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Group 3: Practical Application

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` The Company

` The Market Environment

` The past situation

` Implementing Innovation` Process & Resource Allocation

` Innovation through synergy

` William C. Weldon

` Examples for J&Js performance

` Core success concept

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` Traditional 117 (2006) years

old company

` Consists of 204 business

organization` Largest health company in

the USA

` 10% earnings growth per

year

` Since the 1980 stock priceincreased by 20 times

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0.00%

20.00%

40.00%

0.00%

80.00%

Share of Sales

Share ofOperating Profits

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` Companies Strenths High Economies of scale

High Economies of scope

market dominating

Scientific expertise Marketing savvy

Continuous Innovation or acquisition of innovations

Heritage (tradition of quality)

Acquisitioned power to create synergies

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` Depended on scientific innovation

` 500-stock index decreased by 28.1%

` J&J increased by 19.4%

` Drug business is slowing down its growth

` Less innovations

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` Highly decentralized Organizational Structure` Near-total Autonomy of Business Unites` highly competitive because of theentrepreneurial

attitude

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` Coordinating the Independent Businesses Delivering idea to synergy

` Putting J&Js famed autonomy at risk

` Cultivating alliances

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` Foster communication

` Emphasize interdisciplinary collaboration

` Combination of drugs devices and diagnostics

` High advantage of J&J in achieving this integration` Keeping up theentrepreneurial attitude

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` Weldon delegates crucial decisions to R&D

` Decisive power is by the Business Unit Managers

` Creating the idea of autonomy

` Disease Experts meet quarterly for past 5 years` Two groups focused on two diseases

` Strategy presentation after six month

` Example: The diagnostics team develops a test that

the R&D folks could use to predict which patients willbenefit from a experimental cancer therapy

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Pharmaceuticaloperation

Pharmaceuticaloperation

Drug DeliveryOperation

Drug DeliveryOperation

ImprovedDrugs

epilepsy drug +obesity treatment

ImprovedDrugs

epilepsy drug +obesity treatment

DiagnosticUnit

DiagnosticUnit

Drugresearchers

Drugresearchers

NewMedicalTests

NewMedicalTests

ExistingProductsExistingProducts

SuperiorValue

SuperiorValue

SubstantialInnovation

(LiquidBandage)

SubstantialInnovation

(LiquidBandage)

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` SimpleFamily background

` Major in Biology

` Self made man, worked his way up

` Persuasive

` Casual` Sporty

` Visionary

` Ambitious

Creating a innovation favoringCulture

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Demanding GoalsDemanding Goals

If you werent putting your weight you were gone

Nice job. Why couldnt it have been 25% higher

In t

his gam

ethe

re

are

two strikes

Positive reinforcementPositive reinforcement

Higher bonuses forhis managers

Closed up the shop for a day of rest

Som

etim

es it is b

etter to b

eg forgiv

eness t

hen ask p

ermission

The CriticsThe Critics

He is an intimidator and a dominator

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` Pops open arteries after angioplasty Catheter with balloon at the tip to open arteries The balloon popping open the stent, catheter and balloon are

removed, leaving the stent in place Drug of the stent is released in the blood vessels wall over time

` Teams from the drug business and the device operationcollaborating` Weldon got monthly feedback` Experts were working mostly independent/empowerment of the

divisions

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` Procrit J&Js biggest selling product

` Stagnating growth because of Aransep for Amgen

Inc.

` The European version had to face sideeffects` Stronger competition

` Growth declined from 20% to 2%

` Also the drug Remicade under competition

` Weldon downplays the threat by introducing

a innovational use of the product

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` Strategic Acquisitions

` Innovation favoring culture

` Autonomic and coordinated business units

` Constantly adding innovations` Innovating existing products by adding value

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