What Has Happened to the Great J&J Culture?

For many, many years, Johnson & Johnson was the most admired company in the world on virtually every survey. It built its reputation as an honest, trusted maker of pharmaceuticals, diagnostics and consumer products. Its trusted position was secured in 1982 when it suffered a devastating crisis in which Tyleno, laced with cyanid killed 7 people in the Chicago area. The reaction from J&J, whose McNeil Labs makes Tylenol, is perhaps THE case study for both corporate values and crisis management.

J&J has had a Credo since 1948. It was written by General Johnson at that time to let potential investors know how he was running the company. If they agreed with his direction, they were welcomed to invest. He set expectations, which, as I have mentioned on many occasions, are the basis of reputation. There was to be no surprise for how the company would operate. The Credo has only four paragraphs which discuss J&J's "responsibilities". The responsibilities are, in the following order of importance: to customers, employees, communities and shareholders. J&J was clear that if it were true to meeting its responsibilities to customers, employees and society, shareholders would be well served. Its Credo is the inverse of the way most companies operate, putting shareholders #1 above all others.

When the Tylenol crisis hit, Jim Burke, the then Chairman of J&J asked his team to read the Credo and decide from it what course of action was appropriate. It was clear that J&J had to pull Tylenol from shelves. It also stopped all J&J advertising. Within two-weeks of the crisis, J&J introduced a new, triple-sealed Tylenol--an enormous R&D and manufacturing accomplishment. The company did not look at this as a crisis of one product, but rather a crisis for the entire company. Tylenol regained its previous market share within four-months, despite the predictions from many who said that the product was dead. J&J went on to be admired for its actions. Its trustworthy actions built trust amongst stakeholders.

J&J's culture, as captured in the Credo, was tested during that crisis and was reinforced as being its guiding set of values. Whenever something was in question, the company could return to the Credo.

So, it comes as a major shock to most observers that the same plant that made Tylenol--the Ft. Washington, PA--plant, is now shut down and is being investigated for the lack of adequate safety precautions. It was making Tylenol that exceeded proper dosage--a potentially deadly situation. The Federal Drug Administration has said that it was following the problems at the plant. J&J officials appear to have known about the lax safety and quality programs there and turned a "blind eye" to them.

This is not the same J&J company. This is not the company of the Credo. This is a company that seems to have focused so much on cost containment that the message got people moving in the wrong direction. The entire management team should be held to account for this. I can't even imagine what this has done to the "psychy" of former J&J executives who are looking at a company that is a far cry from the one they used to work for. J&J has slipped mightily and with that slip has tarnished one of the brightest stars in the corporate horizon. Let's hope that this shocks J&J management back to their senses and that they renew their faith in and focus on the Credo. It is even more important today than it was when written some 60-years ago.

Changing CEOs Will Not Improve BP's Reputation

BP announced that it was changing CEOs--not now though, but in October. The Board was supposed to show that it was fed up with the leadership or lack of it from its CEO and move the company forward. Why October? Why not now?

It seems clear that BP has a flawed culture. This is a company that does not seem to really get it. Even Dudley, the new CEO, suggested that he has never seen evidence of problems in his career with BP. He indicated that the Gulf accident was a total anomaly for the company. This assertion despite the fact that BP has more federal violations for its drilling operations than almost any other company. Something is wrong and replacing Hayworth--the seemingly arrogant CEO who never seemed to express anything other than the fact that this was just a big bother for him--with Dudley will not fix it.

The rest of the oil industry has now turned on BP. The others have indicated that they would never have run their drilling operations the way BP had done. Everything that has been learned shows that BP had little real regard for safety. The fire alarm on the platform had been turned off; it rejected warnings from those working on the platform that the drilling was not going well; it did not plan for a true disaster. All of these things add up to a company that has an internal culture with little regard for doing things right. The fact that Dudley has never seen this likely means that he is too blind to see things the way an outsider would. He is a BP "lifer". We can just expect more of the same--amazement that anything has gone wrong.

BPs disaster has impacted the entire oil industry and has put a moratorium on deep water drilling. Their cavalier attitude and denial of what went wrong just makes things worse for all. It is really time that shareholders change this board and get them serious about changing the culture at BP.

Companies Should Avoid Political Advertising, Despite New Rules

I gave an interview to a reporter in Minneapolis yesterday about an advertising campaign in Minnesota by Target, Medtronic, and other companies that supported Republican-backed proposals. The U.S. Supreme Court gave its approval in the past year to company political advocacy. Critics have contended that this gives corporations too much influence over politics; supporters argue that companies enjoy free speech, as do individuals and should not be barred from exercising their rights to express their opinions. The Court agreed with the latter argument.

Just because someone is allowed by law to do something does not mean that they need to do it. Minnesota has had a long history of company involvement in the community. For many years, the Twin Cities companies pledged to contribute 5% of revenues to local community initiatives. Many communities around the country have had company involvement in the local community, including building of opera houses, public art displays, etc. Communities and companies have been intertwined for generations. Some applaud this, some are concerned. While many people may separate contributions to local causes from political advertising, they are very closely aligned in that they are aimed at integrating the company into the community. When it benefits the larger community (e.g., art, social needs, etc.), most people applaud it. When it is aimed at influencing the outcome of political debate in favor of the company, it becomes more problematic to the company's reputation.

Companies, in my opinion, should avoid politically-based advertising. There is a general distrust of corporations currently and too transparent an involvement in trying to influence the political dialog is not in the long-term best interests of the company. Companies deal with a multitude of stakeholders, all of whom have expectations of the company--that is what forms reputation. The relationship with stakeholders is a delicate one that requires balance. By getting too aggressive in a political debate, companies can throw this delicate balance off. While they may be within their rights, according to the Court, they should think long and hard before exercising that right.

Target in one company that has decided to get involved actively in advertising on behalf of Republican causes. Its CEO is a major supporter and donor to the Republican party. However, the corporation speaks for its stakeholders, including its employees, who likely are not so clearly in support of one party's view over another. It jeopardizes its relationships by these political actions.

Companies have incredible access to power and incredible influence. A major company can call on any member of Congress it wants. It represents a significant constituency for the member of Congress. Companies have more access and more power than the average person. This power should be used judiciously. It should avoid outright political advertising.

As Predicted, Jobs Gets "Smacked" for Comments

As predicted in my last post, the comments by Steve Jobs about other smart phones and their equally problematic design generated a lot of negative backlash from competitors. Blackberry and Samsung, among others, were quick to point out that their phones do not have the problem with the antenna and dropped calls that Jobs claimed to be common amongst smart phones. The others were likely irritated, but also delighted that Jobs gave them an opening to make comparisons against I-Phone.

This was a dumb statement by Jobs. Regardless of whether others have the same problem, it was tantamount to a kid coming home from school accused of cheating and who defends him/herself by saying that everyone does the same thing. Leaders are expected to live to higher standards and take responsibility for their actions and problems, not blame others. A quick news story has become a continuing investigation. Jobs stepped into this. He should not have and didn't have to. He acted like the class brain who when found to have made a mistake cannot take the criticism.

Apple is a leader and a leader should remain on the offense. It does not need to be defensive. Leaders have two moves; followers have just one. Apple had the ability to apologize, correct the problem, and stress the value of the I-Phone. Let competitors attempt to criticize the design. What Apple did was awful, because it "broke into jail" by allowing competitors an opening and a sense of parity. Apple simply needed to apologize, offer the casing to protect phones and eliminate the problem, and move on. Let competitors squeal about Apple's faults. Leaders move on.

Apple needs to mature. By that, I mean that Jobs needs to mature. He doesn't have to prove that he is the smartest kid in the class. He has shown that he is the most innovative and that customers love what he produces. All technology has problems. It is inevitable. Correct the problem and move on. Remain the leader. This is a far cry from what we would expect of a leading brand.

Is the Sheen Coming off Apple?

Apple is in the midst of controversy concerning its I-Phone4. It seems that if someone holds the phone in a certain way, it drops calls. The problem is that the antenna is housed under a small fissure in the side of the case. It is fairly easy to inadvertently cover the antenna with ones hand.

Apple acknowledges that it knew about the problem before the I-Phone4 was released, but that Steve Jobs liked the design and authorized shipment. Following the controversy, Jobs said that it was not "big deal" because all smart phones have the same design flaw.

Regardless of whether or not other smart phones have a similar design flaw, we have come to expect more of Apple than the rest of the industry. Apple's products cost considerably more than comparable products. They sell at higher price because their are perceived to be of higher value. Apple diminished their perceived value by arguing that they are no different from others. If they are just like others, then their cost advantage disappears. Perceived value is a ceiling on price. If one were to plot a Kano Model analysis or perceptual map, it would show that Apple was--in Kano language--"a delighter", that constantly exceeds the expectations of its customers. Other phones would be fairly similar in their perceived qualities, and fall along a line of expectations--that is, they meet expected standards. Is Apple suggesting that it is no longer a "delighter"? Is it suggesting that it is now at parity rather than differentiated from others? I doubt that was what was meant. The argument by Jobs was a lousy one for any company, let alone Apple.

The solution Apple offered was admirable. They have offered a special casing to all I-Phone4 purchasers free. The casing will cover the fissure and eliminate the problem. That is a good solution, but it was not handled well at all. Apple should have apologized, noted that the design flaw was below the expectations of customers and not up to Apple standards, and then given the protective casing. There is nothing wrong with an apology. Those who apologize are forgiven and respected if they also offer a solution, which Apple did.

This incident shows that while Apple is an outstanding innovator--perhaps the very best--it remains arrogant and a bit immature. I have read articles suggesting that Apple's reputation has been tarnished. I don't think so. This was, as someone I used to work with called "a drop of water on a piece of granite". It doesn't cause much of a problem, unless the water drops continue and start to erode the granite.

There will be critics, fueled in part by a dislike for Apple or Jobs, or fueled by competitors who would love to knock Apple off its pinnacle. However, I doubt that customers will be bothered by the situation, considering that there was a quick solution. I was at an Apple store recently. The crowds were just as large and sales of the I-Phone4 seemed brisk.

This situation was a warning to Apple, though, that it needs to recognize and live up to the standards by which it expects to be judged. It has raised expectations of stakeholders above that of peers and competitors. It is now the most admired company, according to Fortune magazine. It must continue to meet or exceed the high expectations it has created, or it will risk damaging its brand and reputation.

Brand and Reputation are Critical for Non-Profits

Brand and reputation management are often focused on corporations, but there is tremendous upside for non-profits to focus on their brand and reputation.

Non-profits exist on the basis of support of their donors. Without public support, the non-profit ceases to exist. In the current economic downturn, non-profits have had particularly trouble in two areas: 1) fewer dollars from donors; and 2) fewer dollars from corporation. The two are interrelated. The latter--support from corporations--is more problematic for many non-profits since the dollars were larger and there was an expectation of continuing support, which has dwindled, if not gone away entirely.

Let's start with the idea that people have less disposable income. That means that there are fewer dollars for them to give to their favorite organizations, including universities, religious institutions, hospitals, etc. The "pie" is shrinking, but the same number of organizations are looking for support. Add to this, the added pressure that has come from disasters, including the Gulf Coast, Haiti, and others that have sought public and corporate donations. So, the market has become more competitive.

Whether or not they like to admit it, non-profits have historically operated on a principle of "noblesse oblige". That is, that those with wealth will feel an obligation to help those less fortunate. That underlying motivation may still be there, but people must choose more carefully than ever where the money should go. And, there have been a lot of abuses by non-profits of the money they have received and a lot of scams. So, trust is eroding as well, leading to some people simply unwilling to give for fear that their money will not reach its intended objective.

When competition heats up, brands predominate. Brands create the attributes and associations that cause people to see differentiation. If the pie is shrinking, non-profits need to get very serious about differentiating from other organizations and having a compelling value proposition for the donor, whether it be a person or a company.

The brand and reputation also are important for companies. Donations are changing from philanthropy to strategic social responsibility programs at many companies. This means that a non-profit needs to be very attuned to the objectives of corporations around them and match themselves to the strategy of the company. Gone are the days when they can simply expect a company to give them money with no expectations. Social responsibility programs should be tied to the company's strategy and toward the interests of the company's stakeholders. Non-profits need to understand the goals of the company and match themselves appropriately.

My last few consulting engagements have been with non-profits. They have been the most successful projects I have done in some time because we have enabled the organization to think more broadly and become more "corporate" in their thinking, which has benefited them in the way they have approached their sources of revenue and made themselves more competitive in the market.

Will North America Ever Understand Soccer?

I used to live in Toronto, the most multinational city on the planet according to the United Nations. Whenever the World Cup was played, the streets were filled with blaring horns and people running through the streets with the flags of their native countries, all of whom were represented in the World Cup. Very few native-vorn Canadians were amongst the crowds. They, like their souther neighbors in the U.S., seem to be two of the only countries that are not completely caught up in soccer fever.

I went to the 1994 World Cup opener in Chicago with my son, Adam, who was 10-years old at the time. We watched Germany defeat Bolivia. I must admit it was a great spectacle, but I sat there less than absorbed by the game. This year, however, I watched a lot of soccer. I have to admit that I started to realize what a great game this is. I also started to understand why the game has not caught on in North America.

Some analysts claim that Americans rejected soccer because it was played by the British soldiers during the Revolutionary War. That may be the case, but that would not explain why Canada is not a soccer country. Canada is still part of the British Commonwealth and the Queen is still Canada's official head of state.

I think the differences are in North American life style, which is faster than life in the rest of the world. As one of my former colleagues explained, "soccer is like chess; American sports are like checkers". Americans do not like the slow pace of chess, a game that is based upon ancient European war strategy. The favorite sports in the US are "in your face". They are about size and power. US football (and the Canadian version as well) is played by huge men who are smashing each other. Hockey is fast and furious and, once again, is about smashing ones opponents. Baseball was a slow game until it got "juiced" (players, ball and bats) and the game become one of "long ball". Baseball aficionados may love a 1-0 "pitchers dual", but most of the crowd yawns and wishes for a home-run derby.

Soccer requires patience--something we do not have. It requires thinking--something we do not like to do. It requires us to watch opponents out-finesse each other for nearly 2-hours to score, perhaps, only one goal. That may be "beautiful", but it can also appear boring to a society that is used to speed and smash. It is interesting that many countries (Netherlands, Brazil, etc.) were lamenting the change in the way soccer is being played. There is more emphasis on defense. There are more "yellow cards" being given for rough play. Soccer was to be beautiful--like a ballet.

One has to love the interviews with the Dutch today, however. They were admitting that Spain was a better team; that Spain deserved to win They did not curse the Spanish. They did not blame refs or their own team. They accepted defeat. One Dutch fan summed it up: "oh, well, we came in 2nd. That's better than most countries". Imagine that? Someone accepting defeat. Americans are used to seeing t-shirts that announce "second place is first loser". Everyone wants to be #1 or nothing.

The World Cup was a great example of great sport and great sportsmanship. It should be a great point to reflect on why we see things so differently in North America. It likely would explain a lot about why we are so different from the rest of the world.

Is it the Media or We Who Are at Fault?

The LeBron James situation seems to have more people asking whether it is society or the media who are at fault in following the exploits of a 25-year old basketball phenom. There are many people who are blaming the media for following James' every move.

The media are reflections of society. I know that there are those who believe that the media shape the discourse of society; that they have an "agenda setting" function. They may have had at one time. I think we are giving them far too much credit today. The media, particularly the mass media and cable outlets, are struggling to attract viewers. They are also struggling to keep costs down. As a result, we have had a seemingly endless steam of "reality TV" shows. These are cheeper to produce and seem to attract large numbers of viewers. How many more "Bachelors", "Bachelorets", "Last Comic Standing", "America's Got Talent", etc, etc, can we possibly watch. Yet every time we think we've saturated the concepts, along comes "Biggest Loser", "Iron Chef", and more and more. Every conceivable interest is pursued by the media. And, yes, we keep watching. More people vote for candidates on "American Idol" than vote for candidates in real elections. We seem to care more about who has the best voice or best dance steps than who runs the country.

So, is there any wonder that the media saw the opportunity to follow every step LeBron James made? He was the latest reality TV star of the week. His exploits were discussed everywhere. The night of James' announcement on ESPN, I was walking by a high-end restaurant when a man came out of the restaurant on his cell phone asking his friend to watch ESPN and text him LeBron James' decision as soon as it was known. I could tell by his face that he was probably dismayed that he had to have dinner with his wife on such an important night and during prime time.

LeBron has learned to be a master marketer--or he has hired people around him who are good at marketing him. He knows how to milk our interests. But, it doesn't take a great marketer to get the media interested. This week there has been more coverage of what Lindsay Lohan had printed on her nail during her trial than about the debates in Congress over a new financial bill. The media don't care if you have talent; you just have to be of interest to large numbers of people.

There are many excuses for how bad the media have become. They have to contend with 24-hour headline news, the Internet, blogs, etc. The normal media are competing for attention. So, most have become entertainment services rather than news services. Watch local TV in most markets in the US and one wonders where the news is.

So, who is at fault? The media or society? Both are at fault. American society (and I keep this to US society because there still are good news services in many other countries like Canada and the UK in which there are deep discussions of important issues on the normal, nightly news shows, both local and national). American society has become dumbed down to a point that it is all sound-bites and personality. Following LeBron becomes no different from following Sarah Palin or Lindsay Lohan or the President's latest run to get a hamburger, or Bill Clinton at the World Cup. We loose sight of whose personality is important to us and whose is really unimportant in the grant scheme of things.

To quote Pogo: "we have met the enemy and they are us"

Misbranding By Progressives Leave Them Vulnerable

As I sweated through temperatures that approached 100 degrees Fahrenheit (40 degrees Celsius), I kept thinking about the debates over "Global Warming". Following the last winter when the east coast of the US got more snow than usual, the percentage of people believing that environmental change was man-made dropped by some 20 percentage points. I'm sure that after an early and very hot start to the summer, those numbers are changing again.

The term should have been "Climate Change", or "Man Made Climate Change", not "Global Warming". While the considerable snow this past winter was likely due to warming temperatures in the atmosphere, that is way too difficult a concept for many people. Warm is warm and cold is cold. The right wing used some errant e-mails from scientists to claim that all of the hoopla over "Global Warming" was trumped up, biased science. They actually claimed a conspiracy, imagining that most of the world's scientists would or could actually create a conspiracy. Anyone who has ever worked in academia or in a science-based company knows that it is difficult to get even a few scientists to agree to anything, let along create a conspiracy

It was the terminology, or branding of the problem that was wrong. People need to understand that the climate is changing and much of it is due to decisions we humans make or do not make.

Misbranding also can be found in the debate over abortion. Women's rights groups chose the slogan "Pro Choice", while the anti-abortion movement selected "Pro Life". Imagine two product--pro-life versus pro-choice. Which one would engender more emotional appeal? Clearly, pro-life is more emotional. How many people would claim to be anti-life, but that is what the brand "Pro-Life" suggests about those who appose them. On the other hand, the opposite of "Pro-Choice" is "anti-choice". This is hardly as problematic for people to accept. The bumper stickers that declare "it's a child, not a choice", become the nature advertising campaign, but it further obfuscates the real and honest differences amongst people about when life begins and the rights of women to choose for themselves.

We need healthy, open discussion and debate about such serious issues as climate change and abortion, but the branding puts everyone on the defensive. It would be wonderful if we could get all the branding and advertising hype out of these serious issues so that we can really discuss them as grown-ups.

Don't Blame ESPN for Our Craziness over LeBron

I have been reading a number of sports commentators who are blaming ESPN for showcasing the LeBron James announcement of where he intends to play next year. If we can blame ESPN for this, let's blame the rest of the media for giving any attention to the Jersey group or Lindsay Lohan. They are providing the public with the coverage they covet. As the saying goes: "don't blame the player, blame the game".

ESPN is a network that has a brand promise that it covers all sports all the time. They have moved from TV to every conceivable form of media to meet that brand promise. So, when a legitimate sports story--where LeBron James will play--comes up, who can blame them for covering it fully. They must; it's their primary job and expressed responsibility.

Now, don't get me wrong. I think the whole LeBron situation is beyond over-hype. This is a ball player who is looking to find a new home and we all talk about it in every forum available. Even the Daily Show with John Stewart took up most of its conversation with Julliane Moore by talking about whether LeBron would join the Knicks. Both Stewart and Moore are Knick's fans. This is a show that usually focuses on important things. Moore was on the show to plug her new movie. Bet the movie studio was not too happy that she spent 90% of the time fretting about basketball. They never got time to show a clip from the movie, but they did spent about 60 seconds mentioning it.

Americans have developed an unbelievable interest in sports figures--even more than the sport itself. We focus on individuals. Perhaps we are all taken with their huge salaries and life styles that seem almost "other worldly". They live like movie stars, while fans are loosing jobs. Their salaries help push ticket prices to the breaking point for most fans. But, attendance and viewership keeps increasing, so we obviously do not object to already overpriced talent taking advantage of our support. Imagine what will happen to ticket prices in Miami to support the salaries of Dwayne Wade, Chris Bosh and LeBron James!

So, why would sports commentators complain that ESPN should not have given time to LeBron's "people" to air an hour-long show for him to announce his decision? Perhaps the writers are concerned that their purview is being undermined by ESPN. They should wake up and realize that it already has been The never ending talking heads on ESPN make reading sports commentators superfluous. The writer's only purpose now is to focus on local teams.

The media are whores to the athletes. I may not like ESPN's decision, but I think it was the right thing to do. If they refused to air the LeBron announcement, they would not have been true to their basic brand promise.

US Postal Service--Stranger than Fiction

The scenario is a typical one for many companies in the current economy: demand has fallen, people are using alternative products and services. The questions is what to do? For most companies, the answer would be to drop prices to stimulate demand and at the same time to reposition to attract customers back or create new ones. What about raising prices? That would defy all logic in business. What would be the sense of raising prices when customers already are not interested in the product? Wouldn't that just cut the demand still further?

Well, none of these scenarios make a bit of sense when we're talking about the government or agencies of the government. The demand for postal services has gone down, replaced by the Internet. The answer Postal Officials have come up with is to raise prices by 9%. Think about this increase--inflation is running flat, prices on everything are falling. But, the Postal Service raises prices by 9%. The Postmaster General estimated that this increase would cover the losses of the service and maintain service. The estimates are undoubtedly based on current demand, which will likely dip still further given the increases and further erosion of the traditional mail system by technology. So, there will clearly be another short fall due to continuing drop in demand with a call for more increases next year. This should not even be legal. It almost sounds like the Mafia: "we'll make you an offer you can't refuse".

We can be assured that when the USPS goes to Congress for permission, it will get the go-ahead. What would the alternatives be if they were turned down? My goodness, it would be to cut their costs to the bone; lay off workers, cut back on hours, cut prices of their products, etc. This is what one would expect from any business manager with a brain facing a similar situation. But, once again, this is the government. So, rather than cutting costs or laying off more workers or cutting hours or cutting the price of stamps to attempt to get more people to buy and use stamps, they will go in the opposite direction.

This is all stanger than fiction. It is beyond the logic of any first year business student. The whole country is suffering from the effects of the Great Recession, and the Postal Service decides to raise prices. Will this decision reverse the decline in demand for services? No. So, what will the Postal Service do next year when demand falls still farther? Well, it will raise prices again. This is the height of audacity--we'll do it because we can. If you don't like it, don't use the mail. Oh wait, you already don't use the mail? So what, then we'll raise prices again next year on those who do.

It will continue to work this way until the legal profession finally accepts documents as legal that are faxed or e-amiled. Companies are the ones forced to use the mail system. But, wait a minute, that would take a change of the law which means that it would entail governmental decisions made by lawyers to change things from which they benefit. Fat chance. So, the illogical and almost criminal decision by the USPS will impact businesses most, especially mid-sized and small businesses (who else usually suffers?).

To quote the wicked witch in the Wizard of Oz when she was melting: "what a world, what a world"!