Management: Knowledge Information Strategy:
Business Intelligence and Crisis Management:
How Companies Reacted to Crises
By Professor Emeritus Akira Ishikawa
Former Dean, GSIPEB
Research Fellow, ICC Institute,
Doctoral Program Chair
Since the 1700s, there have
been four major earthquakes in the region surrounding
This has led to a theory that major earthquakes occur approximately every 70 years in this region. This theory cannot be said to have a strictly scientific basis as it builds on only four data points, but I will try to make a mathematical equation out of this.
If we create a linear regression model with the years as dependent variables and the number of earthquakes as independent variables, we have:
Y = 1632.5 + 73.7 X
To predict the next major
earthquake, assign the value 5 to X. When we do that, we have y =
1999 as the year when the next major earthquake occurs. It is the year that Nostradamus
foretold annihilation of the human race, and also the year when
The extreme scarcity of data in the formula above is a saving grace as it makes the prediction unreliable, but the correlation is, astonishingly, r = 0.999. Considering the average of the past records, and estimating from this simple predictive formula, the next Great Kanto Earthquake could happen any time now. Of course, it is one’s individual choice whether or not to believe this prediction, and there is also no guarantee that the past cycle would necessarily be repeated in future. However, we may safely say that we should be on alert for the next major earthquake.
My motive in writing this chapter is that I have felt the need to review earthquakes from the perspectives of risk, crisis management and contingency plans, as their range and diversity have broadened. Risk and crisis management lie in the area of knowledge management in that they involve obtaining, sharing and using knowledge (business intelligence); at the same time, they also lie in the genres of knowledge science and engineering, where they should be developed into social systems for disaster prevention and safety measures.
There is no perfect fundamental counter-disaster measure; we must make continual efforts. We must grasp the potential damage by simulating what would happen if a major earthquake of the magnitude of the Great Hanshin Earthquake or the Mid-Niigata Earthquake were to occur during the day on a weekday, and explore measures at an individual level, an organizational level, and a national level.
First, let us define “emergency” or “contingency” (see Table 2 below):
In this chapter, we will look at actual cases and discuss how we can establish crisis management systems, and the necessity for continual simulated training and practical approaches, and for establishing proactive measures and emergency measures.
Table 2: Categories of Contingencies and their Examples:
1. Political unrest
a) Disbanding of the ruling party, or its power waning
b) Frequent occurrences of international or domestic terrorism
c) Resignation of the Cabinet, or dissolution of the ruling party due to election results
d) Assassination of political leaders
2. Economic unrest
a) Extreme fluctuation of major currencies
b) Extreme fluctuation of the official discount rate
c) Extreme change in financial or monetary policies
d) Sudden drop in public bonds’ credit
e) Extreme decrease in public and private investment
f) Considerable drop in consumer spending
g) Increase in the unemployment rate
h) Shortage of raw materials
i) Drop in general economic indicators
j) Economic sanction
k) Worsening of the subprime mortgage crisis
3. Social unrest
a) Lack of leaders
b) Shortage of workforce
c) Lengthening strikes in the public sector or major private sector companies
d) Expansion of excessively aggressive consumer movement
e) Expansion of disparity in wealth (disappearance of middle-class)
f) Extreme measures for eliminating employment discrimination
g) Serious diseases: e.g., outbreaks of epidemics, AIDS, Avian influenza, and anthrax disease
h) Increase in suicides
i) Acceleration of global warming
j) Increased desertification
k) Shortage of water
4. Military unrest
a) Intrusion into territorial waters or airspace by a potential threat
b) Amassment of troops on a large scale near the border
c) Failure of a military treaty
d) Failure in negotiation on national security matters
e) A third country moving into a (potential) war zone
f) Considerable amendment to a security treaty
g) Extreme fortifying of a neighboring nation’s military strength
h) Accelerated proliferation of nuclear weapons
5. Legal unrest
a) Extreme tightening of antitrust law or privatization-related bills
b) Sudden amendment to Customs Act
c) Excessive strengthening of Consumer Protection Act
d) Extreme regulation of products or production process by Environmental Act
e) Inadequate application of Workers’ Compensation Act
6. International unrest
a) Sudden hike in oil (and other vital raw materials’) prices
b) Emergence of protectionism for resources and technologies
c) Rapid increase in regulations of free trade
d) Intensification of competition against developing countries
e) Disruption in foreign investment and import markets
f) Plummeting of property prices
7. Changes in technology
a) Emergence of extreme protectionism
b) Increase in patent disputes
c) Extreme increase or decrease in technological disparity
d) Broadening of technological disparity between developed and developing countries
8. Natural disaster
a) Major earthquakes
b) Typhoons, cyclones, and hurricanes
c) Massive flooding
d) Damage brought on by abnormal weather phenomena such as windstorms and flood damage, drought, and shortage of water
e) Local rainstorms
9. Industrial unrest
a) Collapse of stable markets
b) Price collapse, or unstable market price
c) Rollout of new definitive products by competitors
d) Product liability lawsuits on a large scale
e) Powerful competitors entering the market
f) Merger and acquisition by competitors
g) Organizational restructuring of competitors
h) Massive drop in domestic demand
i) Sudden big change in consumer activities
j) Forceful implementation of inappropriate policies
k) Widespread false labeling
l) Inappropriate contaminants in products
10. Internal unrest
a) Cancellation of order from the most important client
b) Failure of a big project where a large-scale order was expected
c) Weakening of brands in major markets
d) Serious defects in products (including containers and raw materials)
e) Serious defects in information systems
f) Fire or explosion in factories and facilities
g) Theft of major products and raw materials
h) Problems with debts or fundraising
i) Kidnapping of executives
j) Bankruptcy of affiliated or client companies
k) Aggravation of employees’ strikes
l) Aggravation of strikes at supplier or client companies
m) Radioactive leak in nuclear facilities
n) Destruction of nuclear facilities
[Table 2 Source: Akira Ishikawa, Strategic Budget Management, Dobunkan, pp. 139–140.]
2. Necessity for Establishing Crisis Management Systems, Continual Simulated Training and Practical Approaches
2.1. IBM’s case
We must be prepared for crises and emergencies, even in peacetime. We should have regular emergency drills and establish practical programs. During the Great Hanshin Earthquake, many companies and local governments proved unprepared for the disaster, but there were companies that managed to set up relief activities. What was the difference between them?
IBM Japan had an Emergency Plan
in place at 5.47 a.m., on January 17, 1995 -- just one minute after the
magnitude-7.2 earthquake shook the Hanshin region. The news of the earthquake
first reached Isao Kato, then general manager of customer service department,
IBM Kawasaki Higashi office in
The news was immediately
reported to the president, Kakutaro Kitashiro, and an emergency headquarters
was set up an hour and 14 minutes later at 7 a.m., with Kitashiro installed as
the chief. Meanwhile, the Hanshin headquarters was based in Dojima,
IBM Japan did not know much
about what was happening in the area yet, but the company secured trucks first
and began preparing to send materials for restoration efforts. A shortage of
manpower was likely even though there were 600 engineers in the Kansai Region Engineering
Department, as many employees fell victim to the earthquake which occurred
before they left home for work. With transport and electricity out as well,
reinforcement team members were enlisted, mainly from those who had experience
of working in
IBM Japan already had Special
Assignment Teams of 10 people each, which stood by round-the-clock in
There were 45 large and mid-range IBM computers, respectively, used in companies and government offices in the Hanshin region, and over 1,000 systems that clients used, not even counting PC networks. Thankfully, the restoration support system was set up by the late afternoon of the 17th, and IBM began restoring systems in order of priority. If the systems related to lifelines such as transport and electricity had not been recovered immediately, secondary disasters could have spread. In many cases, the earthquake caused equipment to fall to the floor, and two mainframe computers had to be entirely replaced.
IBM had experienced natural
disasters in various parts of the world before, including the Los Angeles
Earthquake in the
work later on. Knowledge was indeed turned into intelligence in this case.
IBM’s crisis management manual, called the Disaster Plan, is not specifically for earthquakes or different types of disasters. Japanese companies are actually ahead of IBM when it comes to having detailed manuals for earthquakes that even provide counter-measures according to earthquake magnitudes. However, once emergencies occur, there is no time to consult detailed manuals; we need to act on the spot. As general manager Kato pointed out, “The real issue is whether or not the company has established a system where people can act quickly and effectively.”
In IBM Japan’s case, the emergency headquarters chief Kitashiro had Kato of the emergency team report directly to him, and delegated power to Kato as the person in charge of the situation. Kitashiro gave Kato “extralegal” authority to procure goods and manpower for restoration work without having to ask for permission. Thus, without the hassle of going through internal bureaucracy, IBM was able to act quickly.
The emergency headquarters also gave as much authority as possible to Yoshiyasu, the Hanshin headquarters chief. By having separate “Emergency Headquarters” and “Hanshin Headquarters,” IBM managed to make calm, objective judgments in dealing with the disaster. When it appeared that restoration work might be under way, IBM published an internal letter relating to “Customer care in the Hanshin Earthquake restoration efforts” on July 20, and reiterated to employees that its priority was restoration so that they would not think of this as a business opportunity.
IBM’s manual is not a desk plan; it reflects lessons learnt from actual disasters. It contains a volume of data regarding the 1994 Northridge Earthquake, the 1994 Sanriku Earthquake, and the 1993 Southern Kyushu Flood, including records of damages and actual measures taken. Emergency teams in various countries are required to watch video clips of the damage that natural disasters can cause to computer equipment. For example, Kato had watched the footage of the Northridge Earthquake.
IBM acts quickly in a crisis, even in the initial stages when the extent of damage is unclear. It firmly believes that even if its actions turn out to be needless later on, it must act first and think later. Even if it turns out that the company has been overreacting, its employees will still have gained valuable experience and training.
2.2. The Asahi breweries group’s case
Asahi’s Tokyo Factory [closed down in 2002] has a fire-safety scheme in cooperation with the local fire department and the local community; in case of fire caused by earthquakes, the factory workers would help with extinguishing the fire in its initial stage, and with administering first aid. This is called the Community Disaster Support Team
Scheme, a disaster relief scheme founded in 1990, separate from the “fire defense organization for self-protection” (community fire brigade) that is required by the Fire Service Act.
Asahi’s Community Disaster Support Team consists of 260 Tokyo Factory workers, mainly in their 20s and 30s. The headquarters has 20 members, and there are 48 taskforce groups of five. Thus, half of the 550 employees that are in the premises would be engaged in firesafety operations. The area they are responsible for is approximately 550 meters radius of the factory, which includes an old residential area on the south side. The group would be under the command of the community fire brigade. As the community has an aging population, many of the fire brigade members are now over 70, so they welcome younger people’s participation in the communal efforts for disaster prevention.
Taskforce members carry backpacks that contain “the seven tools”: a torch, a sling, a pair of gloves, an armband and a first-aid manual, among others. They also have stretchers. Each team has five members so that there is one extra person to act freely even when four
people are carrying a stretcher.
Of course, it is a difficult task even for professional firemen to extinguish a fire and rescue people in the chaos of a fire caused by an earthquake. For the laymen to do that, they would have to train quite seriously on a regular basis. Therefore, when the Community Disaster Support Team scheme commenced in the summer of 1990, about
85 members participated in training and received careful instruction from the local Omori Fire Department’s rescue squad members. The training was recorded on video for the absent or future members.
During the annual Ohta-ward disaster drill on September 1, the group trains in firefighting and rescue work under the instruction of the Fire Department. The factory also holds an Advanced Emergency Aid Skill Workshop in collaboration with the Ohta-ward Fire Department. This nine-hour class consists of lectures and training. The Tokyo Fire Department issues certificates to those who finish the workshop, and more than 40 people have received certificates so far.
Along with such physical support, Asahi provides the community with water for extinguishing fires or for drinking. According to the accord with the Ohta-ward office, Asahi is to provide 3,000 tons of water from the 4,000-ton water tank for brewing beer.
Kyoji Makita, administrative manager of the Tokyo Factory, who championed the Community Disaster Support Team scheme, says he felt the local community’s high expectations for the relief team when he attended a community meeting after the Great Hanshin Earthquake. However, he thinks that simultaneous multiple fires like those in
Ideally, each family should have a fire-extinguisher at home, and leave it outside the house when there is a fire in the neighborhood. That would help initial fire-fighting efforts, as the support team or the local fire brigade could collect them to use at the site. There are 350 fire-extinguishers in the Tokyo Factory, which would be used to put
out fires outside the factory facilities too.
It would be difficult and hazardous to rescue people who are buried under a collapsed building without the appropriate tools to lift up heavy weights. Yet, if the team member calls out to the victim, “I’m with Asahi’s rescue support team. Help is near,” it may give the victim some moral support.
According to Asahi, there is no employee within the company who is reluctant to join the rescue support team. That may be so, but some employees must feel that they would rather run to their families than save the community or the factory, if they are being completely honest with themselves. If more companies started to contribute to the community relief and rescue efforts, and if it was commonly accepted that your family would be protected by the local company, it would help to lessen such anxiety.
There are hardly any other examples like Asahi’s, however, where a rescue support system is established, although other companies do offer help in case of fire in the neighborhood, such as Suntory’s Musashino Factory. Therefore, there is a need for stronger incentives for corporate communal contribution, which is an important genre of BI (business intelligence) activities.
3. Establishing Proactive Measures and Emergency Measures
The term “contingencies” refers to unthinkable events happening in real life. Unexpected situations can occur one after another, and quite often, the government and other institutions related to disaster prevention do not know what to do at a time like this.
There are three basic attitudes
towards contingencies, where the unthinkable becomes reality. Firstly, the most
passive of the three, the fatalistic attitude: giving it up as a lost cause.
During the Great Hanshin Earthquake, out of the 195 patients who were brought
The second attitude involves attempting to establish a system which would enhance the chance of surviving contingencies even a little, instead of leaving it up to fate; this school of thought first draws up an action plan in order of priority, and then creates a manual for
contingencies. That is what the US Federal Emergency Management Agency did.
3.1. The federal emergency management agency (FEMA)
The US Federal Emergency
Management Agency (FEMA) was established against contingencies during the
Carter administration in 1979. Headquartered in
FEMA reported the Northridge Earthquake to President Clinton within 15 minutes after the occurrence, which enabled the president to make timely decisions on important matters and announce the measures to be taken on the same day. In contrast, in the case of the Great Hanshin Earthquake, Prime Minister Murakami reportedly was not notified of the gravity of the situation until the afternoon of the day of the earthquake.
By reporting directly to the president, FEMA acted promptly in disaster management; however, it was demoted after the US Department of Homeland Security was founded following 9/11 in 2001. As a consequence, when Hurricane Katrina made landfall in August 2005, FEMA’s response came under criticism, leading to the resignation of FEMA director Michael D. Brown.
One year later,
were closed, and the suicide rate was three times higher than before the disaster. This data shows the difficulties involved in uphill work reconstruction.
The third attitude, of the three basic attitudes towards contingencies mentioned earlier, is to predict various contingencies and minimize the damage as much as possible.
3.2. The case of corporation A
Oil company A is headquartered
in a 52-storey skyscraper in the center of
When an earthquake triggers the
collapse of a highway or multiple fires, it is highly likely that rescue teams
may not be sent immediately to the building. Provided that there are about 900
people who work there, each of the floors has therefore been stocked with
enough food and water to last three days. Also, each floor has flashlights,
radio transceivers, and medical supplies. In addition, Corporation A has set up
When the magnitude-6.6
Northridge Earthquake occurred in
It is not wise to assume contingencies will never happen. We must predict all hazards, and eliminate possible causes as much as possible.
3.3. The case of Daiei group
When major earthquakes strike out of the blue, the actual damage sustained in the disaster areas is usually not reported in the initial stages. It is a test of true leadership and management skills for government and corporate leaders, whether they can make accurate estimations to protect victims’ safety and lives, and provide them with necessary food and water promptly.
Daiei Group’s Vice President
Jun Nakauchi reportedly arrived at the company’s headquarters in
Executive director Kawa was
sent to the disaster area as the chief of the relief team, and his helicopter
was allowed to land in
one-meter gap in the center as joints had come off.
As was expected, the telephone service was disrupted. In anticipation of this, the headquarters had borrowed mobile satellite communications equipment. The mobile maritime satellite communications service, Inmarsat, arrived by six in the evening, thus enabling the relief team to have detailed communication with the headquarters.
It should also be noted that
before executive director Kawa and the nine other relief team members left
Daiei took proactive measures
successively, after its immediate initial response. First, on top of sending
emergency food by helicopters, it sent a ferry from the
as Daiei had received
information that the
The ferry was loaded with
portable gas stoves, food, and two tankers carrying water. These water tankers
were arranged by executive director Kawa, when the
order to send another tanker by
Daiei further sent 20,000
umbrellas, 12,000 portable raincoats, 10,000 raincoats, 15,000 rainwear, 6,000
plastic raincoats, and 20,000 tarpaulins from the
3.4. The case of West Japan Railway Company
Today, many global and
multinational companies have more than three headquarters in
In a country like
In fact, Masataka Ide, the
former president of West Japan Railway Company, noted that the company would
not be able to function in an emergency if the
This is still not sufficient, however; according to Ide, it is problematic from the perspective of risk dispersion that many officers live in the same remote area, distant from the headquarters. He argued that officers should have more than one house in diverse areas, and for some positions it is even necessary to have officers live in designated areas. Thus, the multiple-headquarters system is not only about having headquarters overseas; the necessity for such a system within the same nation has been on the rise in recent years.
3.5. Crisis management system for personal computers
In the aftermath of the Great Hanshin Earthquake, many organizations have seriously debated installing CP (contingency plan) and crisis management manuals, and progress has been made in that area. It is clear, though, that this is not enough.
First of all, crisis management manuals have to be distributed to all members of an organization, and must be carefully studied by them. Just handing out the manuals is not enough. Staff must be thoroughly familiar with the content, so that they can act accordingly in times of emergency. It is also necessary to conduct written tests and simulated drills on a regular basis, to test employees’ understanding of manuals and their ability to act on them. As it is, their test scores are usually far below the expected level in crisis management tests.
This again, however, is not enough. Crisis management information systems for computers need to be developed, introduced, and their effectiveness assessed. Such information systems would enable companies to grasp the damage quickly, report it to the relevant departments, deploy personnel to the appropriate departments, and give instructions for evacuation; in other words, it facilitates implementation of the crisis management manual.
For example, Corporation E’s crisis management system for computers includes products that have databases, map information, communications, and damage modeling. With these systems that offer useful, comprehensive information, photographs of the actual disaster sites can be sent digitally, the damage can be simulated, instructions for personnel assignment and evacuation can be given, and information about related facilities can be obtained.
4. Do Your Best and God Will Do the Rest
In an article titled “Danger Past, God Forgotten?” in the 6th edition of Crisis Management Study: Annual Report (March 1998), I pointed out the critically low budget for Research and Development (R&D) for Science and Technology Related to Disaster Management, the abominable lack of consideration for introducing crisis management
programs in educational institutions, and the lack of interest among academics and professionals in establishing crisis management systems and their operations. I argued that these matters needed to be addressed. Since then, however, I am afraid the situation has been aggravated rather than improved.
As I have noted in this chapter, we tend to delay thinking about emergency and disaster measures, as our day-to-day business is more than enough to keep us occupied. This leads us to accept contingencies as a matter of fate, which in turn only leads to more deaths and
loss of property. We must not spare any effort in actively studying the various types of contingencies, and in developing measures that would allow us to avoid such crises in the first place or that would help us deal with emergencies effectively. It should be “Do your
best and God will do the rest,” rather than “Danger past, God forgotten.”
5. Suggestions for Crisis Management that Makes Intelligent Use of BI (Business Intelligence)
First of all, we must question
One proof of that can be seen
in disputes over patents and inventions, which are part of BI. In the
The same can be said of part-time lecturers in universities, which are supposedly the foundation of an intelligent society. Even if you have been lecturing for decades and have written dozens of books and hundreds of papers, your wage is hardly any different from that of a young, new part-time lecturer with almost no academic experience. Generally, once you step down from being a full-time lecturer to a part-time one, the wage value is cut down to less than one-tenth.
There are endless examples like this. It cannot be denied that our attempts at making use of IT fail because our society is, simply, not intelligent. I will hereafter discuss the prerequisites for intelligent use of IT in crisis management, as suggestions that do not satisfy prerequisites are merely academic.
5.2. Futile crisis management
Researchers of earthquakes unanimously and incessantly proclaim on television and in newspapers and magazines that major earthquakes in the Tokai region, the Nankai region, and the Kanto region can happen again any time now. The top priority of national leaders is to protect people’s lives and property and to promote their happiness, and it is our duty, not just of leaders but every single one of us, to make utmost efforts to achieve this.
Yet, there is no sign of crisis management being incorporated into primary or secondary education as an obligatory subject. Furthermore, crisis management training on a regular basis is hardly conducted anywhere in this country. With crisis management training and education in such a deplorable state, this situation hardly invites our confidence or hope.
Such total neglect of this important issue in the government and academia affects distribution of resources too. According to the 1995 White Paper on Disaster Management — the year of the Great Hanshin Earthquake — although the Disaster Management Budget was over three trillion yen including loans, the budget for R&D for
Science and Technology was 37.3 billion yen, which was a mere 1.125% of the total Disaster Management Budget. This shows the lack of interest in disaster prevention research that protects people’s lives and property.
The government’s priority of policies is thus irrational, and intellectual property has not been given its proper value yet in this society.
5.3. Futile IT strategy
The fifth-generation computer
project that was initiated in
Openness is crucial for IT
5.4. Crisis management via intelligent use of IT
In order to remedy the problems discussed above, we need to set a time limit and work on fundamental reform of frameworks for public administration, legislation, judiciary, science and technology, and society.
Japan’s strength in IT lies in
its total budget for research and in its number of researchers, which are
second only to the US, and even above those of Germany, France and the UK
combined (Research budget: Japan, 16 trillion yen; the total of the three
nations, 12.6 trillion yen. Number of researchers:
39,000 industrial robots are used in
Considering these factors, if
we make fundamental changes to the system of research assessments and funds
distribution, and apply state-of-the-art robot technology to space development,
especially to development of large stationary platforms, it might contribute
towards developing a crisis management system.
to the moon, future construction on the moon by remote-control is quite possible, as the Japan Aerospace Exploration Agency had previously succeeded in its experiment of building a construct on a satellite from the Earth by remote-control in 1997.
This would mean that by
remote-control of robot/manned-space machines that are installed on the large
stationary platforms, we would be able to predict not just natural disasters
such as earthquakes, tsunamis and volcano eruptions, but also human disasters
such as acts of terrorism, regional conflicts and hijacking, and take effective
measures, greatly enhancing the possibility of protecting human life and property.
Furthermore, as more platforms are deployed and more cooperation among them is
achieved, the feed-forward function will be enhanced, and as synergistic
effects multiply, I believe it will greatly contribute to protection of human
life and property, not just in
In order to achieve such goals,
we must spare no effort in striving to excel, especially in the genres of
epistemology, ontology, teleology, and etymology; and in increasing the
opportunities to utilize the best brains in the world in a value-adding manner.
It has often been the case in
I believe that establishing a super-long-term value addition assessment system is the key to the success of this project, and something that we can leave behind to the next generation with pride. At its core are the best human resource networks in the world, which cannot be built in a day.
This paper was excerpted from Dr. Ishikawa’s upcoming new book, “An Introduction to Knowledge Information Strategy,” published by World Scientific Publishing Company. Copyright 2012 Akira Ishikawa and WSPC. The paper featured above comprises Chapter 7; additional selected chapters will be featured in upcoming issues of this Journal.
[ BWW Society Home Page ]
© 2012 The Bibliotheque: World Wide Society