Monday, September 19, 2011

Netflix: Is this a Johnson & Johnson Tylenol Moment?

I woke up to a nice email from Netflix's CEO explaining the company's decision to bifurcate the DVD & Streaming services. It's been a pretty rocky month for Netflix, a service I use and a company I admire. What was most striking about the email wasn't the plan, but the humble language and acceptance of blame that came from the CEO. It reminded me of a legendary business case: Johnson & Johnson's recall of Tylenol in 1982. That turned out to be a terrific branding moment for JNJ. It's not exactly the same situation, but I wonder if Netflix aggressive communication and acceptance of blame will create another inflection point.

Tylenol made a hero of Johnson and Johnson - The recall that started them all -

"James Burke, the company's chairman, was widely admired for his leadership in the decision to pull Tylenol capsules off the market, and for his forthrightness in dealing with the media. In a news conference only a month and a half after the tragedy, he gave a full chronology of what the company had done. "He looked in complete control," said Tortorella.

The moves were costly. Johnson & Johnson spent more than $100 million for the 1982 recall and relaunch of Tylenol. A much smaller recall in 1986, and a second relaunch also ran into millions of dollars.

But Johnson & Johnson's shareholders were hurt only briefly. In 1982, the stock, which had been trading near a 52-week high just before the tragedy, see-sawed in panic selling but recovered to its highs only two months later."