Case: Johnson & Johnson

Group 3: Practical Application

Outline
 The Company
 The Market Environment
 The past situation
 Implementing Innovation
 Process & Resource Allocation
 Innovation through synergy
 William C. Weldon
 Examples for J&J’s performance
 Core success concept
The Company: Johnson & Johnson
 Traditional 117 (2006)
years old company
 Consists of 204 business
organization
 Largest health company in
the USA
 10% earnings growth per
year
 Since the 1980 stock price
increased by 20 times
It’s not really about Baby Powder

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The Company: Johnson & Johnson
 Companies Strenths
◦ High Economies of scale
◦ High Economies of scope
◦  market dominating
◦ Scientific expertise
◦ Marketing savvy
◦ Continuous Innovation or acquisition of innovations
◦ Heritage (tradition of quality)
◦ Acquisitioned power to create synergies
The Market Environment:
 Depended on scientific innovation
 500-stock index decreased by 28.1%
 J&J increased by 19.4%
 Drug business is slowing down its growth
 Less innovations
J&J’s past Situation
 Highly decentralized Organizational Structure
 Near-total Autonomy of Business Unites
  highly competitive because of the entrepreneurial attitude
The Challenge implementing the
Innovation
 Coordinating the Independent Businesses
◦ Delivering idea to synergy
 Putting J&J’s famed autonomy at risk
 Cultivating alliances
J&J’s Systematic change for
Innovation
 Foster communication
 Emphasize interdisciplinary collaboration
 Combination of drugs devices and

diagnostics
 High advantage of J&J in achieving this

integration
 Keeping up the entrepreneurial attitude
J&J’s Product Planning Process & Responsibilities

 Weldon delegates crucial decisions to R&D

 Decisive power is by the Business Unit Managers
  Creating the idea of autonomy
 “Disease Experts” meet quarterly for past 5 years
 Two groups focused on two diseases
 Strategy presentation after six month
 Example: The diagnostics team develops a test

that the R&D folks could use to predict which

patients will benefit from a experimental cancer
therapy
Innovation through Synergy
The Innovation Driver: William C.
Weldon
 Simple Family background
 Major in Biology
 Self made man, worked his way
up
 Persuasive
 Casual
 Sporty
 Visionary
 Ambitious

 Creating a innovation favoring

Culture
Setting the tone for Innovation:
William C. Weldon
J&J’s Innovation Cypher
 Pops open arteries after angioplasty
◦ Catheter with balloon at the tip to open arteries
◦ The balloon popping open the stent, catheter and balloon are removed, leaving
the stent in place
◦ Drug of the stent is released in the blood vessels wall over time
 Teams from the drug business and the device operation collaborating
 Weldon got monthly feedback
 Experts were working mostly independent/empowerment of the
divisions
The Case Procrit: Weldons coup
 Procrit – J&J’s biggest selling product
 Stagnating growth because of Aransep for

Amgen Inc.
 The European version had to face side effects
 Stronger competition
 Growth declined from 20% to 2%
 Also the drug Remicade under competition
  Weldon downplays the threat by

introducing a innovational use of the product

Do you think,
Core Success Concept
 Strategic Acquisitions
 Innovation favoring culture
 Autonomic and coordinated business units
 Constantly adding innovations
 Innovating existing products by adding value
Thank you for your attention!