Strategic Kaizen™ summary

On April 20, 2010, the Deepwater Horizon oil well operated by BP exploded in the Gulf of Mexico, killing eleven workers and discharging just under five million barrels of oil into the ocean. 

BP’s CEO, Tony Hayward, was unapologetic. 

It wasn’t BP’s fault, he said, but the rig owners’. And anyway, it was a big ocean – the amount of oil BP was pumping into it was nothing compared to the total volume of water. 

Hayward’s bullish stance provoked a media backlash. When he was finally forced to apologize, he used the opportunity to complain about how tired he was of being attacked. 

From a PR perspective, BP’s response was a disaster. Hayward wasn’t acting on a personal whim, though – his actions reflected a widely accepted idea of the role of corporate leaders. 

Here’s the key message: Short-term profitability doesn’t guarantee long-term success. 

BP’s entire crisis response plan after the Deepwater Horizon explosion served a single goal – protecting the interests of its shareholders.

Tony Hayward was merely the face of that plan. He downplayed the seriousness of the incident, deflected blame, and claimed to be the real victim – anything to prevent BP’s shares from tanking. 

The plan didn’t work, and BP lost over half its market capitalization over the summer of 2010. It’s an extreme example, but it neatly illustrates a widespread problem among today’s corporations.

In modern corporate management systems, a CEO’s highest priority and responsibility is to provide shareholder delight – that is, to guarantee profits for the people who have invested in the company. 

Isn’t that just capitalism, though? Not really. The exclusive fixation on shareholder returns is a relatively recent development, and it often means leaders overlook another vital facet of capitalist enterprises: customer satisfaction. 

It’s hard to put a number on how satisfied customers are with what you produce. Unlike profits, customer satisfaction doesn’t appear in monthly, quarterly, or annual reports – but it’s just as important when it comes to measuring the health of a company. 

If customers aren’t happy, after all, they tend to just go and find somewhere else to spend their money. That doesn’t happen all at once, of course; by the time shareholder-obsessed leaders notice what’s going on, it’s often too late. And the result? The company goes under, and everyone suffers. 

So, if you want to guarantee the short-term interests of shareholders, you must look to the long-term satisfaction of customers.