Johnson and Johnson at Barclays Notes

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Jorge Mesquita – EVP, Worldwide Chairman, Consumer

There’s a lot of disruption in our industry

“But the reality is that the pace of change in our industry is truly accelerating as Lauren said, in fact where I want to spend my time with you here today is to talk about that our industry is really being disruptive. If you look at our last few decades in this industry, there were a series of barriers for entry or sources of competitive advantage that were well established but those are becoming less and less unique. It used to be that companies like ours would acquire the best talent through our recruiting human resources mechanism, but it’s never been easier for you to source great talent across the world on demand.

Our ability to build and nurture brands, brand building competencies used to be again a source of competitive advantage but the reality is it’s very easy for you to start building a business, building a brand from scratch and you really don’t need a ton of money to get a community of active users that support you. Large scale manufacturing assets used also to be a source of competitive advantage. But the reality is if you want to compete in this industry, you can access high quality contract manufacturing work any place in the world.

Retailer relationships used to be also a source of advantage and a barrier for entry, but as you all know, new companies can now sell directly to consumers profitably in most markets. Innovation used to also be a big barrier for entry but again you have an ability now through a network of external partnerships to access innovation even crowd sourcing. And then financial firepower for companies like J&J is not as critical as it used to be because new startup entrants can access capital relatively easy through VCs.

So what you see is a result of these barriers coming down, you see new class of competitors emerging and now we have our classic multi-national, well established competitors and you have these new entrants to contend with. So this disruption that is happening is digitally enabled and is changing the face of our industry. You see these new players coming into our category and at the heart of this disruption, there is a new consumer centric paradigm and that’s challenging completely the cost of goods scale and the value scale as we know it and its forcing a change in both the retail and the media landscape.

New playbook ks asset light infrastructure and control of the consumer relationship via data

“And what we’re seeing now is there is a new playbook emerging, a new how-to-win playbook that is really characterized by an asset light infrastructure. And the control of the consumer relationship,via the acquisition of the sports party data that allows for you to have a highly personalized iterative on demand consumer experience. And the ownership of this relationship with consumers and associated ecosystem that comes with it is now the new playbook. It is now the greatest new source of competitive advantage.”

Small players are succeeding because they are committed to breakthrough innovation, stay close to customers, build digital brands first and are hyper efficient

“What is it that is allowing them to succeed, because by and large if you look at our categories, these small players are the ones that are gaining shares and majority of large companies are losing market share. So we’ve found five things that we think these players are doing uniquely well.

First, they are really committed to breakthrough innovation by staying really close to consumers and customers and staying on top of consumer trend. They see where the product is going and they are designing to what that emerging consumer need is. They are focused on building digital first brands that have a clear purpose and a reason for being that resonates with millennial consumers.

They capitalize on the rise of emerging channels. They don’t just play in the legacy channels but they figure out what are the new shopping behaviors, new emerging channel trends and they disproportionate drive growth in those channels. They are hyper efficient. Normally have very lean cost structures, flat organizations, no bureaucracy and as a result they move very fast. Speed is a great currency for them.