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David Versus Goliath In The Age Of Social Media

Forbes Books

Everyone has heard an angry customer hastily leaving an establishment while threatening to never shop there again, or sat in a restaurant near a table complaining loudly about the service and wait time. Perhaps you have been that unhappy customer. I will personally admit to leaving a frustrated one-out-of-five-stars review on Amazon just last year.

While these thinly veiled threats may make you, the customer, feel better temporarily, nine times out of ten they do not generate the outcome you desired, and they won't make you whole for your loss.

That is, until they do.

I recently spent three weeks at Harvard Business School, enrolled in the Owner/President Management executive education program. One of the highlights of the experience was the use of the case method, in which the leaders of the program presented the students with real-world challenges confronting today’s leading companies, nonprofits, and government organizations, and tasked us with analyzing the issues, exercising judgment and making difficult decisions.

One memorable case was a definitive David versus Goliath in the age of social media.

It involved an airline, a man and his guitar.

Several years ago, musician Dave Carroll claimed his guitar was broken while in the custody of United Airlines. According to Carroll, during a layover at Chicago O’Hare Airport he heard a fellow passenger exclaim that baggage handlers on the tarmac below were throwing guitars off of the plane. When he arrived at his destination, he discovered that his $3,500 Taylor guitar was severely damaged. According to Carroll, once off the plane he alerted three employees who showed “complete indifference” towards Carroll and his predicament.

Carroll filed a claim with United Airlines but was informed that he was ineligible for compensation because he had failed to make the claim within the stipulated 24-hour timeframe. For the 15 months that followed, he fought to claim the full value of damages.

In the meantime, Carroll took action of his own. He and his band, The Sons of Maxwell, recorded and released a series of three songs on YouTube. Each song built on his experience, from the original situation, to his poor treatment from the customer service team, and finally the denial of his claim. As of today, the songs have been viewed online nearly 18 million times.

Dave Carroll and his video received immediate national attention. He is now paid to speak publicly about his experience, and has even authored several books about the event. The outcome was a public relations disaster for United. It was widely reported that within four weeks of the video’s release online, United Airlines' stock price fell 10%, costing stockholders roughly $180 million in value, all over a mere $3,500 claim.

This result begs the question: how did this happen? Further, how would you, a business leader, respond in a similar situation? And finally, what would you do to avoid a similar outcome in the future? For starters, here are the five commonly known steps to managing risk.

Risk Management:

  1. Identify the risk: Uncover, recognize and describe risks that might affect your business.
  2. Analyze the risk: Once identified, determine the likelihood and consequence of each risk; understand the nature of the risk and its potential to affect your business.
  3. Evaluate or rank the risk: Evaluate and rank the risk by determining its magnitude. This is a combination of the likelihood in frequency and severity associated with the risk. Is it big enough to require treatment?
  4. Treat the risk: Assess the highest ranked risks and set out a plan to treat or modify. How can you minimize the probability of each negative risk? Create risk mitigation strategies, preventative plans and contingency plans.
  5. Monitor and review the risk: Businesses change from year to year and so do their corresponding risks.

So where did United drop the ball? Was customer service never a risk they contemplated? Perhaps they can look to their training processes: why did the guitar get damaged in the first place? Or they might look to their customer service policies: how could they not find a way to satisfy this customer after destroying his property?

The fact is that not all situations constitute the same protocol, but studies and experience show that a clear, concise, well-targeted, and timely response should always be the starting point to frame out risk mitigation and potential public relations disasters.

Upon review, I suggested to our Owner/President Management program that a portion of United’s risk strategy moving forward should be insuring itself for the risk it assumes in regards to reputational damages. Available coverages include reimbursement of cost associated with responding to incidents of negative reputational commentary as disclosed in all forms of media. Possible costs include research costs, legal costs, expert professional services, reputational remediation, marketing efforts and business interruption.

Dave Carroll obtained worldwide fame, and in the end he worked with the airlines to improve customer service issues and create solutions as a form of defense against promotional affairs. Unfortunately for United, Dave Carroll’s songs reappeared and trended on Twitter this past April when United reportedly threw a customer off one their overbooked flights to make room for an employee. This particular David versus Goliath story continues to serve as a helpful reminder of the importance of a thoughtful and forward-looking risk management strategy in the age of social media.