CAPSUGEL & TYLENOL: CRISIS - MANAGEMENT CHECK LIST & TRUE LEADERSHIP
No matter we’re talking about a business man, a football trainer or a teacher; the thing they have in common is that they are leaders.
But at what level of leadership are they, how do they treat their employees, what do they think about results, deadlines and so on?
Every leader operates at his own level and I had the fortune to meet three great leaders in the Pharmaceutical Industry they are:
Charles Hoover
Randy Dennin
Angel Mendoza Benavides
In 1983 I had the opportunity to collaborate with Capsugel, a manufacturer of hard empty gelatine capsules for the pharmaceutical industry.
Capsugel was a division of the very famous Warner Lambert pharmaceutical company with presence in the United States, Mexico and Brazil.
What are empty gelatine capsules for? Its function serves to mask the taste of medicines, to be easily passed through the larynx but above all, for the dosage of drugs in the stomach.
The main benefit that many users get from buying empty capsules is the ability to customize their supplement regimens. This means mixing particular herbal formulas, for example, that are not available in retail form.
Capsugel was founded in 1931 in Detroit, Michigan as Division of Parke - Davis after Arthur Colton designed a machine which simultaneously manufactured the body and caps of a hard gelatin capsule, and fit them together.
In 1970, Parke-Davis, including Capsugel, was acquired by Warner Lambert, which was acquired by Pfizer in 2000.
On 1 August 2011, Pfizer sold Capsugel to global investment firm Kohlberg Kravis Roberts for $2.38 billion.
In July 2017, the Lonza Group completed the acquisition of Capsugel for $5.5 billion from Kohlberg Kravis Roberts.
In the 80's I met great leaders who made Capsugel a successful and growing company; come to my mind Charles Hoover, Randy Dennin and Angel Mendoza Benavides.
I am sure that Capsugel was at that time a marketing company, since positioning the empty gelatin capsules between the large laboratories until to compete against substitute products such as pills and pellets, however, this trio of champions (Charles Hoover, Randy Dennin and Angel Mendoza Benavides) did it.
Undoubtedly, Capsugel was able to position its value proposition among the big manufacturers of medicines, proposals that were "BETTER CAPSULES FOR BETTER MEDICINES"
But not everything was easy in the life of Capsugel, since the shadow of the loss of prestige touched his door one day
CAPSUGEL CRISIS-MANAGEMENT CHECKLIST
The famous journalist and Mexican columnist Javier Collado wrote on May 24, 2017, a review in one important and reputable business newspapers in Mexico (El Economista), about the crises that Johnson & Johnson suffered in 1982, a crisis that affected to one of its most important suppliers: CAPSUGEL.
Below is a summary of the same article that can be read in the following link:
https://www.eleconomista.es/empresas-finanzas/noticias/8382435/05/17/La-crisis-del-Tylenol-las-pastillas-de-cianuro-que-no-lograron-matar-a-Johnson-Johnson.html
It was September 30, 1982, and Mary Kellerman, a 12-year-old girl, became a pill for a cold. Thus began a reputation crisis that caused losses to Johnson & Johnson (J & J) of tens of millions of dollars.
Mary Kellerman was the first of seven people who died in Chicago in just one week for consuming what was apparently just a pain pill, Tylenol Extra Strong, a product marketed by a subsidiary of J & J.
The tablets in question contained cyanide. Someone had managed to add the poison at some stage of the drug's development.
The effect on the markets was immediate.
The company was quoting at historic highs, exceeding $ 47 per share. The same September 30, after announcing the first deaths, fell to 43.13 dollars.
His minimum for the incident was marked on October 5, with $ 39 per title.
The company did not recover a closing above the 47 dollars until two months later, on December 7.
Tylenol was at that time the national leader of pain medication that did not need a prescription. It covered 37% of the US market to mitigate the pain - 10% of the total of medicines without prescription -, generating annual sales of about 500 million dollars. The Extrafuerte variety, which was contaminated with cyanide by an assassin that has not been discovered 35 years later, accounted for 20% of the total sales of the drug.
However, the company faced the crisis with promptness and intelligence.
1) On the one hand, it canceled the broadcast of the television commercials of the product as soon as the first reports of the deadly poisoning were published.
2) On the other, he offered $ 100,000 in reward to those who provided information to arrest and prosecute the "person or persons responsible for the murders."
3) But the main thing was the withdrawal of 31 million containers - 1.550 million life-threatening capsules - from the 34 states in which it had been distributed, which cost the company 100 million dollars. It reimbursed the money to stores that had purchased the product, while consumers who returned the drug to the company received coupons to receive the drug in the form of a tablet. In fact, J & J started an advertising campaign printing discount coupons in various newspapers for the acquisition of medicine. Finally, they kept the name of the brand but redesigned the package, adding security measures to hinder its handling.
Good work paid off. Shortly after the October tragedy, Tylenol's market share had gone from 37% to 24%. In mid-December it was estimated that it was already over 30% again.
The estimates for the net operating profit for the fourth quarter were a fall of 13% that finally materialized in 10.5%. A new advertising campaign in 1983 gave the impulse to the brand to recover its preponderant position in the market.
The Next Case was published in "The Vest - Pocket CEO" by Alexander Hiam
APPLICATIONS
• Responding to a crisis.
• Evaluating and improving current crisis-management plans.
PROCEDURES
1. Develop a list of possible crises that could affect your business and industry.
2. Use the checklist to see whether your company is prepared for these possible crises. Develop a forecasting mechanism to make sure a crisis is recognized as early as possible.
3. Reduce the potential damage of future crises by making strategy conform to the approaches described in the checklist.
4. When a crisis occurs, consult the checklist to help develop contingency plans and guide reaction to the problem.
The ten-point checklist is used as a basis for creating crisis-response plans and policies at Warner-Lambert's Capsugel Division.
Crisis planning was adopted at Capsugel after the Tylenol tampering cases devastated the market for capsules and created public suspicion of capsulized over-the-counter medications and their manufacturers.
Management at Capsugel identified a number of policies and tactics that helped it and other companies in this market survive and maintain a positive public image. Their ten-point checklist and associated planning procedures may also help other companies survive crises.
Any organization can find itself in a crisis. Johnson &: Johnson's Tylenol disaster, Union Carbide's Bhopal disaster, the Rushdie/Sa/arjtV Verses incident, and NASA's disastrous 25th space shuttle mission are obvious examples. A recent survey of CEO's indicates that 70% of Fortune 500 companies and 20% of Inc 500 companies have adopted crisis planning. These, and the many other organizations that have yet to address the issue, will find Capsugel's method to be of interest.
1. The first step in crisis planning is to anticipate possible crises. Try listing all the conceivable disasters that could befall your company and its industry.
If the list is long, go back over it and rank them by how likely they are to occur All may seem quite improbable, but some are bound to be more likely than others.
Second, ask how significant the impact of each disaster might be. Try ranking them based on impact.
Now take the most probable and the ones with the greatest potential impact and focus on them in your disaster forecasting and preparation.
Note: This step is the hardest for most CEO's, and the temptation is to delegate the task until it disappears.
As Gerald Meyer, former chairman of American Motors, puts it: "Most executives don't like to think about crises They equate a crisis with bad management; things like that just don't happen on their watch."
2. Review the Capsugel checklist to see whether your company's policies, procedures, and philosophy violate any of the ten items. Make appropriate changes.
Focus especially on forecasting methods (see items 1 and 6 on checklist).
Many companies do not systematically look for signs of crisis. Use the list developed
in step 1 above and think of events and information that could foretell each of the possible crises.
Assign someone in publicity or strategic planning the job of monitoring the environment for early indicators of a crisis. Make sure the staff responsible for this function has direct communication with upper management and is not afraid to relay false alarms, since no crisis forecasting system can be very accurate.
3. Integrate crisis preparation into strategic plans. Some of the items on the checklist are long term in focus. They will do no good if not acted on until after a crisis has been identified. But if implemented as part of the planning criteria, they will provide protection against unforeseen events and make strategy more robust.
Items 2, 7, 9, and 10 are especially relevant to strategic planning.
4. Crisis response. If you are in the midst of a crisis, whether large, like Capsugel's, or of more modest proportions, the checklist may also be useful.
Several of the items focus on how you respond during the crisis.
Advice includes:
• Don't overreact
• Stay close to the market
• Watch your competition
• Be prepared to give up some of your market
• Don't assume a hostile environment
• Develop a contingency plan
See the checklist for specifics.
Crisis-management checklist
1. Look for signs that may foretell a crisis. This task should be formalized and regularly reviewed by the chief executive.
Ask yourself what events could have the worst impact on your organization.
2. Have an alternative product or technology standing by. Initiate product development now so that an almost-ready replacement will be in the pipeline.
3. Speed is of the essence. Your reactions in the first day or two of the crisis will establish consumer attitudes toward your company and product.
Make sure your side of the story is included in the initial news coverage of the crisis.
4. Don't overreact. Make one person responsible for managing the crisis and have everyone else continue to take care of their work.
5. Stay close to the market. Market surveys and direct communications with customers are important. You need to track attitudes during the crisis.
6. Watch your competition. Crises can create opportunities for you or your competitors.
7. Be prepared to give up some of your market initially. According to Charles Hoover, vice-president of Capsugel, "It's ridiculous to think that you can manage a crisis with no damage. The idea is to minimize the damage, not eliminate the possibihty of damage."
8. Don't assume a hostile environment. Many companies "clam up" in a crisis, which raises suspicions and leads to reduced confidence in the company and product. Do not act confrontational. (Include a PR person as well as a lawyer on your planning committee!)
Example: Tenneco Oil's crisis-policy statement includes the following: "When we must take a dose of bad publicity, it is better to release accurate information fast and as fully as possible."
9. Build goodwill before the crisis. A strong positive image will help you through crises.
10. Develop a contingency or crisis plan in advance.
This will allow you to react effectively in the first hours of a crisis.
REFERENCES:
The Vest-Pocket, Decision-Making Tools for Executives, ALEXANDER HIAM, =^^ PRENTICE HALL, Englewood Cliffs, New Jersey 07632
Management Briefing: Business Finance (January 1987). The Conference Board. (Based on a presentation by Charles Hoover of Capsugel at a Conference Board marketing conference.).
Paul Holmes. "Surviving Crisis." Relate: Supplement to Adweek's Marketing Week (March 27, 1989). (See page 10 for a description of the survey by The Goldman Group. Quotes from Gerald Meyer and Tenneco are also from this source.).
El Economista, Newspaper, May 24, 2017, by Javier Collado