Ep 704 | When a Business Must Sound the Alarm

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Code Red. Code Red has been all over the news as of late, and that's because the term Code Red resurfaced with OpenAI, because OpenAI and its, and its leader Sam Altman reportedly called for a code red. And, and what they're doing is using this code red terminology to describe a moment of, of urgency and of high stakes, high stakes focus inside, inside OpenAI, inside the company. Now whether or not you follow the AI world closely is somewhat irrelevant. Hearing a major organization declare a code red 'Code Red' probably should raise some, some questions. First, what does it mean? What does 'Code Red' actually mean in a business context? Where did this idea even come from? And when is it appropriate for a company to call one? Those are questions that I had when I first heard this term in the news this past week. And I want to break these questions down today. I also want to, you know, go into some historical examples that I researched where code red moments produced clear results and a set of action steps that maybe, just maybe, you can use in your own business if you ever believe the situation calls for it. So what does code red mean in business? In business, a code red is not ordinary urgency. It's not a we're busy or we have a tough quarter or we're behind on a project. It's not that. Code red means something far more serious. What it means is if we don't respond immediately and decisively, something fundamental is at risk. Maybe it's our customers, our reputation, our market position. Maybe it's even our company itself. What this code red signals is an all hands on deck approach. It's mandatory. It means stop doing nonessential work. It means that we need to reallocate resources immediately and we have to solve the existential threat first. This code red is, is rare and it's pretty disruptive. But when it's used properly, it is actually one of the most powerful leadership tools a company has. At least that's what history displays. Now, again, I'm talking about this because OpenAI has said it's code red time. So again, they've called for an all hands on deck, everyone stop doing non-essential work, and they're reallocating resources because their entire business is at risk. It's not a function of just like, we're busy or having a tough quarter. Now, the phrase itself, for what it's worth, did not originate in the business world. It comes from— and some of you probably put two and two together here— it comes from emergency response systems. Hospitals use code red to signal fire or evacuation-level threat. Military units use it to indicate high-severity alert. Early nuclear facilities used it for breaches of critical containment. And even further back, the color red has always been a universal indicator of danger, the color that's used for fire alarms and stop signals and emergency protocols. Now Silicon Valley adopted the term because tech companies needed a shorthand that conveyed maximum urgency, a phrase that cuts through meetings and projects and politics and frankly polite phrasing. Code red means this is no longer business as usual. Since we're, you know, talking about code reds, I think it's important that we look at different code red moments, you know, some historical examples. So let's look at 3 clear documented moments where companies faced crisis severe enough to trigger code red level responses. And let's talk about how those choices played out. Now stick with me. You could probably figure out the punchline today, but stick with me here, okay? The first example I pulled was Johnson Johnson. Many of you are probably familiar with the 1982 Tylenol crisis. What happened was that 7 people died after bottles of Tylenol were tampered with. So Johnson Johnson declared an immediate nationwide emergency. They stopped production. Of Tylenol. They recalled 31 million bottles, 31 million, and they channeled all energy and resource— resources to handling this crisis. They ended up building a tamper-proof packaging that later actually became the standard for the entire industry. They had this code red response. Now, the outcome— they took a huge, a massive financial hit. But the trust they earned shaped the next 4 decades of their brand. And it remains— Tylenol remains, and, and this case specifically remains the gold standard case study, specifically in how to handle crisis. The second example was Toy— or was Toyota in 2009-10. They had this, this sudden acceleration crisis. So here's what happened. There were reports of vehicles that were accelerating unintentionally, and no surprise, that caused accidents and it even caused some fatalities. Toyota, while they didn't use the term, they ran a Code Red playbook. They stopped production on multiple models. They recalled over 8 million vehicles. They were forced to immediately redesign critical systems. And their top executives had to make public apologies. They even had to testify before Congress. Now, the outcome, after some, you know, painful short-term impact, Toyota did restore trust. It did regain its position as the, as the world's top automaker. Now, their brand could have been crippled, but they, they took decisive action. And I would say in terms of Code Red, they're a phenomenal example of decisive action. They were quick to dive in and, and do something about it. Intel is the third example. In 1994, they had this processor flaw. They had this Pentium chip, and it had a mathematical error in certain calculations. Now, Intel initially downplayed it, and no surprise, the hesitation made things worse. Consumers panicked. IBM actually stopped selling Intel-based PCs. Only then did it— did Intel declare an internal emergency, a code red. They did a full chip recall. They had a complete, uh, replacement program they put into place, and they had a major overhaul of a number of their systems and policies specifically around transparency. The recall was expensive, and it was— part of the reason it was so expensive is because they delayed. But it did save Intel's long-term credibility, and it kept the company's market dominance intact. However, there's a lesson to take from Intel's Code Red, or, or delay with respect to Code Red. They waited too long, and that made the crap— the crisis that they were experiencing dramatically larger. Now, what do we draw from these examples? I think across all of these, these 3 crisis, you know, scenarios, the pattern is pretty consistent. The company recognized the severity quickly. They paused normal operations. They centralized decision-making. They communicated openly and often. And they solved the problem completely and not partially. And because of that, they survived. Now, we can contrast that with companies that fail in crisis. Blockbuster, uh, BlackBerry, Kodak. These are companies whose leaders denied, delayed, even minimized the threat. See, Code Red isn't about panic. It's, it's actually about, about clarity. So in your business, how do you know when your business might need a code red? I think step one, you have to have some sort of existential threat, existential threat, and you've got to define it pretty clearly. You've got to have something like significant customer loss or operational collapse, maybe a competitor gaining dangerous ground, which is exactly what OpenAI has going on right now with Gemini 3. And some other companies coming after him. So the threat has to be pretty darn significant. It needs to meet this, this sort of, this sort of bar right now. Number 1, that would be number 1, right? Number 2 would be pause all non-essential activities or initiatives. I think this is the part that most leaders resist. At least when I studied, it was where we saw more delay. But you have to pause non-essential initiatives. It's mandatory. Every, every hour, every moment spent on secondary projects is a distraction from survival. Step 3 would be to form a war room sort of team, an empowered war room at that. It's operations, it's product, it's finance, it's customer leadership, and you're meeting regularly, daily, deciding daily Removing bureaucracy. You've got to move with speed. Speed is the advantage. Step 4, you've got to communicate transparently. Can't be silent. You've got to be clear. You got to have clarity. That builds trust. Tell your team what's happening, why it matters, what we're doing. See, your people can handle the truth. They just can't— they can't really handle confusion. And then step 5, overcorrect. You heard that right, overcorrect. The companies that survived, they didn't solve the issue halfway. They did things like recalling everything, 31 million bottles, 8 million cars. They redesigned processes, they rebuild systems, they enhance safety. Small corrections don't rebuild confidence, overcorrection actually does. So that would be the 5 steps. Now, I'm sharing this with you as somebody that did have a Code Red moment in his business at one time. In 2013, 12 years ago, when my business was at risk, significantly at risk, when I had— my sales revenue was way down because I failed and my company failed to pivot its model at the pace we needed. We were cash-strapped. I had 3 or 4 months left of cash reserves with no incoming revenue. And we had to code red it. And I pulled everybody, everybody, salespeople clearly, but even non-salespeople, and we all started generating business that day. In other words, everyone had to become a salesperson. I had admin individuals or admin-minded individuals, operations-minded individuals, people that have never sold anything, on the phones trying to drum up business. And there were tears, and it was challenging, but I had explained to everybody, like, hey, we're not going to be around in 4 months unless it's all hands on deck. We had an existential threat, and we would not be in business. None of us would have jobs. I'm happy to report that because we went all in for 60 days and got rid of everything that wasn't essential and only focused on this problem, We did turn things around. So having had that opportunity, you know, I'm pretty familiar with how this Code Red sort of scenario works. Now, when I look at it in hindsight, I don't know if it was leadership failure. I should have definitely done better. I wouldn't call it leadership failure though, and it wasn't a panic button. It was a decision to confront reality quickly before reality would force my hand. I don't think businesses are, are destroyed by crisis. I think they're destroyed by denial. So handled correctly, a code red becomes a defining moment, and it could very well strengthen the culture and rebuild trust and set the stage for the next chapter of growth. So, uh, not necessarily an action item today because I don't think everybody's in a code red scenario, but it is worth asking yourself What would it look like in my world if I dedicated more energy and time to solving the real problems that we're facing versus all the nonessential stuff that we're working on? It's a good thing to always be contemplating. That's all I have for you today, the No Days Off Podcast. Thank you so much for listening. And remember, every single day brings a new opportunity to get better. So let's get after it. [MUSIC] [MUSIC]