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From exploding phones to vanishing loyalty points, the 5 biggest business blunders of 2016


From exploding phones, to the loyalty program that severely damaged member loyalty, to an experiment in artificial intelligence that turned stupid, 2016 saw some costly corporate blunders.

Some errors, such as Air Miles and the Case of the Vanishing Points, thoroughly enraged many consumers. But analysts say that when mistakes are handled properly, it can actually improve relations between a company and its customers.

“If you have the right intention — and if you own up to it and you fix it — you can actually enhance your relationships with your customers, and enhance trust,” says Toby Heaps, publisher of Corporate Knights, a magazine that focuses on responsible business practices.

So how do the makers of this year’s biggest blunders rate when it comes to handling their goofs? Let’s review Santa’s naughty list.  

Earl’s ‘beef-gate’

It was April that the popular restaurant chain proudly announced it would serve only “certified humane beef” from cattle raised with kindness and without antibiotics.

But only one supplier — in Kansas — had enough of the officially certified product for Earls’ requirements, and that meant Canadian beef was off the menu. Outrage came fast and furious, particularly in Alberta, where the chain was founded.

“It’s a slap in the face,” said Bob Lowe, director of the Canadian Cattlemen’s Association. Then a “Boycott Earls” movement started to take shape.

Within a week, Earls had reversed the policy. The company posted an apology on its YouTube channel. “We made a mistake,” said president Mo Jessa in the video, vowing to work more closely with Canadian ranchers.

Mo Jessa, President Earls

Earls’ President Mo Jessa issued a video apology to Canadians via YouTube after the company took Alberta beef off the menu. (Earls)

And the company has made good on that promise. In August a cattle rancher in Saskatchewan, Terry Hepper, told CBC News “it’s been well responded to by Earls. I feel it’s over with.”  

Sales at Earls bounced back from the slump that began right after the ill-considered announcement.

Samsung’s exploding Galaxy Note7

Nothing says “someone screwed up” like a smartphone burning in your pocket. Was it a faulty battery? Was sloppy engineering to blame? Samsung’s first attempt to fix its disastrous device was to replace the battery, but users continued to report incidents of smoking and burning.

The company hasn’t yet fully explained what went wrong, but it did issue a system-wide update that rendered the phone inoperable. Its December 7 announcement says that despite shutting them down, “Note7 devices will be able to dial 9-1-1.”  Phew!

“That’s pretty devastating for a company,” says David Soberman, a professor at the Rotman School of Business. Soberman says despite Samsung offering refunds, and promising the results of an internal investigation by the end of the year, the blunder won’t fade fast.

Samsung Galaxy Note 7

Samsung’s burning phone debacle could cost the company between $ 1 billion US to $ 17 billion US, say industry watchers. ( Kim Hong-Ji/Reuters)

“I was just flying back from Europe and heard the announcement that you can’t fly with the Samsung Galaxy 7,” he says. “Those announcements are probably being made on every flight on every airline. People that fly tend to be active in business. Not only will they be using phones like that, they may well be making decisions for a lot of people who buy phones.”

Estimates of what the screw-up will cost Samsung range from $ 1 billion US all the way up to $ 17 billion US.

Microsoft’s chatbot goes very wrong

Artificial intelligence is cool, and what tech company doesn’t want to be seen as cool? So Microsoft developed a “chatbot” to interact with humans via Twitter. Named “Tay,” the bot was meant to demonstrate how A.I. can learn from humans.

Tay

Tay was a Twitter chatbot, and an experiment in Artificial Intelligence that went wrong. (Microsoft)

What Microsoft didn’t consider is the racist and sexist views that humans often express on Twitter. Tay promptly learned foul language and ugly opinions too offensive to be repeated here.

“Although we had prepared for many types of abuses of the system, we had made a critical oversight for this specific attack,” the vice president of Microsoft research wrote in a blog post.

The company suspended Tay’s Twitter account within 16 hours of launch. It’s unclear whether the incident caused lingering damage to the brand.

9/11 anniversary mattress sale

“What better way to remember 9/11 than with a Twin Towers sale?” asked Cherise Bonnano of Miracle Mattress, in what must surely be one of the most tasteless commercials ever made. “Right now you can get any size mattress for a twin mattress price!” she exclaimed, while two towers of mattresses behind her collapsed.

Miracle Mattress ad

San Antonio TX-based Miracle Mattress pulled the ad for its Twin Towers sale off most platforms, but a version shot on a smart-phone can still be found on YouTube. (Miracle Mattress)

Posted on Facebook just ahead of the anniversary of the tragedy, the ad for the San Antonio Texas-based business was fronted by store manager Bonnano, daughter of the owner.

Facebook users circulated the ad in disgust, and soon the whole country was appalled.

“To San Antonio, we simply say we are sorry for putting our community at the forefront of a national disgrace,” owner Mike Bonnano said in his Facebook apology. “We ask for forgiveness and an opportunity to earn support in the future.” 

The company closed temporarily, donated to a New York support group for those impacted by terrorism, and said it would give employees “new training.”

Air Miles shoots itself in the foot

The well-known loyalty program lurched from one public relations mess to another in the latter half of 2016. A new five-year expiry rule for points had been announced late in 2011, but the company had said little about it since. No reminders about the approaching deadline had been sent to its 11 million members.  

Air Miles rewards

There was confusion and distress over the ways in points could be redeemed as the Air Miles deadline approached. (CBC)

But then in July, reporter Sophia Harris wrote about the impending expiry on the CBC News website. Her story went viral, and the Great Points Panic of 2016 was on. There were wait times up to two hours to get through to Air Miles on the phone. Then came confusion and distress over the ways in points could be redeemed.

“Your company is a disgrace,” a collector posted on Air Miles’ Facebook site.

It was after Ontario MPP Arthur Potts proposed a private member’s bill to make it illegal for points to expire, and a class action lawsuit was filed in Calgary, that Air Miles backed down and cancelled the expiry policy altogether.  

“It’s not an F but it’s a D,” says Toby Heaps about the company’s handling of the blunder. “An A would have been if they had never said the points were going to disappear, or if they had interacted with people in a more thoughtful way. An F would have been to have not cancelled the policy.”

He puts the error down to a “bean-counting mentality.”

“They probably didn’t take into account the customer dynamic that would play out,” he speculates, pointing out that many collectors still aren’t happy, despite the company’s effort to appease them. “The whole population that’s used Air Miles has now started to doubt the good faith of the currency, which is really the fundamental thing they have going for them.”

Heaps isn’t sure about Air Miles’ recovery. “They stopped the bleeding but there’s a scar.”

CBC | Business News

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