The meteoric rise of GameStop’s stock price has generated international headlines. Because of how and why the company’s stock price increased so dramatically, this is a story that will likely continue to play out in the days ahead— together with several crisis management-related lessons for business leaders.
Elizabeth Christian, CEO of Elizabeth Christian Public Relations, observed, “Whether self-inflicted or a situation a company is thrust into, a crisis is any situation which disrupts operations or threatens customer loyalty and brand equity. Certainly [this #GameStock] phenomenon qualifies….”
She said the situation is unique because “…it has implicated the reputation not only of the companies experiencing dramatic changes in the trading of their stock, but also the platforms facilitating the transactions and brands on social media looking to leverage the moment.”
Although unique, business leaders should keep in mind these seven major lessons from this situation to help prepare for, respond to, and manage crises that strike their companies and organizations.
The Power Of The Masses
Eric Yaverbaum, CEO of Ericho Communications, said, “Never underestimate the power of the masses, especially when combined with the power of social media. This is something I’ve been saying in board rooms for nearly two decades now— it used to get a lot of incredulous laughter, not so much anymore.
“Social media has transformed crisis communications,” he said, “with so many struggling to give it its due respect and suffering the consequences. I always tell my clients that the time to work on their crisis communications plans is well before a crisis arises.’
Yaverbaum noted that, “every company and public figure—no matter how big or small —absolutely must have a plan in place for a number of social media based crises (from public callouts and shaming to getting turned into a meme and beyond). At this point, these kinds of things have to be expected.
“It’s also always been my belief that every crisis is an opportunity, and this is yet another great example of that. If you’re prepared, you can ride the wave, instead of getting swept up or swallowed by it,” he said.
Know What You Are Talking About
“The biggest crisis management tip here is straightforward—know what you’re talking about,” commented Eric Fischgrund CEO of FischTank PR.”So many of the talking heads that went on Fox, CNBC, and other networks were combative and dismissive of Reddit, its users and retail investors trying to ‘undo’ the system.
“Many of these financial institutions were caught off guard because they weren’t listening properly. They were listening to themselves, reading the Wall Street Journal and Financial Times, and ignoring the groundswell and coordination of energy at the retail level.”
Fischgrund observed, “The biggest crisis response should always be to listen thoroughly before developing a plan, and unfortunately, many of these companies made things worse with their public reaction.
“These traders figured out a perfectly legal formula to upend traditional U.S. capital markets and make a buck off those who they perceive controlled the market for some time. This week’s events are as much about getting even as they are about making money,” he said.
Jamie Gilpin, the chief marketing officer of social media analytics company Sprout Social, said “In the midst of unprecedented volatility, knowing what is being said about companies on social media, before this is reflected in share price, is essential to reducing risk and increasing edge.
“Analysts who require the ability to forecast business financials with precision—and change that forecast on a dime as the world around them changes—should be tapping into social [media] as an intelligence tool to optimize the risk/reward calculation that sits at the center of most investment decisions on Wall Street,” she said.
Speed And Focus Are Important
Christian said, “[The] hallmarks of any effective crisis communications response are speed and focus as the company [that is] under scrutiny proactively explains their part in what has created the situation, offers a full apology or statement of remorse and—importantly—explains how they will prevent the crisis from happening again.
“All too often, lawyers and corporate boards are sheepish on those last two points for fear of admitting responsibility, but outrage can only be quelled by taking responsibility and resuming control over the narrative,” she observed.
Responses Determine Judgments
Christian noted, “Leaders must remember that while sometimes a crisis is unavoidable, it is how the company responds that will dictate the judgment of their stakeholders… and sometimes even their shareholders. It is critical to ‘rip off the Band-Aid’ and get out front [of the crisis] with a response ASAP.”
The Power of Retail
Benjamin Weiss, president and COO of cryptocurrency exchange company CoinFlip, said “There are several lessons business executives can learn from this debacle, but ultimately they should use this as a reminder to never underestimate the power of retail.
“It’s fair to say that during unprecedented times the main street can get more passionate than ever to make a statement. [This] GameStop versus WallStreetBets movement is the embodiment of bodied-up tension against Wall Street. And it’s clear that when your goal is to make a statement so big, nothing else matters more, especially not rationale,” he noted.
Weiss said that being in the digital age means business executives need to understand the desires of a few very passionate actors mean more than a group of nonchalant people. “Business executives should not see this as a threat, but as a goal to grow their brand to one where people can feel proud to be passionate about, similar to what Tesla and Elon Musk has done very successful,” he concluded.
Based on what happened to GameStop and how it happened, Ryan Fox, chief innovation officer at AI software company Yonder, said the following insights could help business leaders prepare for a crisis.
Don’t Overlook Low-Influence Groups
“The internet is no longer organized by demographics or geolocation, but by shared passion. These small, hyper-active groups with a common interest, also known as factions, are far more influential than business leaders understand and are often the drivers of brand crisis.
“Given the impact these groups consistently prove they can have over public opinion, brand perception, and even the stock market, it’s irresponsible for brands to ignore them, or disregard their influence,” he noted.
Ring The Alarm Bell Early
Fox said, “To navigate today’s internet, business leaders need to put their brands on offense, not defense. Rather than waiting to dig into why a certain group is targeting your brand or what caused a crisis, invest time and resources into proactively monitoring all corners of the internet.
By catching a potentially damaging narrative in its earliest stages, business leaders can ensure they are adjusting their response and planning accordingly to prevent a costly crisis.”
Enable Your Team To See All Corners of the Web
“Business leaders can’t make smart communications decisions without complete information, and that’s getting harder on today’s internet,” Fox said. “To understand the groups engaging with and influencing conversations around their brands, both negatively and positively, business leaders need to go beyond looking at just shares and likes online on mainstream sites.
“As we have seen in recent weeks, groups in fringe channels have become masters at driving narratives and action at scale that can harm a brand. This knowledge will arm brands with insight into their adversaries and the influence of their allies, so they can build communication strategies that get in front of potentially damaging hits to reputation and revenue,” Fox recommended.