{"id":3245,"date":"2015-12-08T17:11:58","date_gmt":"2015-12-08T22:11:58","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/johnson-johnson\/"},"modified":"2015-12-08T17:12:40","modified_gmt":"2015-12-08T22:12:40","slug":"johnson-johnson","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/johnson-johnson\/","title":{"rendered":"Johnson & Johnson"},"content":{"rendered":"

Company Overview<\/strong><\/p>\n

\u201cWe believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services.\u201d <\/em>[1]<\/p>\n

\"JnJ-Our-Credo-700\"<\/a>As the first line in Johnson & Johnson\u2019s values-driven Credo dictates, the company creates and captures value for a wide variety of customers. Guided\u00a0by a central core philosophy of advancing the health and well-being of people around the world, Johnson & Johnson estimates that the company touches more than a billion people a day through their broad array of health care products and services. The diversified health care giant operates in three business segments through more than 265 operating companies located across 60 countries. The three business segments, Medical Devices, Pharmaceuticals, and Consumer HealthCare, are each comprised of franchises and various therapeutic categories. [2]<\/p>\n

Business Model<\/strong><\/p>\n

At the core of the business model, J&J delivers innovative products and services to its customers fulfilling a variety of their needs across the medical device, pharmaceutical and consumer healthcare areas. J&J\u2019s business model is reflected most notably in its M&A strategy and subsequent integration approach. As stated by Bill Cordivari, former J&J executive, following the announcement of Alex Gorsky as CEO, \u201cThe business model that Johnson & Johnson has followed for many years is a business development model. They find assets and bring them in.\u201d [3] Following an acquisition, J&J allows the acquired company to remain separate and decentralized. As a result, J&J consists of several decentralized operating companies allowing each company to effectively provide value to their respective customer base. [4]<\/p>\n

From a performance standpoint, J&J\u2019s diversified business model has allowed for insulation against downturns in particular markets. For example, in 2014, revenue increased 4% to $74.3 billion, largely due to 15% growth in the Pharmaceutical segment which offset declines in the Consumer and Medical Devices segments for the year. [2]<\/p>\n

Operating Model<\/strong><\/p>\n

As stated in the company\u2019s 2014 Annual Report, \u201cThe Johnson & Johnson operating model is comprised of four concepts: being broadly based in human health; managing our business for the long-term; taking a decentralized approach to management; and focusing on our people and values.\u201d [2]<\/p>\n

\"Operating<\/a><\/p>\n

It is the concept of decentralized management that I believe underlies J&J\u2019s operating model. For example, J&J\u2019s organizational structure and governance consists of an Executive Committee of Johnson & Johnson acting as the principal management group responsible for all strategic operations, a Group Operating Committee of managers representing critical operations and specialized functions overseeing companies related to each of the business segments, but lastly, in line with the concept of decentralized management, senior management at each of the operating companies responsible for their own strategic plans, as well as the day-to-day operations. [5]<\/p>\n

The decentralized management approach stems from J&J\u2019s belief that leaders, those closest to customers and patients, can best understand and address their respective customers’ needs. [6] This approach allows the independent companies and managers to apply strategies and operating models that best adapt to their customers\u2019 needs, therefore allowing J&J to effectively deliver create and capture value to all their customers.<\/p>\n

Conclusion<\/strong><\/p>\n

The alignment of Johnson & Johnson\u2019s business model and operating model has been key to company\u2019s 100-plus year\u2019s of success. J&J\u2019s operating model focused on decentralized management allows the company to effectively deliver on its business model \u2013 one focused on providing value through a diversified set of products and services to a variety of customers. As a recent example, decentralization has been critical to J&J\u2019s success in global expansion. The company\u2019s R&D centers in developing countries have been able to develop products based on local insights and customer needs, and therefore, are expanding J&J\u2019s current product offering to meet the unique needs of the emerging market population. With a tightly aligned operating model and business model, J&J will continue to improve the health and well-being of billions of people around the world through their diversified products and services.<\/p>\n

Sources<\/strong><\/p>\n

[1] Johnson & Johnson, Our Credo; http:\/\/www.jnj.com\/sites\/default\/files\/pdf\/jnj_ourcredo_english_us_8.5x11_cmyk.pdf<\/a><\/p>\n

[2] Johnson & Johnson 2014 Annual Report; http:\/\/www.jnj.com\/sites\/default\/files\/pdf\/jnj_ourcredo_english_us_8.5x11_cmyk.pdf<\/a><\/p>\n

[3] Johnson & Johnson\u2019s choice of Gorsky as new CEO reflects importance of Synthes deal, Susan Todd; http:\/\/www.nj.com\/business\/index.ssf\/2012\/02\/johnson_johnsons_choice_of_gor.html<\/a><\/p>\n

[4] Interview with Jesse Wu, Worldwide Chairman, Johnson & Johnson Group of Consumer Companies, McKinsey & Company<\/p>\n

[5] Johnson & Johnson website, Company Overview; http:\/\/www.investor.jnj.com\/company-overview.cfm<\/a><\/p>\n

[6] Johnson & Johnson Company Fact Sheet; https:\/\/www.jnj.com\/sites\/default\/files\/pdf\/Johnson-Johnson_Factsheet_May%202013.pdf<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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