Medical Device Link.

On November 15, Johnson & Johnson Inc. (J&J; New Brunswick, NJ) announced plans for a significant company restructuring designed to accelerate growth by capitalizing on its broad base of businesses and decentralized structure. The restructuring includes the formation of a new strategy and growth organization and two new business operating groups.

	Valeriani: Rising in the restructuring.

J&J’s new strategy and growth office—to be headed by the company’s current worldwide chairman for medical devices and diagnostics, Nicholas J. Valeriani—will be charged with identifying opportunities for growth that are distinct from those being pursued by the company’s existing businesses. The new operating groups will be a surgical care group, which will focus on technologies and services for surgical settings, and a comprehensive care group, which will focus on solutions to address chronic and pervasive conditions, such as metabolic disorders, through the convergence of technologies, products, and services. The devices and diagnostics companies currently under Valeriani’s leadership will serve as the foundation for the two new business operating groups.

Weldon: Uniquely positioned.

“These decisions recognize that a new environment is emerging in human health and well-being,” said William C. Weldon, chairman and CEO of Johnson & Johnson. “They reflect our assessment of the best way for us to capture and develop the opportunities associated with those changes, and they capitalize on the unique, broadly based, decentralized approach of Johnson & Johnson.”

Although few would dispute that J&J is unique in its broad-based market position, some industry observers are skeptical that the proposed restructuring will enable the company to truly unify its divisions’ efforts.

Patrick Driscoll, founder and president of MedMarket Diligence LLC (Foothill Ranch, CA), says the pitfall of J&J’s restructuring plan is captured in Weldon’s own words—in particular, decentralized. “J&J is uniquely that—decentralized—so any effort to centralize it, such as creating a centralized entity for growth, at least has great potential to run counter to the organization’s essence,” he says. “Corporate culture is a beast with huge inertia, and it’s hard to imagine a beast with more inertia than J&J. Moreover, creating entities that are independent of the operating units to drive growth sound like awfully artificial constructs that will have definite hurdles.”

	Driscoll: A big beast to move.

Driscoll says he recognizes the latent potential that appears to exist at the highest levels of J&J. “The organization spans different clinical and technology sectors, spans professional and consumer markets, and has all of this in separately operating units—so there is this compelling drive to unite them, with the governing principle being growth,” he says. “But in creating a centralized initiative for growth, they may well take the steam out of the incentive each unit has in pursuing growth opportunities.”

In announcing the restructuring, Weldon observed that much of the current change in healthcare reflects the coming together of parts of the system that were at one time separate. “The very solutions that the healthcare system most needs—those coming from the convergence of science, technology, and services—are the ones we are most capable of providing,” he said. “We have the know-how across our pharmaceutical, biologics, devices, diagnostics, and consumer businesses to bring completely new solutions to market. And we believe we can accelerate growth through a dedicated focus on the intersection of our existing capabilities, customer needs, and emerging trends.”

Jackson: Questions to be answered.

Stuart Jackson, vice president and head of the Chicago office of L.E.K. Consulting, says J&J’s restructuring is a bold and exciting move. “Whether it succeeds will depend on how well the company can get people at the operating level to cooperate,” he says.

Jackson also notes that J&J will face many logistical challenges in its pursuit of convergence. For example, he says, if J&J decides to merge some of its sales forces and marketing organizations, its executives will have to consider how best to manage incentives for the very different margins earned by services, devices, and pharmaceutical representatives.

Presumably, some of the restructuring’s big wins are expected to come from R&D, Jackson says. In this area, J&J will have to decide how to integrate development efforts while providing for the different risk levels and development timelines for pharmaceuticals and devices.

The new organizations and appointments at J&J will become effective, January 1, 2008. As part of his new role, Valeriani will assume responsibility for Johnson & Johnson Development Corp., the Corporate Office of Science and Technology, and worldwide operations for the surgical care and comprehensive care groups.

Sherilyn S. McCoy, currently company group chairman for Ethicon, will assume the role of worldwide chairman for the surgical care group, which will include Ethicon, Ethicon Endo-Surgery, and DePuy.

Donald M. Casey Jr.—currently company group chairman for J&J’s diabetes franchise, which includes LifeScan and Animas—will assume the role of worldwide chairman for the comprehensive care group, which will encompass the diabetes companies, Cordis, Johnson & Johnson Vision Care, and Ortho-Clinical Diagnostics.

© 2007 Canon Communications LLC

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