James Burke: A Career in

American Business (A)

Group 2
Arti Pateriya (1914057)
Avinash Kumar (1914038)
Sagar Raj (1914059)
Niraj Agarwal (1914001)
Anurag Doshi (1914021)
 • First McNeil • James Burke
• Band-Aid
3 brothers- Commercial Laboratories became CEO
invention
Robert, James first aid kid gave the • Classic Band-
• Expansion to
and Edward • Successful company Aid ad.: ”I am
rest of the world
founded J&J in significant stuck on
Launch of Baby • Launch of Baby
Band-Aid”
Tylenol-
New Jersey Powder presence in
Shampoo Cyanide Crisis
Pharmaceutical
Medical Field

1986 1888-1894 1921-1957 1959 1976 1981

1. Summarize the issue at hand. How important is the product to J&J
The Tylenol Poisonings- Cyanide Crisis
• Sept 1982- Series of Deaths in Chicago
• Victims had taken “Extra-Strength Tylenol”
• A malevolent person or persons, presumably
unknown, replaced Tylenol Extra-Strength
capsules with cyanide-laced capsules
• Widespread panic about how widespread the
contamination might be
• All poisoned capsule bottles found had been
from the batch number MC 2880- Total
93000 Bottles containing 4.7Mn capsules
• High risk of public safety & damage to well
established brand
• Earlier contention was that there was no
cyanide in use at Plant. Later, during
investigation small amounts of cyanide were
found
• Lapses in quality assurance- No clue about
other batches' contamination
 Tylenol Development
Advertised only through medical journals &
directly to doctors & Pharmacists as alternative
to aspirin Cyanide deaths in
Chicago
• Datril Vs Tylenol Price
war
• Price Dropped by Burke

J&J acquired McNeil Lab

1959 1975 1976 1981

• Tylenol was growing at 20-30% per Annum

• $60 MN business by 1975 • Extra Strength Tylenol was
• Acetaminophen sales increased from 5% to launched
13% of $550 Mn market to $680 Mn • 500mg analgesic per tablet
market • Advertised as most potent
• Tylenol sales was 90% of those pain reliver without presc.
 Strategic Importance Of Extra-Strength Tylenol
Advertising expenditure of Top 5 Analgesic Brands from 1976 to 1981
• Extra Strength Tylenol heavily advertised from
1976 to 1981
• By 1979, Accounted for 70% of all Tylenol sales and
became unstoppable by 1982
• Resorted to knuckle buster lawsuits to counter
competitors attempts to catch up

• Contributed to 15% of company’s profits

• Market share increased from 10% to 35%- as much
as next 3 brands and named as one of the top 15
Brand share of Top 5 Analgesic Brands in 1975 Brand share of Top 5 Analgesic Brands in 1976 marketing success
• Sales estimates were over $500 Mn by 1983
2. What were the issues & conflict areas that burke had to face?
 Credo Challenge & Other Conflicts
Commitment towards delivering high quality product to users VS deliver profits to
stockholders

 Put customer’s at risk or put the company at risk

 Whether to recall the product ( Loss up to $100 MN & not covered by insurance)

 Damage to Brand Equity (Loss of Market share and revenues)

 Loss in faith and confidence of loyal customers in the product

 Competition might cash on the opportunity

 Take responsibility of the issue or Put blame on someone- Information asymmetry

 Departmental conflicts- Extra-Tylenol vs Other Brands

3. What steps did James burke take when the event happened ?
Critically examine the same

• Immediately formed 7
member team strategy team
• Strategy- “How do we Protect
People” and “How do we save
product”
• Initial response from the PR
was denial about the cyanide
use before investigation
Took Charge of the
Situation
Crisis Control by James Burke
Sent Alerts and
Initial Withdrawal • Gave public his command
Rectification
from Chicago area
messages through TV
Shows
• Took action to prevent a
• used PR and Paid • open communications in
advertising to issue clearly disseminating recurrence of the crisis in
the future
national alert warnings to the public as
• Toll free hot line for well as the company's • new triple safety seal
customer stand packaging- a glued box
communications • Developed new random
• Initial withdrawal was Personal messages inspection procedures
not nation wide before the shipment of
with media Tylenol to retailers
4. What are the pros & cons for a national recall? When does the
company’s responsibilities for its products end ? In a recall which of
the Tylenol you would recall
 PROS AND CONS OF NATIONAL RECALL

1. Opportunity to win praise for 1.Impact on company’s share price

appropriate action
2. Opportunity to become consumer
champion
3. Set an example for others to follow
4. Establishing Brand recognition
5.Helps identify various risks in
company’s processes and operations
2. lost production of destroyed goods
3. Revenue loss
4. Adverse effect on management
morale
5. Company market value fell by $1Bn
6. Reputation damage
5. Who is burke accountable to? How would you weigh the different
responsibilities?
 COMPANY’S RESPONSIBILITIES FOR ITS PRODUCTS
1. Environmental Responsibility
• Impact on the environment during manufacturing the product
• Environmental effects of the by-product released during operations
• Environmental impact while disposing the production residue
• Environmental effect of the product after being disposed by the consumer

2. Social Influence
• The impact of the product marketing campaigns carried out by the company on the social harmony of the society
• The product placement and its utility as promoted by the company and its effect on the productivity of the
consumers
• The impact of the product usage on the societal values and consumer behavior

3. Personal data privacy of the customers

• In the information age, the consumer data privacy is the product company’s responsibility
• As the company has access to consumer data from multiple touch points, how they connect the dots and leverage
the information to increase the consumer’s willingness to pay should and will depend on the company’s moral
compass

Since the cyanide was used in quality assurance processes, we must not be complacent
about the level of perceived risks. Therefore both the Tylenol products should be recalled.
6. Did J&J handle the crisis well? Tactically ? What factors
contributed to the same?
 Customer are the most important stakeholders for John Burke

• J&J’s revised Credo under John Burke mentions

High responsibilities towards five set of stakeholders
Consumers,
including
• Each stakeholder is important; however time and resource
healthcare
constrains force organizations to prioritize
providers and
users
• For J&J, which is in the healthcare business, the most
Employees important stakeholder is the customer, which includes
Influence

doctors, nurses, and consumers

Supplier Shareholders • Prioritization of consumers has ensured strong goodwill

and and high stakeholder returns for J&J over the years
Distributors Community
o The company had destroyed shipments of baby liquid
cream in 1960s on internal reports of slight irritation
Low
in few users
Low High
Interest/Impact o Millions of dollars spent in recalls in 1982 and then
again in 1986
 J&J turned the Tylenol crisis into an opportunity
J&J was not only able to come out unscathed from the Tylenol
Media coverage pre-and post-crisis
controversy, but also generated some public goodwill in the
shows J&J was able to undo the
process, through effective management of key stakeholders
damage quickly

• Demonstrated Consumer Media • Open communication - FROM HEADLINES SUCH AS:

Acceptance: Immediate Used media to • Tylenol, Killer or Cure?
national mass public communicate strategy The Washington Post, Oct 1982
advertisements during the crisis • Poison Madness in the Midwest
• Engaged Customers: • Established toll-free Time Magazine, Oct 1982
Established 1-800 number for providing
hotline updates to media
• Sympathy strategy: TO
• Provided counseling
Workers Government Used media to show • Tylenol's Maker Shows How to
and financial assistance,
even though not directly positive actions taken to Respond to Crisis
responsible for tragedy• Rectification: Worked with the FDA help victim families The Washington Post, Oct1982
to introduce tamper-proof • Tylenol made a hero of Johnson &
packaging just six months after the Johnson
crisis The New York Time, Mar 2002
• Swift Action: Nationwide product
recalls at the cost of over $100
million
 Several tactical moves helped J&J change the narrative

• James Burke’s one of the first move to was to establish a seven-member strategy
Through effective team to address two questions in the order of priority – “How do we protect the
people?“, and "How do we save this product?
PR management,
J&J was able to • J&J voluntarily choose to immediately alert consumers through national media not to
position itself as consume Tylenol, until the extent of “tampering” could be ascertained
victim of a • In the first week of the crisis, established a hotline for customers, and a toll-free line
malicious crime, to provide statements and strategic updates to media on the developments
and a
• Was quick to portray itself as the victim, and the deaths as “murders”; in fact the
conscientious company almost immediately announced a $100,000 award for the “killer”
company that puts
public good over • Projected itself as a company willing to do the morally right things despite huge
costs: $100 million recall and relaunch: the company decided to pull out about 31
profits million bottles of Tylenol capsules from pharmacies and customer’s medicine chests,
nationwide, and offered replacement packs in safer tablet form
7. How do leaders prepare their organization for crisis like
Tylenol?
 Crisis Management- How do leaders prepare for Crisis

 Anticipate Prepare Prioritize Respond Recover

1. Anticipate
Creating Risk Governance and Culture
 Encouraging arguments, open discussion, and honest acceptance of failures.
 Leadership consistently demonstrates commitment to ethics such as discarding Baby Liquid Cream on 5%
negative reports of Clinical trials.
 J&J Credo emphasis on responsibility towards all stakeholders, high quality, and ethics.

2. Prepare
Building resilience and capability for an effective response to the crisis proactively
 Reserves must be created to provide for adverse times (from J&J Credo)
 Establishing Standard Internal Controls
 Crisis Management- How do leaders prepare for Crisis

 Anticipate Prepare Prioritize Respond Recover

September 30, CEO, Jim Burke taken the charge of Crisis Management and acted decisively
3. Prioritize
CEO, Jim Burke immediately tasked his team with two key questions
1. How do we protect people?
2. How do we save this product?
4. Respond- Leveraged media, public relations, and technology
1. Warning to all consumers telecasted, consumer queries were attended, advertisements were stopped.
2. Company immediately called back the product from the entire market with loss of 100 million.
3. Called Nelson to identify the source of risk (internal/ external), finding out and disclosure of use of cyanide in the process.
4. Live television feed and Several Major press conferences were held by J&J

5. Recover
 Reintroduced the product with triple seal resistant packaging (Rectification)
 Compensated the consumers by offering discounts and restore sales (Sympathy)
 Focussed on advertisement and Sales of improved product.
 Gained back trust of consumers as well as share holders.
8. What is your view of the leadership at J&J? How do leaders build
value and culture in their organizations.
 Leadership at Johnson & Johnson
Robert W Johnsen II (General)
CEO, 1932- 1963
 Creative
 Encourages experiments
 Acceptance for failure
 Leader, Motivator
 Learn from failures
Gustov O. Lienhard
(Burke’s Mentor)
President 1955 – 1970
 Leader
 Empathetic
 Caring
 Motivator and Supporter
Wayne K Nelson, David E Collins
McNeil Consumer Products
 Process Experts
 Honest and trustworthy
 Responsible
Robert W Johnsen III (Bobby)
President, 1961- 1965
 Example of Ethics and Integrity
 Acceptance of failures
 Innovator
Richard B Sellars
CEO, 1973- 1976
 Stakeholder responsibility
 Acceptance for change
 Employee participation
 Aggressive to protect the
company
James Burke
President 1976 – 1989
 Visionary, Creative, Courageous
 Leader- Decisive, change leader
 Strategist
 Role model of Integrity and ethics
 Aggressive Competitor
 References
1. https://www.jnj.com/caring/patient-stories/legacy-of-leadership
2. https://simconblog.wordpress.com/2016/04/21/johnson-johnson-case-study-analysis/
3. https://www.slideshare.net/rhitsrivastava/johnson-and-johnson-and-tylenol-case-
study?next_slideshow=1
4. https://www.google.com/search?q=richard+B+Sellars&source=lnms&tbm=isch&sa=X&ved=0ahUKE
wiFh4zy1JHjAhXLPo8KHfIuAmsQ_AUIESgC&biw=1242&bih=553#imgrc=WfpUHeKLIrrM1M:
5. https://en.wikipedia.org/wiki/James_E._Burke
6. https://www.google.com/search?q=gustav+o+lienhard+president+of+johnsen+%26+johnsen&sourc
e=lnms&tbm=isch&sa=X&ved=0ahUKEwiNk-
io35HjAhURS48KHY6nD80Q_AUIESgC&biw=1242&bih=553#imgrc=loIUwC5ynnozSM:
• http://mallenbaker.net/article/clear-reflection/johnson-johnson-and-tylenol-crisis-management-
case-study
• https://www.ou.edu/deptcomm/dodjcc/groups/02C2/Johnson%20&%20Johnson.htm
• James Burke: A Career in American Business (A)
• https://www.ou.edu/deptcomm/dodjcc/groups/02C2/Johnson%20&%20Johnson.htm
• Press Search, Team Analysis, Department of Defense, Washington Post, New York Times
Thank You!