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If you're one of those companies operating at the cutting edge of technology, how do you plan for what to do if something goes wrong? And what about the reputational risk to your company if you encounter a technology failure?
We spoke to Valerie Kenyon and Lilian Hardy, both partners at Hogan Lovells about what to do to build a resilient tech strategy - and how to respond when things go wrong. Valerie has a particular focus on technology disputes and the launch of new products onto the global market and Lillian is one of the leaders within Hogan Lovells’ crisis management team.
Q: Valerie, there's a constant cycle of new technology hitting the market. If you're a company that's on the verge of breaking through with a new product, what do you need to be thinking about?
Valerie: There's so much for a product company to be thinking about. First, I'm going to assume that the company has dealt with all of its IP protections and they have that all in place because that's the first thing I'd be thinking about with my great innovation.
Next, it's really important to answer two questions early on: one who is my market and two where is my market? And the product counselling team needs to keep coming back to these questions. So if the ‘who’ in this situation was to include selling to consumers, then there's a whole host of legislation that the product company is going to need to consider before it can put its product on the market. There are lots of laws that the company needs to be aware of - safety requirements, language requirements, warranty laws, rights of repair laws and all of those consumer facing laws that you'd be well aware of when you buy consumer products.
But it's more than that. So if, for example, your ‘who’ means you were developing wearable tech products for use by children, then you're going to need to make the design, the packaging, the in-box material really quite different than if you're designing it for an adult. One of the ideas that comes up time and time again is - should you be including a GPS tracker in your wearable tech if it's tech for children? Is that a safe or a smart thing to do?
The ‘who’ is also important when you're thinking about market conditions. I'll give you another example. If you were designing great technology products and innovation in the realm of heating and air conditioning, then your primary customer base might include building contractors and architects, even though you're making it as a consumer focused product. And that means you're going to need to be really well versed in laws relating to building code requirements.
Let's now talk about the ‘where.’ Where is your market? And that's one of the key pre-launch questions that needs to be raised at an early point. In this area, laws are developing pretty quickly, sometimes in a divergent manner and regulatory and enforcement attitudes can really vary between markets. When a company comes to our team and says they want to start with a single, globally compliant product, packaging and inbox materials, we start getting into the weeds of exactly which markets they want to launch into and when, because it's so much more cost effective for a company to be thinking about the largest number of potential jurisdictions when they're starting to make the product ready for market rather than try to expand into other markets later. And that's because you really want to work out the parallels across all of your markets as quickly as possible.
Q: Can you give us an example?
Valerie:. One example that comes to mind is technological transportation methods that didn't quite work out as planned. That might be because the technology is great, but the rules of the road in a particular jurisdiction means the product can’t legally be used on either the roads or pavements. That's actually happened quite a few times. And then there's examples of smart technology that you would think would be fantastic but it turns out that the data privacy concerns have caused so much tension that people might be worried they’re being recorded covertly and the technology is not yet ready for market because the customers aren't ready to receive it.
Q: So how can companies avoid some of this risk?
Valerie: With innovative products, it might require engagement with regulators at an early stage to get them on board to explain who the user is, what the use case is and what the regulator should be thinking right at the outset. I've often attended really interesting meetings with the regulators, with the product company, with the marketing team to talk enthusiastically about this fantastic technology and what it's going to mean for the customer base and how it comes onto the market in a very different way and to give opportunities to the regulator to ask questions. Of course, the company has to think carefully about whether to do that and how to do that but that’s certainly an approach that can be taken.
At an early stage, I'd also be thinking about whether it's something that your supply chain can cope with. We've had some really noticeable examples in recent years of fantastic products and services simply being hampered by supply chain issues. One that comes to mind for me is Oatly. The company is really fantastic, has a great marketing campaign and has really penetrated people's kitchens and coffee shops. But it's been a real struggle for Oatly to keep up with demand.
Before launching new tech overall, I would say it's really important to have a very strong understanding of the regulatory landscape, the legislation that applies and also what's coming up on the horizon. Product companies and tech companies will be aware of product safety laws. They're thinking about product liability laws, they're thinking about marketing and advertising, data protection and privacy and consumer law. And that's all really fundamental but there are also new areas of legislation coming in many jurisdictions which tech products companies need to be across well in advance of when the legislation takes effect.
A few that come to mind would be the rules coming related to digital accessibility of products and services, and also laws relating to liability for the content of material online. So to conclude, I would say you're going to need to be working with a really strong product counselling team. You need them on side and you need them to be able to draw on expertise relating to all areas of the laws that apply to the innovative products. You don't need them only to focus on product law because that’s just not going to be enough.
Q: When it comes to a company launching a new product, how do you stay within the rules or the laws when there are no laws because it’s a new product you’ve invented?
Valerie I think the key questions that a company has to think about is, ‘how can I be confident that this product is safe and how can I persuade my consumer, my end users, this product is safe? And if it came to it, how would I persuade the regulators?’ And that's really difficult because in many jurisdictions, there's lots of legislation, there's lots of technical standards and a company needs to work out whether the product is safe or whether there is an unacceptable risk that's become a dangerous product
An example that comes to mind that really encapsulates all of this was a new technology product I was asked to help launch, which would have heated baby formula in a new way. And there were lots of really good reasons for the technology to do it that way. The offering was quite different to what was already on the market already. But that was a real challenge because the method that the company was proposing went against all the existing guidance from midwives, from medical professionals, from nursing groups, from parenting groups with respect to how formula should be safely heated. And we got into really interesting discussions because some of that guidance is because of the quality of water in different jurisdictions, it's nothing to do with baby formula. In this sort of situation, considerable work needed to be done to identify how you would persuade all of these stakeholders that your technology and your method was different but safe, and it required working with scientists, numerous experts, it required talking to standards and testing organizations. But it also involved communicating with the various stakeholder groups, the midwives, the nursing groups, the parenting groups. And it was very, very challenging. So often, when we have a company that has a new technology and there is a perceived gap and the law or the standard doesn't cover that gap, it's time to get creative. And that's when you need your product counselling team externally and internally to work really closely together to work out how to get creative and fit to fill that gap.
When things go wrong, it can go wrong really quickly, and it can lead to product safety crises, it can lead to corrective action, enforcement action, civil claims, really tough questions by regulators. And the technology that fails in the product space if somebody is injured or the lack of safety, it can even lead to personal criminal liability in some jurisdictions for the individuals involved.
Lillian, looking outside of the product landscape, what happens when a company experiences a different type of technology issue, such as the loss of service?
Lillian I think that we need to look at crisis management as a continuum. At the beginning of the continuum, you have an opportunity like Valerie does in her practice to be highly strategic, to think about the issues in advance and how to avoid drama. Where I live on the continuum is when there has already been an issue and the public is already watching. And so in that setting, the innovators and the engineers who have set all of this up are on the sidelines and at that point you have the crisis managers and those in legal who have to pick up the pieces and figure out how to move on.
There are traditionally three stakeholder groups and issues that need to be addressed directly following an outage or a technology failure. The first is to find out who is responsible for the problem that led to the outage. The next is to find out what the consumer and the public think about what occurred. And then finally, you have customers and people with whom you have a B2B relationship with who may be impacted by the lack of access to the technology product. And all of those groups have different concerns, but they all have to be addressed simultaneously.
In real time, when something can go viral in under 11 minutes, it just takes seconds for everybody to figure out that there's a real problem. In the U.S. context, one of the biggest outages in the recent past that people generally think about was at the launch of Obamacare, where literally every citizen in America had the opportunity to go online and register for the first time on the health exchange. The problem occurred when everyone went to the system and it just didn't work - and it didn’t work for hours. And at that point, it became an issue of not only the technological failure, but it morphed into something that people could view as a political failure as well. And so looking back in the rear-view mirror on an incident like that, there are a lot of lessons to be learned when similar things happen in the commercial space. There is a small window in which you can re-establish your standing with a customer and with the public and can really reset after something like this.
To do that, there are a lot of different considerations that need to be taken. The first is how you communicate with people and how you describe the outage or the event. There are many ways to communicate with people about service interruptions that can set the stage. The other step is figuring out the technological gaps that have been created or that have been encountered, and to determine if they're a close cousin to other issues like cyber incidents or other manipulations that could be occurring due to an internal threat. You need to make sure that you understand the outage for exactly what it is so that you make sure that it's not just a technological failure that you're confronting and there may not be other issues to address.
Valerie: Two thoughts that come to mind in terms of product safety and product crises. Number one is that this is also a great opportunity for the company to communicate with its customer base. And it seems to me that this is also an opportunity where considerable care needs to be taken into the messaging and style of messaging because there's the opportunity to be authentic and transparent. It's really important to avoid spin and real care needs to be taken with the messaging at every point in a crisis. Secondly, in relation to any crisis it’s important to make sure you've got the right people in the room when decisions are made. Is it the engineering team, the marketing team, the sales team? It's not always the most senior people that should take control of the incident and the investigation stage needs to happen almost immediately.
Lillian: For that reason, I think it's always good to have an incident response team that's put together in advance so that people understand which roles they play in the process and which sort of decisions they own. Because trying to figure that piece out within 10 or 11 minutes is going to just be impossible. It's going to increase frustration and can potentially create missteps in responding. Some people try to call it a SWAT team or an incident response team. Whatever you call it, you've got to set it up in advance. As Valerie said, it's critically important that it’s cross-functional because there are considerations that a legal team might not make that a communications team will make, which may be different than an operational team. And they all matter in those moments. Doing things like tabletop exercises and drills are also really important because you want to understand how you're going to respond, and it's impossible to do that without having tested those muscles and trained them in advance.
Q: Should companies have a specific committee that focuses solely on technology risk?
Lillian: Absolutely. It's a matter of governance. A lot of companies have a resource allocation specific to a technology crisis and to issues such as a cyber crisis. It's important that there is a committee whose job is to understand what these risks are and to do things like interview engineers about new products and to understand how they work and how they're describing them to the public. Putting together these committees in advance has a commercial benefit because it helps everyone sell and market a product more effectively. But it also allows everyone to understand the risks and how to respond to them in real time. So it's really important to allocate resources in advance and not just when the train is off the track.
Q: What’s your top bit of advice for companies looking to launch a tech product or create a new innovation?
Lillian: I think it's really important to be comfortable in making decisions during a crisis, because when you make no decision, you're never going to be able to move on. It's very difficult, especially when it comes to things that are often outside of our control such as whether or not a computer or technology is going to work. We tend to shut ourselves down as humans and say that we also can't work and we can't make decisions, but we have to be able to do that. And those decisions may not always be right, but if they are principled, if they're based on facts, then they will likely be reasonable and sound. So that's my one tip for those who find themselves in a product or technology crisis. Be willing to make a decision.
Valerie: I would add two items to that. The first is the concept of the global village. When any technology is being launched, whether it's a product or a service, it's being launched in the global village. By that I mean, it's being launched globally, but we have tribes of users that might be using your technology or product in a different way. And so we shouldn't assume that the experience is the same across the board. But at the same time, all of those users are connected, all of these regulators are connected. That means that you really need to think very carefully before launching technology or a product that has different features or different standards in one jurisdiction compared to another. Whether that's taking a different approach to the amount of material that you provide in the box in terms of safety warnings or whether you use a local language material in some jurisdictions and rely on sending users to a website in other jurisdictions, you need to be able to justify a different approach.
Secondly, I would reinforce what Lillian said in relation to the need to make decisions, but also the need to document why you made that decision. So throughout the lifetime of the product, you're going to be making decisions from the moment you draw the idea on a page through to the moment the product is launched in a market. There will be a whole catalogue of decisions that have to be made at each stage. There's lots of decision making going on, and this is before any sort of product crisis comes up. So you need to document those decisions so that you can stand by them, whether you need to refer to them later, or if you’re questioned by a regulator or if in fact you have a product safety issue that you need to come back to and understand why the decisions have been made the way they have.
Authored by Lillian S. Hardy and Valerie Kenyon.
