Expect the unexpected? ZTE and Starbucks’ experiences offer sobering lessons for business owners

Stephen Vines looks at how recent events have separately dealt blows to ZTE’s supply chain and Starbucks’ reputation, bringing home the challenges of running a business in these times of uncertainty

PUBLISHED : Wednesday, 25 April, 2018, 2:19pm
UPDATED : Wednesday, 25 April, 2018, 10:33pm

Things had been pretty peachy over at Shenzhen-based ZTE, the world’s fourth-largest telecommunications equipment supplier. Then, suddenly, the company learned that a ban was to be imposed on US companies providing it with supplies, and possibly intellectual property, a crippling and abrupt blow to ZTE’s supply chain. 

The news caused its shares to be suspended, amidst dire predictions of the consequences. 

It is quite possible that ZTE’s management had braced themselves to become an incidental casualty of the burgeoning US-China trade war, most likely foreseeing that it would affect the export of its products to America. What was not expected was the reverse, in which American imports would be cut off. 

As it turned out, the threat to its exports came from another quarter, when Britain’s cyber watchdog announced that it was blacklisting ZTE as a supplier on national security grounds. 

Is ZTE ban the start of a China-US tech war?

The US action against ZTE arises from allegations that it was involved in embargo-breaking sales to Iran and North Korea. ZTE thought this matter had been settled last year, following the payment of US$1.2 billion in fines. However, the US government is now alleging that the company breached the agreements contained in this settlement.

 

ZTE defends R&D, innovation track record amid US export ban

ZTE is hardly alone in reeling from the impact of the unexpected, as the mighty Starbucks chain recently discovered when it was forced into damage-limitation mode after two black men were arrested in a Philadelphia branch of one of its coffee shops when the manager called the police to complain that they were trespassing. In fact, they were waiting for a friend. 

A massive anti-Starbucks backlash ensued. The senior management of the company was abruptly forced to focus all its attention on this one outlet. They went into a huddle and emerged to say that they would be closing all outlets for a day to give employees something called “unconscious bias” training. 

What happened at ZTE and Starbucks are extreme examples of the reality facing people who run companies today: events are harder to predict than before, and more challenging to deal with. 

It’s not just companies that find themselves buffeted by the unexpected, of course; it happens to governments, too. Britain’s post-war prime minister Harold Macmillan famously told an interviewer that the most difficult problems facing his administration, were “events, dear boy, events”. 

Uncertainty has become the new normal in the post-Moore’s law era

There is no way to avoid being buffeted by events. Many years ago, I worked in the research department of what was then the governing party in Britain. The unexpected struck my political bosses from all quarters. While we responded to whatever was the latest “most urgent” thing to do, the major tasks that needed doing got pushed further and further to the back shelf. 

Realists accept that distraction levels will be high. We can hope that experience will temper expectations and provide some guidance for coping, and may even be able to make some contingency plans. But don’t believe anyone who claims to have bulletproof solutions to the problems raised by unexpected events.

Stephen Vines runs companies in the food sector and moonlights as a journalist and a broadcaster