Executive Summary. 3

What is Halo Effect in Branding or Marketing?. 3

Virgin Records Halo Marketing Case. 4

Virgin Cola. 4

Lessons Learned. 5

Risks about Negative Halo. 6

References. 7

Executive Summary

In brand marketing, a halo effect is one where the perceived positive features of a particular item extend to a broader brand. However it is not always the case. Virgin is one company that seems to be able to apply its brand name to almost anything but it was not fully successful in some of the cases. A good example is Virgin Cola, and Virgin Clothing. For Virgin Cola, the competition is so severe that there is no way Virgin can win the distribution from Coke and Pepsi.

 

In fact there some say that Virgin break all the rules of the Ansoff matrix that they should have failed more often. All these difficulties can be explained by negative Halo effect and there are so many risks for Virgin being over Halo. However, the important point is that, far from breaking the rules, they have observed the most important rule: understand the challenge and the risk, and aim to minimize the risk when away from home territory. In Virgin’s case, it is a combination of the brand halo, risk management, meticulous market research and their use of expert partners and suppliers that gives them their success.  This illustrates risk management in handling marketing and branding risks.

What is Halo Effect in Branding or Marketing?

In brand marketing, a halo effect is one where the perceived positive features of a particular item extend to a broader brand. It has been used to describe how the iPod has had positive effects on perceptions of Apple’s other products.(Wilcox Joe) The effect is also exploited in the automotive industry, where a manufacturer may produce an exceptional halo vehicle in order to promote sales of an entire marque. Modern cars often described as halo vehicles include the Dodge Viper, Ford GT, and Acura NSX.

Virgin Records Halo Marketing Case

Virgin is one company that seems to be able to apply its brand name to anything. Although Richard Branson’s empire began as a record label, signing groundbreaking acts such as the Sex Pistols, the Virgin name has been extended to the airways, cola, and a host of other Virgin companies. Companies effectively pass the “halo” from one well-renowned and excellent product on to another, thereby maximizing the value of the name. (Carroll 2012)

Virgin Cola

Virgin Cola was set up during the early 1990s in conjunction with Cott, a Canadian company that specializes in bottling own-label drinks. Cott was looking for a major international brand that could have global appeal.

Within a few months of its release, Virgin Cola had a 50% market share in the outlets that sold it. It went on to be launched inFrance,Belgium,SwitzerlandandSouth Africa. In its first year more than 500 million units were sold worldwide. However, its popularity soon waned.

It is also served on Virgin Atlantic flights, and at Virgin Cinemas. It was previously sold in the on-board shops on Virgin Trains but this is no longer the case. The Gulliver’s Kingdom chain of theme parks in theUKalso sells post mix Virgin cola.

Although it was priced 15–20 per cent lower than the two leading brands, not enough consumers were being won over. Part of the problem was distribution. Coca Cola and Pepsi managed to block Virgin from getting crucial shelf space in half theUK’s supermarkets. Meanwhile, Coke doubled its advertising and promotion budget. As Rob Baskin, Coca-ColaUSA’s spokesman said: ‘We take all competition seriously.’

Ultimately, Coca Cola and Pepsi’s hold on the market has proven too strong and Virgin Cola failed to make a serious dent in their worldwide sales. Even on Virgin’s home turf, theUK, the brand struggled to gain 3 per cent of the market and it has never made a profit. (Author, 2006)

Lessons Learned

Strong brands depend on exploiting competitors’ weaknesses. ‘We often move into areas where the customer has traditionally received a poor deal, and where the competition is complacent,’ Branson once said, explaining Virgin’s brand strategy. However, Pepsi and Coca Cola are anything but complacent. Distribution is everything. If you can’t get the product on the shelves, it will never outsell its competitors. . (Author, 2006)

Risks about Negative Halo

The Ansoff matrix shows how risk increased as a business moved from a growth strategy based on penetration into one based on market extension, or the yet more risky territory of new product development, or beyond that, diversification. The moral of the matrix is not that you should avoid growth strategies based on anything but penetration, but that you should aim to reduce the risks of other strategies by whatever means are appropriate: market research, pilot trials, joint ventures, etc. A key means of reducing the risks involved in such growth strategies is branding. (Cheverton, 2000)

The brand halo works as it sounds – providing a prefabricated protective surround to the new venture, and so easing its way, even when the new venture might be as unconnected from the previous ones as cola is from airlines or mobile phones from cinemas. The halo also allows the marketer to infuse the new venture with the brand values (hopefully saintly) of the existing ones. The ability to transfer brand values in this way is a huge importance, but it must be done well, and it must be appropriate to the circumstances. (Cheverton, 2000)

Some say that Virgin break all the rules of the Ansoff matrix, that moving from record label to airline to hotelier to colar producer to financial services to rail operator is diversification with a vengeance and that they should have failed more often. The point is that, far from breaking the rules, they have observed the most important rule: understand the challenge and the risk, and aim to minimize the risk when away from home territory. In Virgin’s case, it is a combination of the brand halo, risk management, meticulous market research and their use of expert partners and suppliers that gives them their success. (Cheverton, 2000)

References

Author.  (2006). Brand Extension Failures: Virgin Cola.  A brand too far http://brandfailures.blogspot.com

 

Carroll. (2012). AD 610 Course Notes: Enterprise Risk Management and Business

Continuity

 

Peter Cheverton. (2000). Key marketing skills: a complete action kit of strategies, tools & techniques for success marketing

 

Wilcox, Joe (2008). “The iPhone Halo Effect”. Apple Watch – eweek.com

 

Eric Tse, Richmond Hill, Toronto
Tse and Tse Consulting -Security, Identity Access Management, Solution Architect, Consulting
http://tsetseconsulting.webs.com/index.html
https://tsetseconsulting.wordpress.com/
http://erictse2.blogspot.com/

Static vs. Dynamic Risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Static vs. Dynamic Risk

Do you agree or disagree: • Risk issues are largely static, not changing from year to year, so why do we need any change in the organizational approach to addressing risk?

• The traditional risk silos are addressed by specialists who know exactly how to deal with their respective areas of risk.

 

 

Eric Hiu Fung Tse- AD 610- Week2-  Assignment

Table of Content

Static vs. Dynamic Risk. 1

Table of Content 2

Executive Summary. 2

Dynamic vs. Static Risk. 3

Silos vs. Integrated. 5

Conclusion. 6

Reference. 7

 

 

Executive Summary

 

Risks are not always static. Many of them dynamic because the business world (and our world is changing). This is one of the reasons why we need an organizational to address the risk. The process is continuous and dynamic.

Traditionally corporate risk management uses silos approach that has limitations. Many risks are cross functional that sometimes specialists may not know exactly how to deal handle the risks in their respective area. Those limitations drive the emergence of an integration/unified framework to handle enterprise risks as a whole.

Dynamic vs. Static Risk

 

The international business world has been changing dramatically that, people face an assortment of risk almost unimaginable from 10 years ago. For example this decade we introduce e-commerce and other technology that drives business model from years (to the old days) to months (nowadays). No one would agree that risk issues are largely static.

 

Another example is internet that let everyone access information widely ad quickly (Kevin Peraino, 2000). As the Internet comes of age, companies are rethinking their business models, core strategies, and target customer bases. “Getting wired,” as it is often called provides businesses with new opportunities, but it also creates more uncertainty and new risks8. In his book The High risk Society, Michael Mandel states, “Economic uncertainty is the price that must be paid for growth.” To be successful, businesses must seek opportunities “where the forces of uncertainty and growth are the strongest.9

 

The third example is the introduction of derivatives, which were originally intended to help manage risk, has themselves created whole new areas of risk. Under US law and the laws of most other developed countries, derivatives have special legal exemptions that make them a particularly attractive legal form through which to extend credit. (Michael Simkovic, 2009) However, the strong creditor protections afforded to derivatives counterparties, in combination with their complexity and lack of transparency, can cause capital markets to underprice credit risk. This can contribute to credit booms, and increase systemic risks.[3] Indeed, the use of derivatives to mask credit risk from third parties while protecting derivative counterparties contributed to both the financial crisis of 2008 in the United States and the European sovereign debt crises in Greece and Italy. (Michael Simkovic, 2009) (Michael Simkovic, 2011)


From the above examples, we can conclude that risks issues have never been static. We need to adopt various techniques to identify risk, and once identified, the process of identification should be dynamic and continuous.

 

To summarize, here are few forces creating uncertainty in the new economy:

 

–          Technology and the Internet

–          Increased worldwide competition

–          Freer trade and investment worldwide

–          Complex financial instruments, such as derivatives

–          Deregulation of key industries

–          Changes in organizational structures resulting from downsizing, reengineering, and mergers

–          Higher customer expectations for products and services.

 

All these changes provides business with new opportunities, but it also creates more uncertainty and new risks (Washington Post, 2000)

 

Silos vs. Integrated

 

Historically, risk management in even the most successful business has tended to be in silos – the insurance risk, the technology risk, the financial risk, the environmental risk, all managed independently in separate compartments. Coordination of risk management has usually been nonexistent, and the identification of new risks has been sluggish. (Barton, 2002)

 

Silo-based approaches are reactive, not proactive, and their functions segregated; each silo has its own tools and applications to assist with specific management and reporting requirements. Problems arise because these independent systems do not communicate with one another across business lines. (ACI worldwide, date)

 

Companies need a broader view of managing risky corporate activities, so that they can gain a complete understanding of risk profile. This expanded view allows institutions to better detect and prevent fraud by monitoring transactions and events across the entire range of corporate activities.

 

From all the above reasons, we would to change our approach to manage risk – Barton (2002) introduces a new model – enterprise wide risk management – in which the management of risks is integrated and coordinated across the entire organization.

 

Comparing with the old paradigm, with each risk considered in isolation, the new risk management approach is holistic, integrating the risks across the organization and designing risk response strategies.

 

So how do we integrate risk and adopt the enterprise wise risk management? Companies build portfolios of risks, in the form of, a risk map, a list of risks, or a model that highlights the company assessment of risks. Afterwards companies integrate the risks with best practices and tools, and to find room for enterprise-wide management to handle those risks.

 

Companies choose to implement ERM to remove traditional risk silos (Brown, J. 2007). In fact, based on a survey conducted by Internal Auditors Research Foundation and Tillinghast Tower Perrin a main motivating factor driving ERM is the desire for a unifying framework (Miccolis, 2001) that would result in goal of overcoming organizational barriers in implementing ERM (Miccolis, 2001). It would be interesting to evaluate that if a company implement ERM framework and remove the risk silos then if they would still need specialists

 

The advantages of new approach far outweigh the disadvantages. It reduces costs through operation consolidation and enables standardization and flexibility on risk managing methodology, practice and process. It improves workflow efficiencies and synergies. It increases cross-selling opportunities, service delivery and measurability of the overall enterprise environment. (ACI Worldwide. (Date).)

 

 

Conclusion

 

Risks are not always static. Many of them are dynamic because the business world (and our world is changing). This is one of the reasons why we need an organizational approach to address the risk. The process is continuous and dynamic.

 

Traditionally corporate risk management uses silos approach that has limitations. Many risks are cross functional that sometimes specialists may not know exactly how to deal handle the risks in their respective area.  Those limitations drive the emergence of an integration/unified framework to handle enterprise risks as a whole.

 

Reference

 

ACI Worldwide. (Date). Taking Risk Management From the Silo Across the Enterprise

 Barton. (2002). Making Enterprise Risk Management Payoff,

 Brown, J.P.W. Enterprise Risk Management. Retrieved on June 4, 2007.

 Kevin Peraini. (2000). A Shark in Kid’s Clothes, Newsweek (October 2 2000): 50

Miccolis, et al. (2001). Enterprise risk management: Trends and emerging practices.

Tillinghast-Towers Perrin, Institute of Internal Auditors Research Foundation.

Washington Post. (2000). New Challenge Arise as All Business Becomes E-Business.

 

Eric Tse, Richmond Hill, Toronto
Tse and Tse Consulting -Security, Identity Access Management, Solution Architect, Consulting
http://tsetseconsulting.webs.com/index.html
https://tsetseconsulting.wordpress.com/
http://erictse2.blogspot.com/

British Petroleum (BP Deepwater Horizon)

Table of Content

British Petroleum (BP Deepwater Horizon) 1

Table of Content 2

Executive Summary. 3

BP Deep Water Horizon Incident 4

Public Events. 4

Company Actions: 5

Was it effective? How would you define ‘effective’?. 7

What could have done differently?. 8

Conclusion. 10

Reference. 10

Appendix A – BP Financial Statements. 12

 

 

Executive Summary

 

This paper talks about British Petroleum, a UK based global oil and Gas Company, the third largest energy company and the fourth largest company in the world suffered an image impact from a national wise disaster.

 

It talks about public affairs related to the disasters, the image and financial impact to the company, and how the company turnaround the situations. It also discusses about the effectiveness of the action plan.

 

In general we conclude that this has been effective but from the crisis management perspective, 5 things they could have done differently if something happened again.

BP Deep Water Horizon Incident

Rig Explosion and Oil Spill

On April 20, 2010. BP PLC’s (BP) Deepwater Horizon, a floating oil rig located in the Gulf of Mexico (Gulf) some 50 miles off the coast of Louisiana, had a blowout. Natural gas pushed up the drill pipe, the well’s blowout preventer failed, causing an explosion and a horrific fire. Eleven workers perished. (Hawkins, 2011)

 

The spill caused extensive damage to marine and wildlife habitats and to the Gulf’s fishing and tourism industries.

BP’s stock fell by 52% in 50 days on the New York Stock Exchange, going from $60.57 on 20 April 2010, to $29.20 on 9 June, its lowest level since August 1996.

 

On 27 July 2010, BP announced a net loss of $16.97 billion during the second quarter of 2010, with the oil spill costing $32.2 billion up to that point. (CNBC.com, 27 July 2010).  Also on 27 July 2010, BP confirmed that CEO Hayward would resign and be replaced by Bob Dudley on 1 October 2010. (CNBC.com, 27 July 2010).

Public Events

On 30 April President Barack Obama ordered the federal government to hold issuing new offshore drilling leases until a thorough review determines whether more safety systems are needed (Johnston, Nicholas; Nichols, Hans, 2010-05-01).

 

The Obama administration has been aggressive and often excessive rhetoric in criticizing BP, which some investors saw as an attempt to deflect criticism of his own handling of the crisis. A White House spokesman said the President’s job was to keep his “boot on the throat” of the company.

 

Republicans such as Rand Paul and Joe Barton have accused President Obama of being anti-business and “un-American”, with Paul stated that said he had “heard nothing from BP indicating it wouldn’t pay for the spill”.

 

British pension fund managers (who have large holdings of BP shares and rely upon its dividends) accepted that while BP had pay compensation for the oil spill and the environmental damage, they argued that the cost to the company’s market value from the President Obama’s criticism was far outweighing the direct clean-up costs. (Johnston, Nicholas; Nichols, Hans. 2010-05-01) (CBS/AP, 2010-04-29).

 

On 30 April President Barack Obama ordered the federal government to determine the cause of the disaster. That same day he announced that he had dispatched the Secretaries of the Department of Interior and Homeland Security, as well as the EPA Administrator and NOAA to the Gulf Coast to assess the disaster. (Office of the Press Secretary. 2010-04-30).

 

The Obama administration sent a $69 million bill to BP for the U.S. government’s clean up effort. The bill was also sent to Transocean, Anadarko, Moex Offshore and QBE Underwriting. (Blake Ellis. 2010-05-03).

 

Company Actions:

 

After the oil spill incident, BP spent $7 million a day with its partners to try to battle the oil spill and contain the disaster. (White, Ronald D, 30 April 2010). In comparison, BP’s 1st quarter profits for 2010 were approximately $61 million per day. (British Petroleum, 27 April 2010)  BP has agreed to create a $20 billion spill response fund administered by Kenneth Feinberg. (Brenner, Noah, 17 Jun. 2010)(NPR. 16 Jun. 2010) (Weisman, Jonathan; Chazan, Guy, 16 Jun. 2010). The amount of this fund is not a cap or a floor on BP’s liabilities. BP will pay $3 billion in third quarter of 2010 and $2 billion in fourth quarter into the fund followed by a payment of $1.25 billion per quarter until it reaches $20 billion. In the interim, BP posts its US assets worth $20 billion as bond. For the fund’s payments, BP will cut its capital spending budget, sell $10 billion in assets, and drop its dividend. (Brenner, Noah, 17 Jun. 2010) (BBC News, 16 Jun. 2010). 

 

Action Plan Calendar (Hawkins, 2011)

April 20, 2010 Blowout at Deepwater Horizon.
April 30, 2010 Analysts estimate the cost of containment and cleanup to be about $3 billion.
May 10, 2010 Bloomberg estimates a worst-case pretax cost to BP of $8 billion.
June 15, 2010 One consulting firm to the oil and energy industry estimates cost to BP to be between $17 billion and $29 billion (assuming Macondo well capped 90 days after explosion); another says cost to be between $20 billion and $60 billion.
June 16, 2010 BP agrees to $20 billion trust fund.
June 25, 2010 BP reports it had spent $2.4 billion to date for containment, cleanup, and claims.
Summer 2010 Several Wall Street firms, including Goldman Sachs, suggest the total cost to BP could reach $200 billion.
July 15, 2010 Macondo well capped
July 17, 2010 One consulting firm revises its estimate of the cost to BP from $17 billion–$29 billion to $15 billion–$39 billion.
July 27, 2010 BP names a new CEO.
September 19, 2010 Macondo well “officially killed.”
October 4, 2010 BP announces plans to raise $2.7 billion via a bond issuance to help cover costs associated with the Gulf accident.
October 11, 2010 RBSa estimates a worst-case cost to BP of $42 billion if the explosion and spill were caused by gross negligence.
December 15, 2010 U.S. Department of Justice files civil lawsuit against BP and 8 other firms; does not, however, specify damages sought.
December 29, 2010 The Associated Press estimates costs to BP to be between $38 billion and $60 billion.

 

January 5, 2011 National Commission on the BP Deepwater Horizon Oil Spill reports its findings; BP alone not to blame

 

 

Was it effective? How would you define ‘effective’?

We are going to evaluate the effectiveness from first on the financial perspective. Stock price is one of the easiest indicator we can get to have a rough analysis. First there is sharp drop within 5 months from (from $60 to $30). This is understandable because a lot of debt BP has to bear from the crisis. The income statement has large negative items from the oil spill in the first few quarters. (See Appendix A for financial statements for the details).

 

On the other hand, from the stock trend, you can see the stock price bounds back to $40 within 1 year, implying it has a reliable and sustainable recovery. The company manages to pay the debt and investors are still optimistic about the future of this company.

 

For the image lost, or brand devaluation, somewhat it can be reflected from the stock price decrease. However from the financial data, the money compensates the disasters. It seems that not too many customers leave the brand because of the blowup (please check the revenue after the disasters). Perhaps because oil industry depends heavily on the infrastructure and physical assets, the company does not depend solely on the brand. Also from their action plans after the disaster, BP gave an image to the public that they are willing to ne responsible and turnaround the situations. The brand did not devalue as much as some other companies do after disasters.

 

After the incident happen, BP delivers an public image that  they have good will of bearing most of the responsibilities on cleaning up the mess and paying the losses. In general the action plan is quite effective.

 

What could have done differently?

 

On the other hand there are many things they could have done to prevent things happen. Some of them are on the proactive side. There are some suggestions and feedback from crisis management and business continuity perspective. (Heineman, 2011)

 

Response Plan

 The Gulf spill was not unthinkable. The possibility of a well blow-out was explicitly addressed by systems, processes and technology. Yet, BP and the U.S. had no response plans which addressed the sequence of events that, though remote, were arguably foreseeable in environments where dangerous technology was located and which, in particular, addressed the additional issues outlined below.

 

Public or Private Responsibility?

The U.S. government initially left many dimensions of crisis management and response to BP. But, the Gulf spill was a national issue, which required governmental direction, responsibility and accountability. The BP Commission properly criticized the federal government for failing to assume leadership soon enough or to act effectively in coordinating the private sector and public sector (federal, state and local) actors.

 

Confusing Information

 A host of factual questions were raised by Gulf Spill: How much oil was flowing? How could the flow be stopped? Where was the oil going (surface/sub-surface)? How could it be contained or removed? How could damage to environment/people/property be eliminated or mitigated? But for a significant period of time, responses from the company and the government were confusing. The U.S. government needed a central authority which used expert working groups, and which made clear to the public what was known, what was unknown, what process was in place for improving knowledge, and when there would be regular updates on those issues. Again, a single central authority needs to have seized control of the information flow and been as candid and explicit as possible about what is known, what isn’t known, and how information gaps are being filled.

 

Decision-Making Processes

 As noted, there was substantial confusion for weeks after the Gulf spill about whether the company or different parts of government were making decisions. The decision-making processes on a host of crisis response issues (see preceding paragraph) were not set out clearly for the public — including comparison of options — and led to a perception of drift and lack of direction during a major national catastrophe

 

Implementation and Resources

In the Gulf, there were also serious issues about which private and public sector actors would implement which decisions — and about what resources were necessary. Indeed, just the lack of resource preparedness increased the severity of problems of containment and damage mitigation.

 

Conclusion

 

This paper talks about British Petroleum, a UK based global oil and Gas Company, the third largest energy company and the fourth largest company in the world suffered an image impact from a national wise disaster.

 

It talks about public affairs related to the disasters, the image and financial impact to the company, and how the company turnaround the situations. It also discusses about the effectiveness of the action plan.

 

In general we conclude that this has been effective but from the crisis management perspective, 5 things they could have done differently if something happened again.

 

Reference

 

BBC News. (16 Jun. 2010).  “BP to fund $20bn Gulf of Mexico oil spill payout”. Retrieved 16 Jun. 2010.

 

Blake Ellis (2010-05-03). “White House sends BP a $69 million bill”. CNNMoney.com. Retrieved 2010-05-03.

 

British Petroleum (BP p.l.c.). (27 April 2010). “First quarter 2010 results”. . Retrieved 19 May 2010.

 

Brenner, Noah (17 Jun. 2010). “Hayward says spill ‘never should have happened'”. Upstream Online (NHST Media Group). Retrieved 17 Jun. 2010.

 

CBS/AP (2010-04-29). “Oil Spill Reaches Mississippi River”. CBS News. Retrieved 2010-04-29.

 

CNBC.com. (27 July 2010). “BP Launches Image Overhaul, Ditches CEO. Retrieved 19 December 2010.

 

Drake, Bruce (2010-05-27). “Public Pans Obama’s Response to Oil Spill, But Gives Worse Marks to BP”. Politics Daily. Retrieved 2010-05-27.

 

Hawkins. (2011).Accounting for Catastrophes: BP PLC and Union Carbide Corporation, Harvard Business Publishing.

 

Heinema. (2011). Crisis Management Failures in Japan’s Reactors and the BP Spill HBR BLOG POSTS

 

Johnston, Nicholas; Nichols, Hans (2010-05-01). “New Offshore Oil Drilling Must Have Safeguards, Obama Says”. Bloomberg. Retrieved 2010-05-01.

 

Office of the Press Secretary. (2010-04-30). Statement by the President on the Economy and the Oil Spill in the Gulf of Mexico. . The White House (The White House). Retrieved 2010-05-05.

 

NPR. (16 Jun. 2010). “White House: BP Will Pay $20B Into Gulf Spill Fund”..

 

Weisman, Jonathan; Chazan, Guy (16 Jun. 2010). “BP Halts Dividend, Agrees to $20 Billion Fund for Victims”. The Wall Street Journal (Dow Jones & Company). Retrieved 16 Jun. 2010.

 

White, Ronald D. (30 April 2010). “For BP, oil spill is a public relations catastrophe”. Los Angeles Times. Retrieved 1 May 2010.

 

Eric Tse, Richmond Hill, Toronto
Tse and Tse Consulting -Security, Identity Access Management, Solution Architect, Consulting
http://tsetseconsulting.webs.com/index.html
https://tsetseconsulting.wordpress.com/
http://erictse2.blogspot.com/

A Manager’s Toolkit: Communicating Change During Mergers and Acquisitions


Introduction

It is an understatement and an underlying truth that organizational changes have “serious impacts on the organizations and their employees” (Appelbaum, Lefrancois, Tonna & Shapira, 2007, p.191). Mergers and acquisitions exemplify perhaps the worst kind of change in any employee’s mind (Petersen, 2009).

It needs to be understood that managers, by definition, are responsible for an employee’s adaptability (Caproni, 2005, pp. 223-224; Petersen, 2009).

Even early rumors and hints of mergers or acquisitions foretell a time of instability, uncertainty, stress, and change in the workplace. Such passages touch on the lives of an entire workforce, from the most recent entry-level employee to veteran senior managers (Petersen, 2009). From the first announcement and well into the future of any newly merged operations, the responsibility of a manager will also change. Each person will have to adapt.

                Employees may view downsizing during a time of economic turmoil as a manmade disaster. “The resulting disruptions have rippled across supply chains, shaken entire industries and taken their toll on employee, customer and partner relations” (The Human Side of Business Continuity Planning, n.d.). Thus, it is crucial that a manager be prepared to intelligently present the changes, be sensitive to the impending personal adjustments required, and be aware of the many human capital risks that could impede desired corporate results.

The interior circle in Figure 1 points to three troublesome corporate challenges that could grow out of human capital risks:

Figure 1: The Human Side of Business Continuity Planning (www.continuitycentral.com retrieved February 13, 2009)

Managers can limit or eliminate any negative side effects through effective communication. “People want purpose and meaning in their day-to-day work lives” and this focus may be skewed during mergers and acquisitions (Caproni, 2005, p.221).

Uncertainty can be reduced by meeting with the workforce often during the change, providing answers to questions. This will help in “motivating and retaining key staff in the event” (Kummer, 2008, p.5). Reassuring high-performers of the value they provide will also maintain motivation levels.  People will naturally arrive at conclusions themselves, but will be satisfied that their questions have been answered.

In this toolkit, you will learn guidelines for effective communication, guidelines for active listening, suggestions for delivering bad news to employees, guidelines for dealing with emotional employees and suggestions for self-motivation and healing.

Guidelines for Effective Communication

“There is no such thing as too much communication when dealing with employees, especially when the timeline is short and they are required to make decisions affecting their careers with very little notice” (Charland, 2008, p.11). The workforce needs “a sense of predictability and control” with a clear mission, consistency, high involvement, and adaptability (Caproni, 2005, p. 221). During mergers and acquisitions, a person’s culture or “people issues” remain one of the most difficult tasks to accomplish successfully” (Kummer, 2008, p.5). “People bring their culture to an organization,” making adaptability a vital organizational survival skill (Fisher, 1999, p. 12). This can be done by following these effective communication guidelines (Szpekman, 2004, p.9):

  • Talk less and listen more,
  • Tell the workforce everything,
  • Ensure messages are “clear, simple statements,”
  • Reduce uncertainty instilling a new sense of control,
  • “Let people arrive at conclusions themselves,”
  •  “Reassure high-performing employees of their value,”
  • “Measure performance outcomes and monitor employee reaction” and allow senior management to be visible.

If you are dealing with difficult issues such as down-sizing be sure to communicate “squarely and candidly” (Roach, 2007, p.8). Always tell the workforce everything with clear and simple language. Communications should be unambiguous, dealing with “quantifiable facts openly” and achieved by confronting reality, setting objectives, and simply being there for the employees at this time when they need managers most (Valant, 2008, p.15).

Continue to measure performance outcomes and monitor employee reactions to keep you in touch with the reality of the workforce impact and allow you to change your communication strategy if needed. Most importantly, being visible during this stressful time will show that you have empathy and that you support the people. The uncertainty and stress during a merger and acquisition can be reduced so “employees have faith in the success of the transition” (Charland, 2008, p.11).

Guidelines for Active Listening

During the merger and acquisition process, managers need to allow employees to express concerns about their future. Managers should be able to listen to current employees and address these concerns.

Employees, regardless whether they stay or leave, will suffer less and hold the company in higher esteem if employees are treated with compassion and respect. A good start is to look people in the eye, answer their questions, listen to their concerns, and warmly thank the people for sharing these concerns (Fryer, 2009).

The following are guidelines and suggestions for active listening as a manager (Caproni, 2005, pp. 117-118):

  • Learn to listen with intensity and give the person speaking your full attention.
  • Don’t get distracted. Turn off your cell phone and ignore the computer screen in front of you;
  • Don’t assume that the issue is uninteresting or unimportant;
  • Don’t listen only for what you want to hear;
  • Don’t think ahead to what you plan to say next;
  • Don’t interrupt, talk too much, or finish people’s sentences for them;
  • Don’t engage in fake listening techniques such as nodding your head;
  • And, don’t let the person’s status, appearance, or speaking style distract you.

Also, learn to listen with empathy. Understand, or attempt to understand, the message from the speaker’s point of view. Don’t relate everything you hear to your experience and pay attention to body language providing clues to the speaker’s concerns and emotional state.

Demonstrate acceptance and show that you are listening with an open mind. Avoid killer phrases such as “You have got to be kidding, that will never work,” and “Yes, but…” Also, avoid judgmental body language. Condescending grins and rolling one’s eyes can have the same effect as killer phrases.

Additionally, take responsibility for completeness and encourage the speaker, whether it is your manager or your employee, to give complete information. And, be yourself. Be sincere and do not come across as compulsive artificial, or overly trained as an active listener (Robbins & Hunsaker, 1989).

Most importantly, be aware of cultural diversity issues if you have visible minority subordinates. Identify the culture traits of your employees and adjust your communication style and listening style accordingly.

Guidelines for Delivering Negative Information to Employees

Informing an employee the organizational culture is changing, their job is changing, or they may be losing a job because of a merger or acquisition is challenging. In this section, consider suggestions how to deliver the “bad news.” Remain supportive of the corporate strategy; how you can maintain business operations; and how you can deliver critical information in the process. The following describes guidelines for delivering negative information prior to, during, and after a merger or acquisition.

            First, be aware of what you can communicate based on legal constraints (IABC.COM). If your company involves both employees and consumers, recognize that the communication with employees will have an impact on the consumer. Downward communication is what your focus, as a manager, will be (Timm & Peterson, 2000, p. 128). Then, as suggested in the previous section, be prepared to listen as a vital part of upward communication (Timm & Peterson, 2000, p. 128). The sooner you have clearance to communicate, the more efficient the implementation will be. By nature, people tend to resist change and they see threats in the unknown (Timm & Peterson, 2000, p. 132). Make every effort to be able to explain if the merger and acquisition is makes sense from a strategic, financial, human resource, and individual employee perspective.

            Once it is absolutely necessary to change the structure of the organization, follow these suggested guidelines (Bossidy & Charan, 2004; Caproni, 2005; IABC.COM; Timm & Peterson, 2000; and Petersen, 2009):

  • Make sure you understand and embrace the reasons for the change. You are likely to be asked.
  • Know what you can and cannot say.
  • It may be appropriate to have a representative from Human Resources with you, both to witness and field related questions.
  • Directly and succinctly present what exactly will happen.
  • Explain to the employee that the company, or the division within the company, simply has to “confront reality.”
  • Approach employees by sharing your own feelings. Suggested wording includes, “I, as you, thought we would be on solid ground, but I did not account for the possibility of what is now clear.” You may also say, “I have had to digest it, how it affects you, how it can affect our supervisors, and me.”
  • Ensure employees have a chance to be part of the change management team if the bad news you are delivering is not that they will be losing their job. Explain that their job function might be changed.
  • Recognize the employees’ achievements and acknowledge their success. Reassure them they can continue their achievement toward a “new success” under the guidelines and values of the new company.
  • Open the opportunity for question and be honest, while not answering questions you cannot answer. Promise to inquire and tell the employee you will return with information when you have it, and then actually do it.
  • Ask the employees for suggestions on how they think the company can adjust under the new circumstances.
  • Give the employee time to digest the information, but thank them for their initial response.
  • Tell them that you are available to address their concerns, and keep it that way.

Remain aware of the trade-offs that come from productivity once organizational change is made. It is possible that the employee who is laid-off could initially react positively but return with negative emotions the following day (Caproni, 2005, pp. 121-122).  “Voice your understanding how difficult, even sad, this is for them and for their families” (Petersen, 2009). If necessary, have a crisis team available to answer any questions or offer emotional support (The human side, n.d.).

Knowing How to Deal with Emotional Employees

Today’s economic condition has made the job environment even more stressful than usual. On a scale of life events, those associated with job loss or change in work environment rate in the top ten (Swan, 2008). This influx of change in the workplace will significantly increase emotional stress on an employee, which a manager needs to be prepared to manage effectively.

Managers dealing with employees need to deal with emotional issues in addition to daily work activities. The manager who possesses developed emotional intelligence will be able to cope with the merger and the emotional reactions coming from employees like anxiety, uncertainty, conflicts and the challenge to continue to motivate (Caproni, 2005).  In order to manage a group of employees faced with the prospect of a merger, there are some core principles to keep in mind to achieve success. These principles include (Stockdale, 2006):

  • Be in constant, honest communication with employees.
  • Provide resources for those who will be displaced or have significant changes to their job duties. It is critical to show employees that you, as their manager, have their interests in mind during the merger.
  • Give assurances about change to the employee’s role in the organization. Ensure that the employee will still play a part in the department and its achieving set goals.
  • Employ active listening techniques to hear employees. Work to take discernable action to address their concerns.

These key concepts will work to reassure employees while also providing a level of stability from their direct manager.  A manager must be prepared for the employee emotions to run the spectrum from being scared to confused to angry (Stockdale, 2006).  From an employee point of view, the sudden change brought about by a merger will call into question their role in company as well as the reciprocal loyalty element between employee and employer.  There is a strong emotional attachment to a company’s culture and the employee expects some level of reciprocation of this relationship through a stable work environment and a semblance of loyalty (Siegal et al, 2006).  Once this relationship is changed or perceived as broken by the employee, a manager needs to step in and act as an arbitrator to keep the employee-company relationship stable. It is at this moment the manager needs to remember the core principles mentioned heretofore in order to provide the needed reassurances to the employee to keep them focused on performing their job.

Guidelines for Managerial Motivation and Healing

Within a merger or acquisition a manager may come across conflict within his or herself. Their ability to lead a team during transition is key. Both before and during the transition it is important for a manager to spend time on self-reflection and analyzing their own role and performance (Tracy, 2009). Managers need to find ways to educate themselves (Zatz, 2009).

The foundation for a manager’s ability to self-coach should be rooted in the following principles (Tracy, 2009):

  • Use upward feedback. Create an open channel for your subordinates to give both anonymous and specific feedback.
  • Acquire self-coaching skills by incorporating a written exercise to visually see daily activities and the outcomes of each. For example (Tracy, 2009):
  • Outline your goals and future plans ahead of time.
  • Log daily activities and the outcomes you intent.
  • Review the outcomes and the reasons for each.
  • Critique yourself and analyze what changes could have been made to create a more effective solution.
  • Seek advice from your direct subordinates as well as your own direct supervisors.
    • Also, learn to delegate tasks to other employees. Delegating tasks can promote trust within your department (Caproni, 2005).
    • Obtain education. Seek out courses that can help enhance your experience. Or, team with other managers who have experienced a merger in the past. Consult your network to educate yourself on their strengths and weaknesses.
    • Analyze yourself. Have the ability to step back and examine your own abilities. Spend time each day reviewing your positive and negative traits.

The ability to deal with the rapid changes of a merger can greatly depend on the ability for self-evaluation. In order to effectively coach others, you must be able to educate yourself. A manager’s role within the company can change just as much as that of an employee. The ability to adapt is key to a successful transition. The adaptation comes when a manager can analyze their own performance and promote communication as an opportunity to further the newly acquired skills.

Conclusion

Follow these guidelines to communicating change and your organization is sure to maintain the support and loyalty from the people who are the powerhouse to the organization’s success during a merger or acquisition. A merger represents a significant organizational change that makes many employees react in an emotional manner.  Managers need to recognize the unique issues during this time and work to stabilize the environment and employee emotions.  Following these guidelines will build organizational credibility from management to the employees and keep the performance of the impacted employees at the same, or a better level prior to the merger or acquisition.

References

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Bossidy, L. & Charan, R. (2004) Confronting Reality: Doing What Matters to Get Things            Right. Crown Business [From Notes Taken February 2009]

Caproni, P. (2005) Management Skills for Everyday Life: The Practical Coach (2nd Edition).        Upper Saddle River, NJ: Pearson/Prentice Hall

Charland, M. Brent. (2008) Innovapost executes on high-speed merger and acquisition   activities. [Electronic Version.] ABI/INFORM Strategic HR Review. Chicago. Vol. 7. 6.,             p. 11

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Roach, C. (2007) Taking the Lead During a Merger. [Electronic Version] ABI/INFORM.            Strategic Communication Management. Chicago. Vol. 11, 1., p. 8

Robbins, S. and Hunsaker, P. (1989) Training in Interpersonal Skills: Tips for Managing            People at Work. Upper Saddle River, NJ: Prentice Hall

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Stockdale, D. (2007) Helping Employees through a Merger or Acquisition. Retrieved on   November 23, 2009 from: http://www.myarticlearchive.com/articles/6/042.htm

Stone, D., Patton, B., & Heen, S. (1999) Difficult Conversations: How to Discuss What Matters   Most. New York, NY: Penguin Books

Swan, P. (2008) The Top Six Stressor Areas in Life: How to Recognize and Handle the Stress.       Retrieved on November 25, 2009 from:      http://www.sixwise.com/newsletters/05/05/17/the-top-six-stressor-areas-in-life-how-to-            recognize–amp-handle-the-stress.htm.

Szpekman, A. (2004) Guiding Principles During a Merger. [Electronic Version]. ABI/INFORM.             Strategic Communication Management. Chicago. Vol. 8, 4., p. 9

The Human Side of Business Continuity Planning. (n.d.) Continuity Central. Retrieved            February 13, 2009 from www.continuitycentral.com

Timm, P. and Peterson, B. (2000) People at Work: Human Behavior in Organizations. (5th          Edition). Cincinnati, OH: South-Western College Publishing

Tracey, B.J. (2009) Helping Managers Help Themselves. Cornell Hospitality Quarterly. Cornell   University

Valant, L. (2008) Why Do Both Marriages and Business Mergers Have a 50% Failure Rate?        [Electronic Version.] ABI/INFORM. The CPA Journal. New York. Vol. 78, 8., p. 15

Zatz, D. (2009) An HR Manager’s Guide to Mergers and Acquisitions. Toolpack Information.     Retrieved November 27, 2009 from: from www.toolpack.info/how-to/hr-managers-   guide-to-mergers.html

Eric Tse, Richmond Hill, Toronto
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