In disputes between major firms, the balance of power often favors one side, setting the stage for a complex negotiation where both parties must manage significant financial and reputational stakes while seeking a discreet resolution. Moshe Cohen, Senior Lecturer of Management and Organizations discusses the recent conflict among major firms:
Generally, in a conflict between a customer, in this case, the airline, and a vendor, the cybersecurity firm, the balance of power tends to tip toward the customer, especially since the technical problem originated with the vendor. The airline will further try to improve its position by filing a lawsuit against the cybersecurity firm, increasing both the real and perceived risks to the cybersecurity firm if the case isn’t settled. While, on the surface, this provides the airline with a negotiating advantage, if the two companies part ways, the costs to each of them is considerable. The intertwined and embedded nature of the two companies’ business relationship therefore gives both parties an incentive to resolve the matter quietly between them.
At the same time as they negotiate with each other, each of the two parties is also working to manage morale and cohesion internally while engaging in damage control over customer and shareholder perceptions externally. The public face of this negotiation might therefore appear confrontational, with each party trying to minimize its perceived responsibility while blaming the other, while the two companies work outside the spotlight to put the matter behind them as quickly as they can. After all, both companies suffer so long as the matter remains prominently in the public eye.
The direct financial stakes in this dispute are significant but are dwarfed by damage that could be suffered by both parties if the conflict impacts their brand perception. After all, they each have competitors in their own markets. Internally, the message from leadership to employees must be a calming one, acknowledging the gravity of the situation but assuring them that the troubles are temporary and that things will turn out well in the end. Externally, messaging must also be reassuring, emphasizing that the technical issues have been remedied and that processes have been put in place to ensure that mishaps such as this won’t happen again.
As litigation and fact-finding proceed, new information may advantage one party or the other. If the vendor is found to be at fault or is seen to bear more of the responsibility, there will be industry pressure to increase protection for customers in future contracts. This tightening of contractual protections is likely to impact other vendors and the industry as a whole in addition to this specific vendor and customer. Similarly, if the airline’s processes are determined to have contributed significantly to the severity of the outage, vendors may try to insert language in future contracts that protects them from liability in such cases.
Matters like this are often litigated in the public eye, while negotiations to resolve the issues take place quietly, in the background. The airline might try to use litigation and public relations to shift as much blame as possible to the cybersecurity firm, in an effort to recoup its losses, while the vendor will highlight contributing factors on the airline side to minimize additional financial damage. Simultaneously, both parties might be eager to negotiate a settlement as quickly as possible, limiting the damage to their brand reputation, investor relations, and employee morale. Thus, negotiations of this nature are often conducted along multiple tracks, each proceeding with different timelines, objectives, and visibility, as the companies try to balance a variety of interests simultaneously.
