Lessons for Small Business from the BP Disaster

John Luther (an American lawyer who wrote the short story Madame Butterfly) said “Learn from the mistakes of others—you can never live long enough to make them all yourself.”

So what does the BP disaster teach small business owners?

Admit mistakes quickly
On April 22, 2010, BP’s drilling rig, Deepwater Horizon, exploded, killing 11 workers; two days later, the rig sunk, and on April 25, the well’s blowout preventer failed. One of the problems with the BP oil spill was the company’s failure to admit quickly how big the disaster really was. This led to unbelievable bad press, the ouster of the head of BP, and a dramatic decline in the company’s stock price. (It is less clear how much BP’s failure to get the scope of the problem right actually led to the poor handling of the capping and cleanup.)

Admitting mistakes quickly allows you to react just as quickly so that you can correct the situation. If a customer claims you did not do a job correctly, examine the complaint immediately; if indeed you failed to perform correctly, own up to it. Apologize for the error and fix the mistake. This will prevent the customer from spreading the word on Twitter or elsewhere about your subpar performance. The customer may say you did something wrong, but the customer can’t say you failed to fix it promptly.

Always have a plan B
On May 7, BP tried to place a containment dome over the place in the well that was spewing oil; the attempt failed. On June 2, it tried another capping strategy that failed. Over the course of nearly four months, it made a variety of attempts to deal with the gusher until success was achieved on August 4 when it performed a static kill procedure that did not result in any further leaks.

When the piece that lead to the explosion failed, BP should have had a plan B in place that could be executed. Instead, it had to think on its feet and try strategy after strategy until one worked.

While most small businesses are not in a position to experience a BP-like incident, they should still anticipate “what if” scenarios so they can make contingency plans.

  1. What if a product I sell doesn’t work as I said it would? Has the product been adequately tested and received all necessary approvals? Do I offer warranties? Is insurance needed in case a customer is injured as a result of a product malfunction?
  2. What if I make a mistake when providing a service and a client suffers some damage? What safeguards do I have in place to avoid the mistake, such as checks and balances within a company? Will insurance provide adequate compensation to the client?

Get accurate information
In BP’s case, the company did not accurately know the extent of the spill (see here). This likely contributed to the initially weak response to the cleanup efforts and the serial rather than multi-prong attack of the well itself.

You may lack vital information needed to make decisions. If you can’t get the information yourself, bring in experts who can.

Be involved with the community
Tar balls from the oil spill reached the shores of the Gulf coast states on May 19. Fishing and tourism were directly impacted, angering residents and business owners. It took quite a while before BP enlisted fishing boats to help with the cleanup and earn some needed money. It will be years before all claims against BP arising from the disaster are settled.

No business, even one that’s Internet-based, works in isolation. There is a community to consider, whether it’s a neighborhood in which a retail store or restaurant is located, or the online community for a web-based operation. Communication is vital to help keep things in perspective and, hopefully, keep the community informed and calm. For a serious problem, consider bringing in a PR expert to help manage your company’s reputation.

Your view
Have you learned any lessons from BP? Care to share them?

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