Why Tech Companies Don't See Their Biggest Problems Coming

Early success often breeds overconfidence. JL

Ian Mitroff reports in MIT Sloan Management Review:

Peter Drucker wrote about the failure that ensues when companies succeed quickly and spectacularly. The cascade of great news can make an organization blind to problems that lurk within its business model and are embedded in its culture and structure. Smugness about achievements in IT can make management seem deceptively easy. An ethical crisis can quickly morph into PR and financial crises and into a crisis of confidence in the entire company.
Since Mark Zuckerberg’s recent congressional testimony about Facebook’s unauthorized release of the private data of millions of users, many flaws in the company’s business model have come to light. Crises related to member privacy, misuse of data, and loss of public trust in the company have been emerging in an almost uninterrupted stream.
That’s what can happen when organizations do not make crisis management a central feature of their everyday operations. Tech companies are especially prone to this shortcoming. Five blind spots, in particular, make tech companies likely to face crises they never even remotely anticipated. Each one is troublesome in its own right, but together they lead to disaster.
Let’s take a look at each one of those blind spots in turn.

1. Too much early success. Peter Drucker famously wrote about the failure that ensues when companies succeed quickly and spectacularly, as Facebook has. The cascade of great news can make an organization blind to serious problems that lurk within its basic business model and are embedded in its culture and structure. A recent New York Times article argues, for example, that Facebook’s platform not only provides safe harbor for extremists, but actually creates extremists by promoting content that riles (or, euphemistically, “engages”) them. Because of the early success of its business model, in terms of both user numbers and advertising dollars, Facebook was insufficiently wary of how the model itself could cause a crisis.
2. Overconfidence after weathering small crises. Facebook’s ability to manage the public’s outrage about how its platform promotes cyberbullying may have bolstered the company’s sense that it could address crises as they arise, rather than building a serious crisis management program. This kind of reactive approach, particularly when it appears to be effective in a company’s early days, can lead to a dangerous sense of invincibility.
3. The assumption that management is easier than technical work. The technological skills and systems required to run an operation as massive as Facebook’s are clearly impressive. But smugness about achievements in the IT arena can make management, even crisis management, seem deceptively easy. If management practices are not given the serious attention they require, crises are more likely to blindside a company.
4. Inadequate responses to major crises. Companies that are well-prepared to handle crises take immediate responsibility when things go wrong. They don’t issue trite, meaningless apologies that only make matters worse. No crisis is a stand-alone event; it’s part of a larger, highly interconnected system of events. And often, the initial crisis sets off a chain reaction of other crises. For instance, an ethical crisis can quickly morph into PR and financial crises — and, ultimately, into a broad-based crisis of confidence in the entire company. Organizations must anticipate and plan for such rapid developments.
5. Obliviousness to potential abuse. All technologies are prone to misuse in ways that their creators did not envision. In the case of, say, a social network, developers and other fans of the technology may think, “This is just a platform; it merely connects people.” So they either fail to recognize problems that arise or, out of a misguided sense that technology is the solution to everything, convince themselves that any and all related damage to humankind is inevitable and justified, because it’s simply the cost of progress. Such willful agnosticism can prevent tech companies from taking appropriate steps to lessen the likelihood of any misfortunes.

How Tech Companies Can Manage Crises Better

By embedding crisis management into their ongoing development of products and services — and their organizational processes and systems — tech companies can anticipate problems more easily. They must not only envision the worst that can happen, but also do everything in their power to prevent it. Simply dumping the latest great technologies on the world — and then cleaning up any ill effects after the fact — is unacceptable.
A crisis management mindset for tech companies, both within the organizations themselves and throughout society at large, is key to increasing the likelihood that technology will serve humankind, not the other way around. Developing an effective crisis management program involves multiple steps, but these four are essential:

• Commission an outside group of reputable experts to come up with worst-case scenarios as to how the company’s wondrous technological creations could be abused and misused and thereby cause crises that the company’s leaders and employees are reluctant to think about.
• Convene a company-wide crisis management team as soon as possible. This panel’s basic job should be to look for early warning signs of any of the potential crises anticipated by the outside committee of experts. The team also should identify its own set of potential crises — and meet regularly to assess the state of the company’s readiness to handle both the identified crises and any not yet envisioned.
• Make crisis management part of everyone’s job — from the CEO to front-line workers. Explicitly communicate that directive to all employees in the company and establish ways to assess implementation.
• Work with government agencies to develop well-crafted regulations that the company can comply with. Even more important, demonstrate from day one that the company takes customer well-being seriously and prioritizes it ahead of profits.

The burden is on technology companies to act responsibly and on government and the public to demand that they follow through on that obligation. Otherwise, the backlash against technology will only grow, possibly leading to the undoing of our love affair with it. That is the ultimate crisis facing tech.