An Oklahoma court ordered Johnson & Johnson to pay $571M for involvement in “false, misleading, and dangerous marketing campaigns” that contributed to the state’s opioid crisis. Here’s both a risk and brand perspective on why business leaders should care.
J&J Shares Recover — But Its Reputation May Not
Our Security & Risk Analysts Alla Valente And Renee Murphy Pose . . .
C-suite leaders mark this ruling because: 1) It’s the first in the US to hold a drug company accountable for its role in a national public health disaster (so, precedent-setting) and 2) Paradoxically, J&J shares rallied to gain 3% post-verdict (meaning it got off easy). This story contrasts starkly with the infamous Sept. 1982 cyanide-laced Extra-Strength Tylenol crisis. Then-CEO James E. Burke wrote the textbook on corporate crisis management when he pulled 31 million bottles at a cost of $100M. Burke enforced active media communication, issuing mass warnings and an unprecedented recall, and followed up with quality assurance changes. The government followed J&J’s lead, passing the “Tylenol bill” and tamper-proofing guidelines. Burke earned the Presidential Medal of Freedom and was named a top-10 CEO in history. Today: The government is taking J&J to task as the company scrambles with the optics. And worse: J&J just burned through one of the most envious brand equities around. CMOs, CIOs: Book time with your chief risk officer and ethics and compliance head today. Risk management has moved beyond product quality — marketing, data, and brand are subject to the new realms of risk. Prevention, in this case, is the best cure.
Dipanjan Chatterjee, Our Lead Analyst Covering Brands, Also Offers . . .
J&J’s credo to “put the needs and well-being of the people [it] serve[s] first” rings hollow in the face of its Tasmanian poppy fields especially developed for OxyContin and what a judge referred to as “overly aggressive marketing tactics.” But J&J isn’t the first to have its actions wildly veer from its professed principles; Wells Fargo used “trust” 24 times in its 2016 vision brochure to explain how it put customers first. Juul is under fire as evidence emerges that the company is using tactics to influence teens. Although consumers are increasingly sensitive to the practiced (not just professed) values of brands they patronize, long-term consequences remain uncertain. VW benefited from our short wick of outrage — but only with a mea-culpa product revisioning. Will wrath for J&J be visited solely upon its products, like baby powder, that bear the eponymous brand? Do sister brands such as Listerine, Neutrogena, and Aveeno get a pass because they are shielded by a brand architecture that lay consumers don’t comprehend? For CMOs looking to build a brand powered with the energy to connect with their consumers, there is a way out of this morass of questionable practices. It is a path well lit by many direct brands (and we illuminate it in our report on DTC brands and in this AdAge article) — be uniquely intelligent, brutally honest, and fanatically fair, not just in word but in deed, as well.
Continuing on our dual-perspective theme this week, we share two takes on last week’s issue of new guidance on the role of corporations from the CEO-led and influential Business Roundtable, as it has periodically since 1978. The group, which includes the likes of Michael Dell, Tim Cook, and Julie Sweet, challenged every company to think beyond shareholder value to also consider the impact of their companies on customers, employees, and society.
New CEO Pledge Opens A Big Door For EX Improvement, But Let’s See Action
CIO-Serving Analyst David Johnson Shares . . .
Each version of the document issued since 1997 has stated that corporations exist principally to serve their shareholders. But in addition to other significant changes, the new statement now lists that we’re entering an era where both governments and corporations will be motivated to develop a more complete understanding of human behavior and create environments where their people’s strengths are amplified and their weaknesses are held with compassion and understanding. For the first time, employees are included as “important stakeholders” in the language. Corporations should invest in helping each employee be their best — by being places where they can focus on the work that they’re good at and where machines will focus on the work that they’re not. It’s already happening, and CIOs can use this opportunity to change the conversation about employee experience (EX).
CMO-Serving Analyst Sam Stern Adds . . .
While we were thrilled to see the commitments CEOs made to better serve the needs of customers, employees, suppliers, and communities, we will be watching closely for evidence that they are honoring those commitments. For example, we’ll look for companies to address the issue of workplace burnout as a way of investing in employees. Burnout is a huge cost to companies and burden on employees. The stress and distraction of modern office environments that lead to burnout should be addressed, with new norms and expectations around when employees are available and when they are allowed to truly disconnect from work in order to renew themselves. Another signal of commitment would be to strategically consider its alignment with customers’ values but also its alignment with the company’s own values. Not doing so holds real downside risk for companies. According to the Edelman Earned Brand 2018 report, 64% of consumers “choose, switch, avoid, or boycott a brand based on its stand on a societal issue.”
Google Is Poised To Turn On The Google Maps Advertising Money Machine
Morgan Stanley has forecast that Google Maps will generate $11 billion in advertising and licensing in 2023. Google has been assembling a giant stack of data and algorithms to drive Google Maps, and it’s about to turn on the Google Maps advertising spigot. That money machine is subsidizing the biggest mapping platform program on the planet. We believe that Google spends as much as $2 billion every year collecting mapping data. Nobody else can match that, not HERE, not TomTom, not Mapbox, not Apple, not even when you add all those spends together. Why should you care? As we will reveal in a new report out next month, you will care once you realize that a mapping platform — open access to mapping data and algorithms — is the bedrock of your physical future, including IoT, augmented reality, autonomous vehicles, and the location intelligence that drives your business. And nobody wants to have a single supplier for that future, do they? So who’s going to step up and compete with Google with a robust mapping platform when they don’t have access to that $11 billion advertising cash cow to subsidize it? You need an answer to that question, pronto.
VMware Has Dramatically Expanded Its CIO Value
As analyst James Staten noted earlier this year in his blog, Dell’s biggest software company has finally shifted its focus from fighting its disruption by cloud and container technologies to now empowering client engagement with these innovative technologies. At last week’s VMworld conference in San Francisco, VMware announced its acquisition of the leading container platform provider, Pivotal, and a stellar cloud security vendor, Carbon Black. These acquisitions are now being coupled with its massively expanded portfolio of hybrid cloud, management, networking, and security services, which are also mostly due to additional acquisitons in the past two years. As such, VMware is now a much more broadly relevant modern technology provider, which is raising its relevance with CIOs and their teams (well beyond I&O, which has been its legacy alignment). And like the vast majority of leading technology vendors, VMware is also prioritizing edge compute solutions, which every CIO should recognize as the next chapter in their hybrid cloud realities.