Values drive culture and strategy in times of crisis
Johnson & Johnson’s recall of Tylenol Extra Strength is often cited as a beacon of success in business ethics. THRUUE recently discussed additional insights from this famous case with Mark Williams, a leader in the medical diagnostics field who worked at Johnson & Johnson during the crisis and recall decision. Williams shared with us his insights about the importance of a values-driven culture and strategy.
The Tylenol recall
In 1982, Johnson & Johnson recalled Tylenol Extra Strength from shelves across the globe (31 million bottles, totaling more than $100 million in retail value) after bottles were poisoned with cyanide and caused seven deaths in Chicago. Deciding to recall the product—at great financial cost to the corporation—was simple because the core values of the company demanded it.
At the height of the crisis, Johnson & Johnson’s acting CEO, Jim Burke, read the corporation’s Credo aloud to a room of panicked executives. The Credo details the core values of Johnson & Johnson, declaring that the company’s responsibility is first and foremost “to the doctors, nurses and patients, mothers and fathers, and all others who use our products and services.” With this focus on responsibility to communities, the leaders immediately pulled the drug from all shelves.
This decision demonstrated the influence of a values-driven culture. Core values should act as beacons in a company’s culture, guiding decision-making and helping employees navigate trade-offs to align everyone on a single trajectory. For Johnson & Johnson, articulating that stakeholder wellbeing was highly valued provided employees with a clear way to make decisions. Within a culture where employees always put ethical responsibility first, crises like the cyanide poisonings are much less likely to result in catastrophe for the organization. Leaders could have placed more importance on safeguarding market share and cushioning the financial blow in the short term, but instead used core values as a ‘North Star’ for long-term success.
Core values also support smart business strategy. In the case of Johnson & Johnson’s recall, CEO Jim Burke immediately defined and put into action a plan to regain the company’s leading 37% market share, which had dropped to just 7% within a month of the cyanide poisonings. Though he did not ask about the financial setbacks when he made the decision for a full recall, he knew that they would have to act immediately and smartly to regain lost market share. Leaders quickly rolled out a plan to include a three-part, tamper-proof seal on all new Tylenol bottles. Johnson & Johnson not only quickly reintroduced the product with its new safety packaging but also went to the media to explain how the company had used its Credo to make its decision and shape its actions.
Perhaps the savviest component of the reentry plan was for Johnson & Johnson to become a pioneer in the tamper-free packaging movement. As fear of copycats spread (one report cited more 100 copycat poisonings of Tylenol or other products), Johnson & Johnson voiced concern about unsafe drug packaging and urged doctors and consumers to buy only products with tamper-proof seals. Johnson & Johnson forced the adoption curve for other companies, proving to the public that consumer safety was their utmost priority while simultaneously gaining a first-mover advantage. As a result of this values-driven strategy, the company’s market share rebounded from 7% to 30%—almost returning to its percentage before the crisis—within a year of the recall.
The impact of values-driven culture and strategy
When Williams left Johnson & Johnson to pursue other positions throughout the rest of his career, the importance of a culture driven by strong values remained with him. In every interview with a new company, Williams would ask the same simple question: “How do you make decisions?” By asking this question, Williams was able to uncover whether or not the organization had a values-led culture.
“What that question really means,” Williams says, “is, ‘tell me about your core values.’ I wanted to hear about their decision-making philosophy.”
In his next position as Vice President, Marketing at Roche’s US Diabetes division, Williams encountered a similar situation to the Johnson & Johnson case. The company faced inconclusive information that a diabetes testing device, which had #1 market share and accounted for a large portion of the company’s total profits, was producing erroneous results for diabetes patients. Executives were split, but were able to make a decision using the company’s core values (much like Johnson & Johnson’s Credo-led decision). Roche demanded a full recall of the product, despite large costs.
What Roche did not immediately consider was a smart, values-driven strategy that Williams had seen at Johnson & Johnson. So upon Williams’s recommendation, the CEO soon rolled out a comprehensive plan to explain Roche’s values and priorities, the decision-making process, and even how the recall meeting was conducted, to doctors and patients who used Accu-Chek™. Because the company used their values to drive strategy, Accu-Chek’s leading market share rebounded quickly and Roche regained its first-class trustworthiness with consumers.
Note: Williams is the former Global Vice President of Sales and Marketing at CeloNova BioSciences and former VP of Marketing at Roche Diagnostics U.S.Return to Blog