Johnson & Johnson initially rejected current Chairman and CEO Joaquin Duato when he applied shortly after finishing graduate school.
He quickly found his way back—and 34 years later, has led the Fortune 500 company through good and bad times, he told Editor in Chief Alyson Shontell at the CEO Initiative conference in Washington, D.C.
In a rare interview, Duato discussed spinning out the consumer business, Kenvue, and how he's addressing recent Baby Powder lawsuits against J&J. He also talked about new innovations in cancer treatment and surgical robotics.
Watch the video above or read the transcript below.
Alyson Shontell: First, I should note. Johnson & Johnson has been one of 49 companies to be in the Fortune 500 list every single year since we've made it since 1955. This year, they clocked in at number 40. As Alan said, the healthcare and pharma markets have been booming. And you've been in the job for two years, but you've been at the company for 34. So you've seen quite a bit. Two years in, what's your primary focus and biggest surprise since becoming CEO?
Joaquin Duato: Thank you. I'm proud to be the CEO of Johnson & Johnson. In our 130 years of history, we have had only eight CEOs. And I am the first one who is not born in the US. And I'm proud to represent that. And certainly, it's a great legacy that we have had during this period. So, in becoming CEO of Johnson & Johnson, I have a dual purpose. One is to remain a company that is true to our mission of addressing difficult to treat diseases. And the other one is to be able to continue to be a company, which is principle-based, people-based, and maintains the reputation that we have had during such a long period of time.
Alyson Shontell: Now, is it true that you didn't get the job at first? I mean, not the CEO job, but initially when you were interviewing 34 years ago.
Joaquin Duato: Yeah.
Alyson Shontell: They said, "No."
Joaquin Duato: It's true. When I finished graduate school, I interviewed with Johnson & Johnson. And I didn't make it to the second interview. So, then I joined another company. A pharmaceutical company. And eventually found my way back to Johnson & Johnson. And I've been here for 34 years. And I'm really a product of the development opportunities that Johnson & Johnson provided me. Working in different geographies, in different sectors, in different functions. So, I'm here to really thanks to the opportunities that Johnson & Johnson provided me.
Alyson Shontell: I mean, the longevity of your career there I think is telling. And the attrition rate is shockingly low at Johnson & Johnson, right?
Joaquin Duato: Yeah, it's very low. It's lower than the industry and our PR companies. And I think there's a number of reasons for having low attrition. One is the size of the company that enables people to work in different sectors and have careers within Johnson & Johnson. Sometimes I say, "Johnson & Johnson has its internal job market."
The other one is that people simply like to work for Johnson & Johnson. Our engagement levels are high. People like to work for a company with a purpose in healthcare. And we are a company that pays a lot of attention to our people, their development. We just had yesterday, for example, we had a global learning day. So we gave all employees a full day to develop a learning mission and to get acquainted with the learning resources that they want to use.
We are a company that pays a lot of attention to inclusion. So everybody feels good when they come to work. And certainly, we like to believe that we are a caring company. That we care not only for the patients, but also care for each other. So, we will try to have a strong health and wellness offering for our employees. So, we're all people who like working in Johnson & Johnson and stay longer in Johnson & Johnson. Our average tenure, for example, in the US is more than a decade. So people can have careers. And we're happy that...We are glad that people like to stay at Johnson & Johnson longer.
Alyson Shontell: So when you became CEO, or even in your memo to become CEO, you'd said, "I think we should spin out the consumer business." Johnson & Johnson can compete with L'Oreal there, but should it? And so could you speak a little bit about Kenvue, which is the company that just spun out just earlier this year. It's now publicly traded.
Why did you do that? Why is return to focus important for Johnson & Johnson versus diversification of businesses?
Joaquin Duato: Yeah, so Kenvue is our consumer company. So, when you think about the Johnson & Johnson and the brands that you know about Johnson & Johnson, BandAids, Tylenol or baby shampoo, now they are all in Kenvue. Why did we decide to separate Kenvue and create a global consumer champion with Kenvue?
Because we thought that focusing on the consumer market and focusing on healthcare was going to deliver better results for consumers and for patients.
For us, it was very complex to be able to compete with L'Oreal, as you mentioned, in skincare. And at the same time, competing in biologics with biopharmaceutical companies and in surgical robotics with medical technology companies. So, we thought there was a benefit for Johnson & Johnson to be exclusively focused on healthcare, on research and development, on innovation. And that was going to create a better platform for us to be true to our mission, not only in the next two or three years or post IPO, but during a long period of time.
Alyson Shontell: And what's your advice been to the new CEO? And how did you make sure that they were set up with a good culture and you maintained yours?
Joaquin Duato: I am very proud of the management team of Kenvue. The entire management team of Kenvue, including the new CEO, comes from Johnson & Johnson. They are also the product, like me, of the development opportunities of Johnson & Johnson. And I told him, you know, "Be patient and perspective in things. Learn how to listen more." And I gave him confidence that they were going to do great. So, I put my emphasis in providing confidence to the management team, and to give him some advice about be patient and put in perspective In the job of CEO, you have to be patient. You have to put perspective on things. And I've helped myself by being a Mediterranean. I take things with a certain perspective and I wanted to transmit that wisdom to him.
Alyson Shontell: Well, this conversation is short. And so I want to make sure we hit on a number of things. We've talked about the spin off for a long time. But one thing I do want to make sure I hit on is R&D is a huge part of Johnson & Johnson. What are you seeing in this space? You've said that this is the golden era for your business. That there will be more change and more positive movements towards curing disease over the next few years than you've seen in the last number of decades. So what are you seeing that's exciting? What are the innovations? And what are you doing with things like robotics, AI? How's that all changing the industry?
Joaquin Duato: Yeah, so R&D is the heart of an innovation-based company. Last year, we invested $14.6 billion in R&D and Johnson & Johnson. We are one of the largest, if not the largest, investor in R&D in life sciences. What we see now, it's a combination of more knowledge on the biology and genetics of disease with an acceleration of that due to technology. Things like artificial intelligence, machine learning, and now generative AI, it's helping us accelerate drug discovery. And it's helping us also make medical technologies smarter. So that combination is what I believe is going to help us in addressing some diseases that are considered incurable, or diseases that create a lot of suffering around the world.
Two examples, one is in the area of cancer. We are being very successful utilizing different treatment modalities in cancer. For example, now we're using in cancer cell therapy in hematological tumors, utilizing your immune system cells to attack the cancer cells. And we obtain incredible responses in a way that you could think that some cancers, hematological cancers, are going to become chronic diseases.
In the surgical side, surgeons are now able to utilize robotic assisted techniques, better visualization, better sensors. Those instruments are connected, they can provide them insights, and they can significantly improve the average outcome of surgery. So, those are things that are going to help accelerate the discovery and progress of healthcare in a way that we have not seen in the last century.
Alyson Shontell: And one thing, we had lunch previously, and you had mentioned that, you know, imagine knee surgery, but being done by maybe a robot versus a surgeon. I mean, think about the precision needed. I might prefer a robot for something like that than someone with a potentially shaky hand.
Joaquin Duato: Absolutely. All our instruments now have some component of intelligence or connectivity. So, our instruments now have sensors that can measure pressure, temperature, and have visualization capabilities. Which, at the end of the day, this software is digital that give an idea to the surgeon of where they are going to interfere with a critical structure, and all that can be visualized. And we can even provide guidance to the surgeon real time or where they have to go.
So that's going to be transformational in the way we do surgery. And it's going to help improve the outcomes of a procedure, which is very common. I'm sure in the audience, every one of you has had some type of surgery in your life. So that's important. If we can improve the outcomes and the quality of surgery. When I think about what we can do as a company, we have the range of technologies to be able to do what no other company can do. We can do cell therapy, but we can do robotic surgery.
We can do genetic or mRNA therapeutics, and we can do also smart implants. So, there's a lot of things that we can do as a company based on the number of technologies and capabilities that we have.
Alyson Shontell: So, as the leader of a company, you have to lead in good times and in bad. And with a company as large as Johnson & Johnson, there are hard things. And there are lawsuits. You've had talcum powder lawsuits, opioid crisis to deal with, COVID. Having your vaccine essentially be dismantled. How do you lead in those hard times? How do you encourage your team to not lose morale, stay focused, stay focused on the mission when there's a lot of hardship around?
Joaquin Duato: Yeah, we do it with conviction. Conviction on the principles of our credo, that, by the way, this year is the 80th anniversary of the credo was written. And we do it by having a trajectory of more than 100 years in which we have always tried to do the right thing for the patient. When we make a mistake, we take responsibility. And when the facts, the science, and the law are on our side, we stand by our products. And we have been able to manage this balance for many years. But the people in the company working at Johnson & Johnson have a genuine passion for doing the right thing. And we don't do it for recognition.
We do it because we have convictions. And those convictions normally help an organization to manage change. I'm convinced that purpose-driven organizations are much better in managing change. And our organization has a strong tradition of being a purpose driven one. Internally, we say, "We are the original, mission driven company." Based on the fact that our credo was written 80 years ago.
Talking about putting the patient first, the employees, the communities, and then if you do the right thing, it's going to be good for the shareholder was very innovative, very different. So I think that that's part of the energy that people at Johnson & Johnson have in order to navigate the ups and downs. That anything in life, it's going to present you with.
Alyson Shontell: Quick question from the audience? Yes, right over here.
Audience member: I wondered with the new legislation, what impact that's going to have on the ability to do the research you're talking about, and whether you think that the advantage and technology...Will help address the efficiency side? So maybe there will be more resources. I just wondered how you looked at that.
Joaquin Duato: We always want to be a constructive actor when it comes to health care. The recent legislation that you're referring to, I'm assuming you're referring to the Inflation Reduction Act, right? And the fact that now, Medicare is going to be fixing prices for some products.
On one hand, we believe that this legislation is misguided in as much that there's been a lot of, or a number of challenges constitutionally to the law. And there's a number of companies that have presented lawsuits. On the other hand, it's going to have a chilling effect on innovation without addressing the basic issue that we have when it comes to pharmaceuticals, which is the patient affordability, and the patient out-of-pocket costs.
So, inevitably, this will have an effect on R&D investments because it would make it more unpredictable. And it would be particularly acute, not in the big company, not only the big companies like Johnson & Johnson, but in the smaller companies that are funded by investors.
Because the return for those investors is going to be more unpredictable. At the same time, it's going to be shaping the way we invest in R&D. So no, on one hand, it doesn't address the issue of patient affordability, which is real. And on the other hand, it's going to have a chilling effect on innovation.
Alyson Shontell: Thank you all so much. And thank you so much for being here with us this morning.
