Knowing a business’s role in society helps build the brand

October 13, 2012

The big idea: Business can positively affect how we live through cooperation, innovation and increased trust.

The scenario: Thirty years ago, seven people in the Chicago area died after taking extra-strength Tylenol capsules that had been poisoned with potassium cyanide. Investigators established that at least eight bottles of the Johnson & Johnson product had been taken from store shelves, laced with cyanide and returned to stores. At the time, medicine bottles lacked inner seals or other safety components that enabled consumers to determine whether someone had tampered with the medications.

The sudden deaths caused panic in Illinois and beyond.

Johnson & Johnson’s then-chief executive James E. Burke decided immediately, and without government urging, that the company had to take action. With no way to determine whether other poisoned products were sitting on store shelves, Johnson & Johnson recalled 31 million bottles of Tylenol, which had a combined retail value of more than $100 million. This event remains one of the largest consumer product recalls in history. To this day, the culprit has not been found.

While the recall decision was swift, the foundation of this action had been laid six years earlier during a company-wide initiative that engaged all employees in committing to the company values. Its values statement declares that the company’s first responsibility is to its customers and that the organization must enact good citizenship. This credo provided the leadership and all employees with a framework for making business decisions that have a positive impact on society.

The resolution: Although Tylenol market share dropped from 35 percent to 8 percent after the 1982 recall, it rebounded within a year. Johnson & Johnson innovated a triple-sealed package, which quickly became the industry standard. Additionally, working with Johnson & Johnson and other industry leaders, the Food and Drug Administration developed more stringent product tampering regulations. These guidelines led to the replacement of drug capsules with caplets.

Burke, who died in September, left a lasting legacy. Beyond a seminal event of crisis management, his recall decision provided a blueprint for corporate and public leadership. Many other leading companies have followed his example by viewing society as a partner in creating value and driving innovation.

For instance, recognizing the shared economic interests in preserving and replenishing the world’s freshwater resources, Coca-Cola has conducted hundreds of community water projects in 94 countries.

The telecom company Digicel employs 70,000 people in Haiti. After a devastating earthquake hit the country in 2010, the company partnered with Port-au-Prince’s mayor, Jean Yves Jason, to rebuild the capital city.

The lesson: Understanding the role that business plays in society is a core competency for current and future business leaders. Given the ever-increasing complexity of the global environment, this business in society mind-set must be embedded in the way we operate every day — not just a point of focus when responding to a crisis — if we are to create value for society. Paying attention to social needs spurs innovation. It is “good” business, in every sense of the word.

Dean Krehmeyer

Krehmeyer is the executive director of the Initiative for Business in Society at the University of Virginia Darden School of Business.

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