Daily Maverick
Dailymaverick logo

Opinionistas

This is an opinion piece. The views expressed are not that of Daily Maverick.....

The CrowdStrike meltdown fiasco and the magic of simply saying ‘mea culpa’

Francis Herd
By Francis Herd
16 Oct 2024
Facebook
4
The recovery of the company involved in the worst IT fail in the world — ever — is testament to the CEO’s decision to apologise hours after it caused a global meltdown.

In the real world, most of us understand the power of an apology. If we’ve done something wrong or hurt someone, we get that, in order to keep our relationships intact, it’s best to say sorry and ask (or, in some cases, beg) for forgiveness.

Many company executives, however, are still in the bad habit of avoiding apologies. They remain prone to ducking and diving, deflecting and minimising the problem even though there is growing evidence that, in many crisis situations, apologising is not only the right thing to do, it’s the best thing to do for the company’s reputation, future and even finances.  

Somehow, company leaders believe (or are convinced by lawyers, accountants or the threat of no insurance payout) that different rules apply in business. But they don’t.

Relationships are relationships, and that’s what teams of marketing and PR and branding people work hard to forge. However, one bad interview by a CEO can undo all that effort. As a television news anchor, I’ve watched things fall apart in front of me, in real time.  

Imagine you were confronted with evidence of cheating by your partner and you said “no comment until my internal investigation wraps up in a few months time”. That might be the end. And yet companies are still trying to take this stance when a crisis strikes.  

Due to these bad habits, the quick apology from the head of the company involved in the largest cyber blackout in history, the cybersecurity company CrowdStrike, is particularly remarkable. The fact that CrowdStrike not only survived, but is seemingly starting to thrive again, is testament to the power of saying sorry.  

The IT meltdown from a software update pushed through by CrowdStrike in July was nothing short of calamitous, with a hint of the apocalyptic. People around the world using Windows servers switched on their computers only to be confronted with blue screens.

Thousands of flights cancelled


Thousands of flights were cancelled or delayed, broadcasts went to black, and who knows if lives were not lost due to disruptions to emergency calls and health services around the world. Microsoft said the faulty update disabled 8.5 million computers globally. 

CrowdStrike pushed the defective update to Windows machines just after 4am Coordinated Universal Time (UTC) on 19 July 2024. New York, five hours behind, was still fast asleep, but Australian and Asian businesses began to report issues.

The initial articles on the IT fail were full of confusion and speculation, but then the name of CrowdStrike began to emerge as a common thread. Americans woke up to the possible end of the world but, within a couple of hours, the company had taken full responsibility and had issued a very public and unequivocal apology.  

The CEO of CrowdStrike, George Kurtz, agreed to a television interview on the NBC Today Show before it ended at 11am. It was immediately replayed and reported on around the world. The IT wreck now had a human face, and at least it appeared that someone was in charge and knew how to clean up the mess. 

https://www.youtube.com/watch?v=xySnsTQLqB8

Reports on that interview suggesting the CEO was “visibly shaken” augmented his humanness (although he may have just had a frog in his throat). Kurtz’s apology was also not the “sorry not sorry” that many companies offer. He didn’t try to minimise the problem, downplay culpability or gloss over embarrassing details. He didn’t try to sell the company as usually wonderful but having an extraordinarily bad day. He focused on apologising, facing the problem, and sharing what was being done about it.  

When you’re meant to protect your customers from hacks and disruptions, and you cause the biggest IT fail ever, it could be argued there is nowhere to hide. CrowdStrike had to release enough details for end users to recover. Still, the interview was frank and light on excuses. 

CrowdStrike gets back up again 


Before the crisis, CrowdStrike was on a good run and its share price had climbed to levels just shy of $390. A day before the calamity it closed at $343. As businesses ground to a halt, however, its shares were sold off and plunged by 11% on 19 July. The fall was even more precipitous the next day. No surprises there.  

What is surprising is that the company behind the “biggest IT outage the world had ever seen” began to recover relatively quickly. At about $320 the share price was only around 7% below the level it fell from, and the trend, since the beginning of August, has been conspicuously up. A consensus target by analysts on FactSet last week suggests that $330 per share, not far from the pre-crisis price, is within reach.

Years ago, scholars began to measure the time it takes for a company’s share price to “resolve” after a crisis, or simply, to return to pre-crisis levels. Although there are many influences on a share price and it is a blunt measure, it’s still the best proxy for reputation, and what is clear is that the resolution is significantly faster when companies respond well to a crisis, including apologising for failures.

When companies respond badly the resolution may be years away, or may not happen at all.  

On CrowdStrike’s fateful day in July, Elon Musk shared on X that “we just deleted CrowdStrike from all our systems”. It was also reported that some ex-employees had spoken about a lack of quality control.

However, Kurtz’s apology closed down the barrage of bashing and endless negative coverage that no doubt would have ensued without it. The discussion quickly moved to how concentrated and integrated “big IT” is around the world, and how that makes us all vulnerable.  

The CEO can now attend events and talk about the positive aspects of the business, as he has been doing, without fearing that the crisis will be the elephant in the room. A good apology disarms everyone, especially journalists, and helps the company to move on.  

When investors and financial journalists are asking whether or not a stock is a “buy” less than three months after the company caused a global IT collapse, you know some magic is at hand. The magic of a proper apology. DM

Categories:

Tags: