Tuesday, August 15, 2006

Dell: What could have been learned from the 1982 Tylenol Recall

One of business school's most touted leadership case studies is about J&J's 1982 Tylenol recall. J&J acted immediately and at a cost of over $100 million to pursue action in the best interest of the consumer. In the end, it was in the best interest of the Tylenol brand, which to this day remains a top global seller.

Dell could learn something from J&J's action. Although its battery problem has yet to completely play out, the defects and more importantly the response could further erode its customer service reputation. The take aways from J&J's crisis management actions were:

  • Declare a crisis to defuse a crisis: Doesn't matter whether the company believes something is a crisis or not ... if the customer believes it, it's true
  • Act immediately: Lead time between first report and action should be less than 72 hours
  • Act transparently: Tell everyone what you are doing
  • Take responsibility
  • Make it easy for the customer

It took awhile for Dell to respond as pictures of exploding batteries circulated virally. No doubt, Dell was examining the battery to determine if there actually was a problem. But that goes against the first rule "Declare a crisis to defuse a crisis". Action was slow. Time will tell whether customers find it easy to work with the recall.

Appropriate crisis management is not only responsible, it's also a sound business decision. Recalling 4.1 million batteries will likely cost Dell and Sony more than $100 million. However, with a slow response, Dell allowed negative publicity to steamroll. This actually could be costlier in the long run.


DR said...

It's amazing that this is a lesson that needs to be learned over and over and over. Also seemingly forgotten is that a problem is the best chance to earn a good name. Who remembers when things go right the first time? Few. Who remembers when things go wrong and someone comes leaping to the rescue? Everyone.

Changemonster said...

Dell was slow, but Apple was slower!

Rob said...

changemonster ... good point. I think the interesting thing though is that Apple could afford the mistake and Dell can't. Just by nature of its position, Dell needed to respond immediately. Everyone loves Apple and cuts them slack.