The Secret of J&J’s Success
In the business world we often find that the most successful companies are not the most complicated. Success usually comes down to knowing what business you’re in and relentless focusing on that. Relentless execution becomes the propellant.
Fortune magazine recently published an interesting article on Johnson & Johnson. “What’s frustrating about J&J’s imperatives for success is that you probably could have thought them up yourself,” wrote Geoffrey Colvin and Jessica Shambora in the article. “The secret turns out to be not the rules but rather the company’s extraordinary insistence on following them all the time.”
It’s that kind of discipline that enabled Johnson & Johnson’s sales to increase 4.3 percent last year, during a period where the overall U.S. economy declined. In addition, its profits increased 22 percent while during a period where the overall profits among the Fortune 500 dropped by 85 percent.
Johnson & Johnson achieves that kind of success by relentlessly focusing on five strategic imperatives. First, J&J diversifies within only one industry — health care — with one group in consumer products, a second group in medical devices and diagnostics, and a third in pharmaceuticals. This strategy keeps the company both focused and diversified.
Second, J&J bets heavily on the future, always thinking a decade or two out while at the same time playing it conservative by creating substantial cash reserves for hard times.
Third, J&J is decentralized, so managers can run their own businesses and, if successful, rise to the top.
Fourth, J&J stays very financially disciplined. Always. The company refuses to get caught up in bidding wars, as evidenced by its recent refusal to outbid Boston Scientific for Guidant. As soon as it became clear that it was not possible earn an acceptable ROI, J&J withdrew its bid.
Fifth, J&J famously has “a purpose beyond profits,” as expressed in its Credo: “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services.”
Johnson & Johnson is a great example of corporate focus and strategic discipline. As with all business rules, the secret isn’t really in talking about it, but rather in actually believing it enough to take action on it.
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