Kenvue CEO says big companies can lose focus due to their remoteness from the action.

Kenvue CEO says big companies can lose focus due to their remoteness from the action.

The Assignment of a Lifetime: Kenvue’s Journey to Consumer Health Leadership

Kenvue Brands

Mongon, a 20-year veteran at Johnson & Johnson, called his new role as the leader of the Kenvue portfolio of iconic brands the “assignment of a lifetime.” He believes that as an independent company, Kenvue will have the opportunity to bring a fresh perspective and drive consumer health to new heights. In a recent interview, Mongon discussed two key advantages of being an independent company: focus and capital allocation.

“I would say two things. One is this idea of focus. Focusing the organization on one way of winning in our industry, one way to measure our performance, aligning the organization along clear and similar performance indicators—that’s something that is tougher to do in a large corporation, where by definition you are a little more remote from where the action is.”

In a large corporation like Johnson & Johnson, Mongon explains that it can be challenging to align the entire organization towards a singular goal. With multiple divisions and various priorities, maintaining consistent focus becomes more difficult. However, as an independent company, Kenvue can streamline its operations and concentrate on a unified mission, allowing for better measurement of performance and more effective decision-making.

“The second is capital allocation. Kenvue has historically generated north of $2 billion of cash flow every year. In the Johnson & Johnson environment, this cash flow was centralized at the corporation level. Now we will be able to make use of this cash flow for the sole benefit of our brands.”

Under the umbrella of Johnson & Johnson, Kenvue’s cash flow was consolidated and managed at the corporate level. This centralized control limited Kenvue’s ability to allocate funds solely for the benefit of its brands. However, as an independent company, Kenvue now has the opportunity to utilize its substantial cash flow directly for the growth and development of its brands. This newfound financial freedom provides Kenvue with the means to invest in innovative technologies, expand market reach, and strengthen its position in the consumer health industry.

This brings us to the larger question of why conglomerates exist in the first place. A recent book by William Cohan, “Power Failure,” explores the downfall of General Electric (GE), a once-great conglomerate. The book highlights the importance of clear operating goals and sound capital allocation, which GE failed to implement in its final years. Cohan’s analysis serves as a reminder of how conglomerates can falter when lacking a focused strategy and making poor financial decisions.

However, despite the cautionary tale of GE, many companies still favor acquisitions over divestitures. A recent survey by EY reveals that 98% of global CEOs expect to actively pursue strategic transactions in the next 12 months. These transactions include mergers and acquisitions, divestments, and strategic alliances or joint ventures. The driving force behind these transactions is the desire to enhance technology capabilities, particularly in areas such as artificial intelligence (AI).

As technology continues to advance, companies are keen to leverage AI to gain a competitive edge in an increasingly digital and data-driven world. The ability to harness AI algorithms and insights can revolutionize business operations, improve decision-making, and enhance the overall customer experience. Companies are willing to invest in strategic transactions to acquire the necessary technological expertise and stay ahead of the curve.

In conclusion, through his new role at Kenvue, Mongon aims to achieve focus and optimize capital allocation to lead the company to success in the consumer health industry. Kenvue’s independence provides an opportunity to streamline operations and make efficient use of its substantial cash flow. However, the cautionary tale of General Electric reminds us of the importance of clear operating goals and wise financial decision-making. Nonetheless, the corporate deal environment remains vibrant, with companies actively pursuing strategic transactions, driven by the desire to improve technology capabilities such as AI. The future of Kenvue and the wider business landscape is undoubtedly fascinating and full of exciting possibilities.

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This edition of CEO Daily was curated by Nicholas Gordon.