{"id":3845,"date":"2015-12-08T21:39:19","date_gmt":"2015-12-09T02:39:19","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/"},"modified":"2015-12-08T21:47:00","modified_gmt":"2015-12-09T02:47:00","slug":"a-family-of-companies-johnson-johnson","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/","title":{"rendered":"A Family of Companies \u2013 Johnson &amp; Johnson"},"content":{"rendered":"<p>Johnson &amp; Johnson (J&amp;J) is a large multidimensional company with a business model to provide innovative products to advance the health and well-being of the global population. And the structure of their operating model suggests they are focused on long-term growth over short-term gains. In my opinion, they are a TOM winner because of the alignment they exhibit firm-wide between their business &amp; operating models. Even credit rating agencies have taken note of their consistent success as they are one of only three US companies that hold a \u201cAAA\u201d credit rating.<\/p>\n<p>J&amp;J\u2019s operating model is formed around their Credo, which is a management document authored by their former chairman, Robert Wood Johnson, over 70 years ago (see video below). The Credo states that the company\u2019s primary responsibility is to the people who use their products, secondary responsibility is to their employees, tertiary responsibility is to the communities they operate in, and final responsibility is to their shareholders. And as a result, J&amp;J historically has deployed an operating strategy to invest in people and innovation, both through their own employees and external parties through acquisitions.<\/p>\n<p style=\"text-align: center\"><iframe loading=\"lazy\" title=\"A History of Leadership at Johnson &amp; Johnson\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/nlTijmelPCQ?start=56&#038;feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p><strong>New Focus<\/strong><\/p>\n<p>J&amp;J is known by many as being the company that makes Band-Aids, Listerine, Tylenol, and different types of baby shampoos and oil. However, consumer products are just a small piece of the pie. In Figure 1, you can see J&amp;J makes most of its money from pharmaceuticals and medical devices. They have grown these two sectors over the past decade through major capital investments in acquisitions and people development. Instead of investing in developing technology in-house, they use their size to acquire smaller companies who they believe have a promising trajectory in the healthcare space.<\/p>\n<figure id=\"attachment_3828\" aria-describedby=\"caption-attachment-3828\" style=\"width: 543px\" class=\"wp-caption alignright\"><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/JJ-Figure-2.png\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-3828\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/JJ-Figure-2.png\" alt=\"Figure 2\" width=\"543\" height=\"280\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/JJ-Figure-2.png 710w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/JJ-Figure-2-300x155.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/JJ-Figure-2-600x309.png 600w\" sizes=\"auto, (max-width: 543px) 100vw, 543px\" \/><\/a><figcaption id=\"caption-attachment-3828\" class=\"wp-caption-text\">Figure 1<\/figcaption><\/figure>\n<p>However, success does not follow every investment decision they make. After investing heavily within their medical devices sector in the early 2000s, they were forced to cut their losses on two operating companies, Orthoclinical Diagnostics and Cordis, and sold them off in the past two years. Yet because they operate in multiple sectors, they can quickly shift focus to another area of the company to pick up the slack.<\/p>\n<p>Over the past 5 years, this shift has apparently moved to their pharmaceuticals sector. In 2014, pharmaceuticals accounted for more than 50% of their earnings (43% of revenue). As we have learned through several cases here at HBS, in order to maintain strong earnings in pharmaceuticals, companies must continue to develop new drugs to supplant the drugs that come off patent. And although J&amp;J spends a great deal on internal R&amp;D, in recent years they have deployed a strategy to acquire companies with promising drug trials. They recently acquired Alios BioPharma, Cougar Biotech, and Crucell to develop their viral disease, oncology, and vaccines pipeline. Combine these recent acquisitions to promising trial results on drugs already in J&amp;J\u2019s pipeline, and their pharmaceuticals business is projected to add another $5-$6 billion in annual revenues by 2021.<\/p>\n<p><strong>Post-Acquisition<\/strong><\/p>\n<p>The last piece of their operating strategy that has allowed J&amp;J to create and sustain a competitive advantage in the healthcare industry is their decentralized management approach. Once they have acquired a company, rather than waste valuable resources and time on merging the new company\u2019s model to fit within their own, they allow the firm to operate on its own. There are some slight organizational changes, and recently they have begun to centralize procurement functions to leverage existing contracts, but on the whole they take a backseat approach. Figure 2 visually brings together J&amp;J\u2019s operating model, and we can see these four strategic principles has allowed this value-based company to stay true to its business model of providing innovative healthcare products to help the worldwide population.<\/p>\n<figure id=\"attachment_3831\" aria-describedby=\"caption-attachment-3831\" style=\"width: 506px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-3831\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Figure-3.png\" alt=\"Figure 3\" width=\"506\" height=\"122\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Figure-3.png 444w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Figure-3-300x72.png 300w\" sizes=\"auto, (max-width: 506px) 100vw, 506px\" \/><figcaption id=\"caption-attachment-3831\" class=\"wp-caption-text\">Figure 2<\/figcaption><\/figure>\n<p>With $37 billion in excess cash and a strong pharmaceuticals pipeline, J&amp;J is primed and ready to have a sustaining business model for many years to come. Whether they choose to grow through internal innovation or through acquiring companies on the verge of major breakthroughs, J&amp;J\u2019s flexible operating model allows them to continue to maintain a broad presence in the growing healthcare industry.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p>&nbsp;<\/p>\n<p>References:<\/p>\n<p>[1] (n.d.). Retrieved December 9, 2015, from http:\/\/www.jnj.com\/sites\/default\/files\/pdf\/jnj_ourcredo_english_us_8.5x11_cmyk.pdf<\/p>\n<p>[2] A History of Leadership at Johnson &amp; Johnson. (n.d.). Retrieved December 9, 2015, from https:\/\/www.youtube.com\/watch?v=nlTijmelPCQ#t=56<\/p>\n<p>[3] Abrams, P. (n.d.). The J&amp;J Credo &#8212; A Model for Corporate America That Would Make America Work. Retrieved December 9, 2015, from http:\/\/www.huffingtonpost.com\/paul-abrams\/responsible-capitalism_b_1125597.html<\/p>\n<p>[4] Company Structure. (n.d.). Retrieved December 9, 2015, from http:\/\/www.jnj.com\/about-jnj\/company-structure<\/p>\n<p>[5] GuruFocus Premium Membership. (n.d.). Retrieved December 9, 2015, from http:\/\/www.gurufocus.com\/news\/351552\/johnson&#8211;johnson-53-years-of-lowrisk-dividend-growth<\/p>\n<p>[6] Johnson &amp; Johnson &#8212; Trefis. (n.d.). Retrieved December 9, 2015, from http:\/\/www.trefis.com\/stock\/jnj\/model\/trefis?easyAccessToken=PROVIDER_8ab24d0592c70128498434b208ba1c0205f7befd<\/p>\n<p>[7] Johnson &amp; Johnson Strategic Framework. (n.d.). Retrieved December 9, 2015, from http:\/\/www.jnj.com\/strategic-framework<\/p>\n<p>[8] Johnson &amp; Johnson is Going Strong. (n.d.). Retrieved December 9, 2015, from http:\/\/www.forbes.com\/sites\/greatspeculations\/2014\/01\/27\/johnson-johnson-is-going-strong\/<\/p>\n<p>[9] Johnson &amp; Johnson&#8217;s Segment Performance in 2Q15. (n.d.). Retrieved December 9, 2015, from http:\/\/finance.yahoo.com\/news\/johnson-johnson-segment-performance-2q15-140929510.html<\/p>\n<p>[10] Our Management Approach. (n.d.). Retrieved December 9, 2015, from http:\/\/www.jnj.com\/about-jnj\/management-approach<\/p>\n<p>[11] These 3 Companies Have Debt Rated. (n.d.). Retrieved December 9, 2015, from http:\/\/seekingalpha.com\/article\/3418446-these-3-companies-have-debt-rated-aaa-but-not-all-are-buys<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Johnson &amp; Johnson&#8217;s flexible operating model helps them maintain a strong presence in healthcare.<\/p>\n","protected":false},"author":557,"featured_media":3923,"comment_status":"open","ping_status":"closed","template":"","categories":[689,690,41,479,222,578],"class_list":["post-3845","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-acquisitions","category-consumer-products","category-healthcare","category-medical-devices","category-pharmaceuticals","category-tom-winner"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>A Family of Companies \u2013 Johnson &amp; Johnson - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Family of Companies \u2013 Johnson &amp; Johnson - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Johnson &amp; Johnson&#039;s flexible operating model helps them maintain a strong presence in healthcare.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"article:modified_time\" content=\"2015-12-09T02:47:00+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/BN-KS362_1013jn_J_201510121135461.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"750\" \/>\n\t<meta property=\"og:image:height\" content=\"500\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/a-family-of-companies-johnson-johnson\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/a-family-of-companies-johnson-johnson\\\/\",\"name\":\"A Family of Companies \u2013 Johnson &amp; Johnson - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/a-family-of-companies-johnson-johnson\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/a-family-of-companies-johnson-johnson\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/BN-KS362_1013jn_J_201510121135461.jpg\",\"datePublished\":\"2015-12-09T02:39:19+00:00\",\"dateModified\":\"2015-12-09T02:47:00+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/a-family-of-companies-johnson-johnson\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/a-family-of-companies-johnson-johnson\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/a-family-of-companies-johnson-johnson\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/BN-KS362_1013jn_J_201510121135461.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2015\\\/12\\\/BN-KS362_1013jn_J_201510121135461.jpg\",\"width\":750,\"height\":500},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/a-family-of-companies-johnson-johnson\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"A Family of Companies \u2013 Johnson &amp; Johnson\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"A Family of Companies \u2013 Johnson &amp; Johnson - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/","og_locale":"en_US","og_type":"article","og_title":"A Family of Companies \u2013 Johnson &amp; Johnson - Technology and Operations Management","og_description":"Johnson &amp; Johnson's flexible operating model helps them maintain a strong presence in healthcare.","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/","og_site_name":"Technology and Operations Management","article_modified_time":"2015-12-09T02:47:00+00:00","og_image":[{"width":750,"height":500,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/BN-KS362_1013jn_J_201510121135461.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/","name":"A Family of Companies \u2013 Johnson &amp; Johnson - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/BN-KS362_1013jn_J_201510121135461.jpg","datePublished":"2015-12-09T02:39:19+00:00","dateModified":"2015-12-09T02:47:00+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/BN-KS362_1013jn_J_201510121135461.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/BN-KS362_1013jn_J_201510121135461.jpg","width":750,"height":500},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/a-family-of-companies-johnson-johnson\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"A Family of Companies \u2013 Johnson &amp; Johnson"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/3845","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/557"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=3845"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/3845\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/3923"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=3845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=3845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}