Hambrecht & Quist
18th Annual Healthcare Conference

On the road for Info.Resource, publisher of Oregon-Bioscience.com

Independence from innovation

Milestones, the critical thinking company
Seattle, WA

Each year CH&Q invites a significant industry leader to deliver its healthcare keynote. This year it was Ralph Larsen, chairman and CEO of 113-year old Johnson & Johnson, one of the world's most respected health care companies with a market cap of $140 billion and $26 billion in revenues.

Since 1989 under Larsen's leadership Johnson & Johnson has enjoyed a 25 percent increase in revenue and margin growth. Much of his job is travelling to J&J operations and subsidiaries throughout the world. He's a compelling speaker, a solid spokesperson for a healthcare company whose name is synonymous with integrity.   J&J got started 1887 in New Jersey by supplying sterile bandages to healthcare providers at a time when there were no antibiotics, a time when the life expectancy for men was 46, 48 for women. Today it's 74 and 80 respectively in large due to the integration of Pasteur's and Lister's research and its transformational application in obstetrics, surgical and post-trauma care.

Today, Johnson & Johnson has nearly 190 operating companies in 52 countries around the world, selling products in more than 175 countries. In 1998, the company recorded sales of $23.7 billion. One of the most striking differences in how this company has been engineered is its decentralized operations, a management style that Larsen told his audience is key to J&J's sustained innovation and growth of the people who, in turn, drive innovation and growth.

Speaking with a great deal of pride and obviously enjoying the telling of J&J's story, Larsen paused, looked out over the audience and said:  "I know what a lot of you are thinking…you're thinking I have a pretty good job. But in this Internet Age let me assure you it's no walk in the park."

"The equity markets reward sustained growth and they exact a terrible price for those who allow themselves to stagnate. Let me give you an example…

"Seventy-five percent of the companies that comprised the S&P 500 20 years ago no longer have a place on it," he said. How can large established companies like ours sustain themselves?

"We believe it's through endless, relentless innovation and meeting our responsibility to the doctors, nurses and patients, to mothers and fathers and all others who use J&J's products and services.

Going beyond the type general comments and observations one would expect of an industry keynote addresses, Larsen demonstrated to the CH&Q audience J&J's commitment to innovation and its customer base. He told a story and showed a video about J&J's IBOT transporter, an advanced mobility system for people with disabilities that is currently in clinical evaluation.

Throughout its developmental phase the company has worked closely with people with mobility-related disabilities, including employees of J&J, and an outside advisory board. The video featured a twenties-something woman who had been a rigorous soccer player, disabled and wheelchair-bound following an auto accident.

The IBOT™ transporter is an advanced gyro-balanced system designed to operate on four wheels or two wheels, stabilizing the user by instantly and automatically adjusting and balancing itself. Among its many design features is its ability to allow a seated user to move about at eye-level while balanced on two wheels. Its rotating four-wheel base is designed to allow the user to climb stairs and traverse uneven and hilly terrain, such as grass, sand and rocky pathways. In its four-wheel operation the device is designed to climb over street curbs, while keeping the seated user level and balanced.

The IBOT system is the invention of Dean Kamen, founder of DEKA Research & Development Corp., Manchester, NH, with whom Johnson & Johnson partnered five years ago to develop the advanced mobility system as an FDA approved medical device. Kamen's innovation was spurred by an observation he had made of a wheelchair bound man attempting to negotiate a sidewalk without an adequate curbcut.

"After visiting with Kamen, one of my senior managers called me and simply said, 'Ralph, you've got to go to New Hampshire this weekend." After learning that I was to see an innovative wheelchair I told the manager that I was not going into the wheelchair business.

"Remember what I told you a few minutes ago about J&J's decentralized management? Well, the manager asked me not to 'blow him off' on this one. Needless to say, I went to New Hampshire and following FDA review, we hope to introduce the INDEPENDENCE™ 3000 IBOT™ Transporter system in 12 to 18 months," he said.

In a five-minute video, Larsen was able to demonstrate J & J's commitment to its patients, shareholders, and employees, a commitment that was reflected in the bright eyes of the young paraplegic who was   -- while seated in the IBOT Transporter -- able to look her mom in the eye and give her a hug" (Johnson & Johnson Credo).

We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers' orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.

We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical.

We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens-support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.

Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.

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