The Triple Bottom Line Blog

An excellent article in today's New York Times by David Leonhardt about the lessons to be learned from the currently unfolding story of dangerous kids' toys coming from China. (Among other experts, it happens to quote Adrian Slywotzky, a business strategy guru with whom I've worked on several books.) The key grafs discuss how HIT Entertainment, owner of the Thomas the Tank Engine franchise, and RC2, the company that makes Thomas toys for HIT, have mismanaged the crisis:

In effect, HIT has outsourced Thomas’s image, one of its most valuable assets, to RC2. And RC2 has offered a case study of how not to deal with a crisis, which is all the more amazing when you consider that the company also makes toys for giants like Disney, Nickelodeon and Sesame Street. . . .

Battening down the hatches might very well work if this were a scandal about sweatshop conditions. Fairly or not, Americans have a limited attention span when it comes to human rights problems on the other side of the world. But the prospect of lead paint in your child’s nervous system tends to focus the mind.

The fact that the executives at HIT and RC2 haven't grasped the difference shows how out of date the corporate script on outsourcing has become. In many businesses, outsourcing has simply grown too big to stay behind the curtain. What happens in Chinese factories determines how good--how reliable and how safe--many products are. So there is no way for executives to distance themselves from China without also distancing themselves from their own product.

Business people only need to look at the dismal approval ratings of the Bush administration to realize the severe limitations of a policy of "plausible deniability." Such a policy may have worked at one time--in politics and in business. No more. A corporation can no more disclaim responsibility for what happens up and down its supply chain than the White House can disclaim responsibility for the results of its Iraq policies.

Labels: China, David Leonhart, Supply Chain