Johnson & Johnson: Becoming The World’s Largest Healthcare Company Through Innovative Ideas, Products And Services
Johnson & Johnson was founded on the quest to make a difference in people’s lives by providing solution to a serious problem in the healthcare industry. In the 1880s, the percentage of deaths resulting from infections after surgery was on the high side. Then came a ray a hope in the late 1880s when Joseph Lister found that the cause of the infection were airborne germs in operating rooms.
Lister recommended sterilizing operating rooms by spraying them with carbolic acid, but this method, although effective, was impractical. Propelled to find solution to this challenge, Robert Wood Johnson, a New England druggist landed an idea: to produce surgical dressings for hospitals.
Together with his brothers, James Wood Johnson and Edward Mead Johnson, he began producing surgical dressings in 1886 with 14 employees in New Brunswick, New Jersey. And in 1887, the brothers incorporated Johnson & Johnson.
Their product, which was an improved medicinal plaster that incorporated medical compounds mixed in an adhesive, found a ready, eager market, as hospitals have long been looking for how to prevent death resulting from infection after surgery. Following its first product, Johnson & Johnson (J & J) quickly developed a soft, absorbent cotton-and-gauze dressing, and began mass production with the dressings distributed across the United States.
To be able to improve on its products, and create more innovative ones, J & J, in 1891 established a bacteriological laboratory. And by introducing dry heat, steam, and pressure throughout its manufacturing process, the sterility of the company’s bandages was assured,
In 1899, Johnson & Johnson made another improvement on its adhesive bandage by introducing a zinc oxide-based adhesive plaster, which was tougher, and didn’t cause skin irritation for many patients, unlike the previous type.
Johnson & Johnson lead founder, Robert Wood Johnson, died in 1910, with his brother James taking over as Chairman. To ensure the company’s source of textile materials, one of its major raw materials, is within its control, J & J bought over Chicopee Manufacturing Corporation in 1916.
The company expanded internationally in 1919 when it set up its first international affiliate in Canada, and later established Johnson & Johnson Limited in Great Britain in 1924.
Johnson & Johnson continued to diversify as it introduced Band-Aid brand adhesive bandages and Johnson’s Baby Cream in 1921, and Modess sanitary napkins, the company’s first feminine hygiene product in 1927.
Elected president in 1932, Robert Johnson, son of cofounder Robert Wood Johnson facilitated the company’s organizational structure. He created divisions and affiliates with autonomy to direct their own operations. The company also diversified into textiles, Pharmaceuticals, and hygiene products.
To strengthen its Pharmaceutical business, J & J bought McNeil Laboratories, Inc., maker of Tylenol, which was then a prescription drug, but which was relaunched a year after the acquisition as over-the-counter (OTC) medication. Johnson & Johnson also purchased Cilag-Chemie, a Swiss pharmaceutical company in 1959, followed two years later with the acquisition of Janssen Pharmaceutica, maker of Haldol, the major antipsychotic drug, which was introduced in 1958.
Robert Johnson led Johnson & Johnson through tremendous growth in his time as president, with sales reaching $700 million at the time of his death in 1968 from $11 million.
With increasing federal regulation in the 1960s on the healthcare industry, the need to increase sales and profit in its consumer products line became paramount in Johnson & Johnson. To achieve this, James Burke, who became president of J & J’s Domestic Operating Company in 1966 built a formidable marketing team to win the market.
He launched several successful advertising campaigns that saw Johnson & Johnson attaining leadership position in several of its product lines. One of this was the introduction of Carefree and Stayfree sanitary napkins into a market that was already dominated by Kimberly-Clark, the well known leader in feminine products.
Instead of advertising Carefree and Stayfree only in women’s magazines, as adverts for women hygiene products then were low-keyed and discrete, Burke took a different approach. He advertised Carefree and Stayfree on television. And by the ending of 1978, Johnson & Johnson had captured half of the market.
Another of Burke’s marketing success was the transformation of Tylenol from a dwindling high-priced product to a mass-market leader. In response to Bristol-Myers Company’s introduction of Datril, which they advertised as having the same function as Tylenol, but sold at greatly reduced price, J & J Board allowed Burke to do what he had wanted to do for a long time – to bring Tylenol into the mass market.
He slashed Tylenol’s price, and ended up beating all products in the category, including Datril and the market leader, Anacin.
The J & J ‘Signature of Quality’ program, which focused the corporation’s operating companies on meeting three general goals: ‘Continuously improving customer satisfaction, cost efficiency and the speed of bringing new products to market,’ was instituted in 1992. This formed the motivation that catapulted the company to higher success in the 1990s and beyond.
Resulting from a series of acquisitions in the 1990s, including RoC S.A. of France, maker of hypoallergenic facial, hand, body, and other products, the clinical diagnostic unit of Eastman Kodak Company in 1995, and Neutrogena Corporation (for $1 billion), producer of dermatologist-recommended skin and hair care products.
It also included Indigo Medical (1996), specialist in minimal invasive technology in urology and related areas, Cordis Corporation, a world leader in the treatment of cardiovascular diseases for $1.8 billion in 1996, the purchase of Biopsys Medical, Inc. in 1997, a specialist in minimally invasive breast biopsies, and the acquisition of DePuy, leader in orthopedic products, such as hip replacement devices, in 1998 for $3.7 billion in cash.
This shot Johnson & Johnson’s revenue to $21.47 billion by 1999, and $61.9 Billion by 2009, with a net earning of $4.17 billion, and $12.3 billion in 1999 and 2009 respectively.
Founded over 120 years ago on a revolutionary idea to provide doctors and nurses sterile sutures, dressings and bandages to treat their patient’s wounds and prevent them from dieing as a result of infection, Johnson & Johnson has grown to meet the healthcare needs of people worldwide.
It has pioneered many new ideas and products that have changed human health and well-being, including such products as baby powder, sterile bandages and antiseptic mouthwash, disposable contact lenses, and hip and knee replacements. And by mergers, acquisitions and the formation of new companies, J & J has grown to become the largest and most broadly based health care company in the world, a position it is not prepared to cede as it looks into the future.
Read Johnson & Johnson’s Business Strategies here.
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