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5 Strategies for Surviving Contagion

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In a tightly interdependent global economy, information is exchanged everyday between people, communication networks and computers. Sometimes the information flow is benign or favorable. However, when the flow consists of gossip, rumor, bad news or panic, there is a tendency for such information to accelerate and take on a life of its own. When contagion swirls, five strategies can help marketing executives control the damage and even take advantage of chaotic circumstances.

Contagion takes many forms in our global economy. Some definitions for contagion include the “spread and transmission of disease, ideas, influence and emotions.” Another aspect of contagion is that it spreads in unimaginable ways. Thus, sometimes what seems like a tiny spark ends up as a full fledged forest fire.

Marketing professionals know that contagion can sometimes be extremely dangerous to our companies, brands and reputations. Therefore, it’s imperative to not only recognize early warning signs of contagion, but to react quickly when contagion spills over. Below are five strategies that can help us plan, prepare, manage and even seize the advantage when contagion strikes.

First, manage your risks. Author Nassim Taleb of Black Swan fame, says the essence of risk management, “lies in maximizing the areas where we have some control over the outcome while minimizing the areas where we have no control of the outcome.”

One method of risk management is to maintain a significant buffer against unforeseen forces. For example, in financial services, companies are required by regulations to maintain a liquid capital cushion to buffer financial losses. Financial services firms also measure their risk exposure via Value at Risk (VAR) modeling or other stress test methods. And while it can be intelligently argued such methods are flawed, for many companies they remain the best tools available for analytical risk management.

Second, calmer heads prevail. When the European debt crisis threatened to engulf nation states in the European Union, German Chancellor Angela Merkel did her very best to stay above the fray. While contagion swirled around Merkel, she maneuvered among constituents, political leaders and central bankers to find a solution that would benefit both Germany and the greater European Union. And though some pundits argued that Merkel perhaps made matters worse by delaying action for weeks, sometimes it pays to gather information and not make hasty decisions.

Third, have a plan. Suppose a crisis hits, have you considered the likely outcomes? This is where scenario planning can help. Scenario planning is the consideration of known facts with plausible alternatives. Think about a given a situation and the top five likely outcomes. Then prepare a plan of action. Afraid you won’t get scenario planning right? Author Bill Ziemba reminds us that it’s darn near impossible to get scenario planning exactly correct. “What is important,” he says, “is to cover the board of possible occurrences. Then you will make sound decisions with risk under control.”

Fourth, consider using overwhelming force to deal with contagion. Sometimes the only way to restore confidence is via “shock and awe” or the use of the “big guns”. Best practices include the recent response of forty-three children’s medicine manufacturers to remove all potentially tainted products from store shelves until contamination causes can be determined. In another example, facing fraud allegations by the Securities Exchange Commission, Goldman Sachs hired Greg Craig, the lawyer who “saved Bill Clinton from impeachment.” Instead of responding in piecemeal to contagion, often it is better to respond in force.

Fifth, when contagion strikes look for opportunities in chaos. When the Wall Street “flash crash” occurred on May 6th 2010, liquidity evaporated from the market and bellwether companies like P&G saw their stock drop 35%, while global consulting firm Accenture’s stock traded briefly for one penny! Meanwhile, on financial news network CNBC, the normally hyperactive and boorish Jim Cramer calmly announced that anyone with modicum of common sense should buy those two stocks. Ultimately, the market corrected itself within a twenty-minute time frame and those who listened and immediately acted on Mr. Cramer’s advice made a mint. Where there’s panic, nervousness or irrational behavior, there’s also likely opportunity for gain—if you’re paying attention!

With today’s global economy tightly linked by capital, labor, and information flows at the speed of light, it’s not uncommon for bad news, nervousness, or outright panic to spill across borders and disrupt even the most stable of companies and industries. Moreover, what may seem like a non-event can quickly transform into a full blown crisis.

Listed above are five strategies when contagion swirls. Do you have others?


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Paul Barsch directs services marketing programs for Teradata, the world's largest data warehousing and analytics company. Previously, Paul was marketing director for HP Enterprise Services $1.3 billion healthcare industry and a senior marketing manager at global consultancy, BearingPoint. Paul is a senior contributor to MarketingProfs, a frequent columnist for MarketingProfs DailyFix, and has published over fifteen articles in marketing, management, technology and healthcare publications. Paul earned his Bachelors of Science in Business Administration from California Polytechnic State University, San Luis Obispo. He and his family reside in San Diego, CA.

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