April 2003 Harvard Business Review: Crisis Management Plans Are ''Fighting New Wars with Old Strategies'' and Leave Companies Vulnerable to Deliberate Attacks

Business Wire, April 2, 2003

Business Editors

BOSTON--(BUSINESS WIRE)--April 2, 2003

As the war in Iraq and a "high" terror threat level prompt U.S. businesses to review their crisis management plans and increase security measures, an article in the April issue of Harvard Business Reviews says that U.S. businesses are in "denial about the size and scope of abnormal accidents" like bombings and sabotage and that most crisis management plans do not adequately prepare companies for handling unfamiliar crises.

In "Preparing for Evil" (p.109) Ian Mitroff, a professor at University of Southern California and an expert on crisis management, and his coauthor Murat C. Alpaslan, write: "Most companies develop and refine plans to improve the way they handle emergencies of the kind they have confronted in the past. But they face a bigger threat from calamities that they have never faced, or worse, from threats they cannot even imagine they would ever have to cope with. As a result, they are, essentially, fighting new wars with old strategies."

According to Mitroff's 20-year study of crisis preparedness, 75% of companies are not equipped to manage an unfamiliar crisis. At worst, 95% are unprepared.

The authors say that corporate leaders must focus on preventing crises, not just containing them. Among their specific recommendations for coming to grips with abnormal accidents: Create a crisis center whose head reports to the CEO. Seek input from investigative journalists or lawyers who can help stage hypothetical assaults. And focus resources and attention on a few facilities picked at random, just as airlines conduct detailed security checks on just a few passengers.

Elsewhere in the issue, cybercriminal and former federal prison inmate Kevin Mitnick warns that the phone, not the computer, is the hacker's most dangerous tool. In "Are You the Weak Link?" (p. 18), Mitnick writes, "Attackers who talk their way into a company's 'secure' systems are skilled at exploiting basic human nature to manipulate their unwary targets." He advises companies to develop a policy that addresses these phone scams and to make sure that every employee is aware that he or she is vulnerable to the threat.

Also in the April Issue of Harvard Business Review:

"Luxury for the Masses" (p. 48) America's middle-market consumers are trading up like never before, going from Bud to Sam Adams, Chevys to Beamers. Even difficult economic times aren't likely to spoil consumers' love affair with "new luxury," say Michael J. Silverstein, a senior vice president of the Boston Consulting Group and Neil Fiske, CEO of Bath & Body Works. They examine the supply- and demand-side forces of this phenomenon--and explain why ignoring it could condemn companies to "death in the middle."

"Tipping Point Leadership" (p. 60) How do some leaders catapult their organizations to high performance when money and time are scarce? Police chief Bill Bratton, who now heads the Los Angeles police department, has pulled the trick off no less than five times. Management professors W. Chan Kim and Renee Mauborgne of Insead lay out the approach that has enabled Bratton to overcome the forces of inertia and reach the tipping point in his turnarounds.

"The 2003 HBR List: Breakthrough Ideas for Today's Business Agenda" (p. 92) The editors of HBR offer their annual roundup of promising new business insights, including how to come to grips with the new realities of growth and an appreciation of organizational messiness. Also on this year's List: "Business Die, But Companies Can Outlive Them," "Leaders Don't Lead Alone" and "Emotional Intelligence Is Still Smart."

"Psychologist Karl E. Weick: Sense and Reliability" (p. 84) Few people are better qualified to help us understand "high-reliability" organizations--those that can't afford to make any mistakes--than Karl Weick, a renowned professor of psychology at the University of Michigan Business School. In this interview conducted by HBR senior editor Diane Coutu, Weick challenges executives to "complicate themselves."

"R&D Comes to Services: Bank of America's Pathbreaking Experiments" (p. 70) Stefan Thomke, a professor at Harvard Business School, offers an inside look at Bank of America's formal experiments aimed at creating new service concepts for retail banking. Is this the future of R&D?

HBR Case Study: "Keeping to the Fairway" (p. 29) In this fictitious case study written by strategic adviser Thomas J. Waite and inspired by recent events, a company must decide whether to pull its promotional support for a golf tournament at the center of a public controversy. Four marketing veterans comment.

Forethought (p. 18) An interview with former SEC chairman Arthur Levitt explores conflicts of interest in financial services companies. Marketing company YaYa's chief executive, Keith Ferrazzi, describes how companies like DaimlerChrysler and Coke are experimenting with computer games for marketing, recruitment, and training. A look at converging U.S. and European accounting standards. Books in Brief.