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SMU865

JOHNSON & JOHNSON’S CHOICE OF REGIONAL

HEADQUARTERS AND INNOVATION HUB: WHY SINGAPORE?
It was November 2019. Ong Ai Hua, Group Chairman, Asia Pacific, of Johnson & Johnson (J&J)
had just finished her six-week wellness programme with the company’s newly launched curriculum
by the Human Performance Institute (HPI) in Singapore. Thanks to the wellness program, Ong had
been able to change her eating habits from three meals to five small meals a day. As she munched
her lunch, Ong ruminated over the history of J&J’s presence in Singapore over the last many years
and its prospects going forward. Singapore was a regional headquarters (RHQ) and a strategic hub
for the company, with several initiatives being spearheaded from the city before being implemented
on a large scale across other markets in the region. Innovation was at the core of J&J’s strategy, both
globally and regionally, and one of the key reasons J&J had set up its RHQ in Singapore was because
of its infrastructure and availability of high-quality research institutes.

A consortium of companies, J&J had around 250 subsidiary companies operating in 60 countries,
with products sold in over 175 countries. J&J brands comprised numerous household names of
medications and first-aid supplies. Some of the company’s popular consumer products were the
Band-Aid brand line of bandages, Tylenol medications, Johnson’s Baby products, Neutrogena skin
and beauty products, Clean & Clear facial wash and Acuvue contact lenses. In 2018, worldwide sales
for the company reached US$82 billion, and by 2019, Asia Pacific (APAC) had become the fastest-
growing market for the company across the globe.

Competition between locations as a choice for RHQ within APAC had grown considerably over the
years. China was a major market for J&J, as were India and Japan. Over the years, all three countries
had developed high-quality expertise and infrastructure facilities. In addition, cities like Shanghai,
Hong Kong and Tokyo had emerged as RHQ choices for many multinational companies because of
their proximity to large markets in the region.

So far, much of Singapore’s competitive advantage had been derived from several factors including
its geographic location, political stability, focus on innovation and ease of doing business. However,
Ong wondered if these advantages were sufficient to support the long-term positioning of the city as
the regional hub of J&J. Could the innovation-ecosystem in Singapore be the differentiating factor
for the RHQ amidst rising competition?

J&J

Found by three brothers in New Jersey, US, in 1885, J&J began its journey as a manufacturer of
ready-to-use surgical dressings. The company expanded into Asia in 1931. In 1959, J&J acquired
McNeil Laboratories in US and Cilag Chemie, AG in Europe. The two acquisitions enabled the
company to gain a foothold in the field of pharmaceutical medicine. In 1961, J&J made one of its
most significant acquisitions – that of Belgium company Janssen Pharmaceutical. Janssen was one
of the world’s leading research-based pharma companies producing prescription medicines, and its

This case was written by Professor Arnoud de Meyer and Lipika Bhattacharya at the Singapore Management University. The
case was prepared solely to provide material for class discussion. The authors do not intend to illustrate either effective or
ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information
to protect confidentiality.

Copyright © 2020, Singapore Management University Version: 2020-09-12

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SMU-20-0002 Johnson & Johnson: Singapore Regional Headquarters

acquisition put J&J at the forefront of the global pharmaceutical industry. Over the next few decades,
J&J experienced significant growth across the globe, organically as well as through strategic
acquisitions, and by 2018, it had recorded worldwide sales of US$82 billion.

J&J operated three major product divisions globally - Consumer Health Products, Medical Devices
and Pharmaceutical products. Consumer Health Products included baby care, skincare, oral care,
wound care, over-the-counter and women’s health products. Under its Medical Devices wing, the
company catered for surgery, orthopaedics, vision and interventional solutions, coupled with training
for physicians to use the products and solutions. The Pharmaceutical arm of the company was led by
Janssen and addressed some of the most devastating and complex diseases humanity faced.

J&J derived its revenue from four regions: the US, Europe, the Western Hemisphere (excluding the
US), and APAC /Africa. J&J was ranked fifth in prescription sales and second in research and
development globally. In 2018, J&J earned a revenue of almost US$42 billion in the US; Europe was
the company's second most yielding region with a revenue of US$19 billion. APAC was projected
as the next growth driver for the company (refer to Exhibit 1 for J&J revenue by Region 2006-2018).
As of 2019, the company was ranked amongst the top three pharmaceutical companies globally in
terms of research and development pipeline.

In 2018, J&J relocated its RHQ for APAC in Singapore, and assembled all its offices under one roof
- in a state-of-the-art facility in the city’s Science Park 2 complex. It also established three new
institutes in the new office, with each catering to a different strategic focus for the RHQ in the region.

Singapore

Singapore had been a clear choice for J&J to position its RHQ. Over the years, the city-state had been
very successful in attracting many multinational companies to set up their regional headquarters in
the country (refer to Exhibit 2 for a brief history of Singapore’s growth as a choice of RHQ). A range
of firms, including the technology giant Microsoft, and the pharmaceutical company
GlaxoSmithKline, had set up their RHQs in Singapore.1

In a survey conducted for Japanese companies with RHQs in Singapore, favourable access to nearby
countries, ready accessibility to business information and English being widely spoken were the top
reasons cited for the choice of Singapore as a location for RHQ functions.2 In fact, Singapore was
widely perceived to be a ‘global city’ with unique connections to the outside world, which functioned
as a centre of command and control that provided MNCs with global reach.3 Like London and New
York, it had been recognised as a RHQ choice given the access it offered to advanced producer
services (such as marketing, accounting, law, and finance), its cosmopolitan environment and
extensive connectedness to local and global markets.4

Singapore thus had a number of desirable features for firms looking to set up their RHQs; it had been
consistently ranked high in ease of doing business and the strength of its legal system, in addition to
having a well-qualified workforce and highly ranked universities for the hiring and training of talent.

1 Phillip Kotler and Milton Kotler, “Winning Global Markets: How Businesses Invest and Prosper in the World's High-Growth Cities”,
John Wiley & Sons, New Jersey, 2014, https://www.wiley.com/... p-9781118893814, accessed November 2019.
2 “The 4th Survey on the Regional (RHQ) functions of Japanese Companies in Singapore”, Jetro Singapore, December 2015,
https://www.jetro.go.jp/ext_images/singapore/pdf/rhq_report_eng.pdf, accessed January 2019.
3 René Belderbos, Helen S. Du, and Anthony Goerzen, “Global Cities, Connectivity, and the Location Choice of MNC Regional ”,
Journal of Management Studies, Volume 54, July 2017,
https://www.researchgate.net/Global_Cities_Connectivity_and_the_Location_Choice_of_MNC_Regional_ss, accessed November 2019.
4 Ibid.

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SMU-20-0002 Johnson & Johnson: Singapore Regional Headquarters

The political stability of Singapore, the high quality of life, and the supporting infrastructure of
banking and logistics services had served to increase its attractiveness as a launching pad into the
region. Besides, being in the same time zone as China and having a large proportion of the workforce
that was bilingual in English and Chinese had enabled Singapore to act as a bridge between the East
and the West. Finally, Singapore’s location and travel connectivity to multiple countries in the region
cemented its offering as the location of choice for APAC’s RHQs (refer to Exhibit 5 for APAC
Regional Headquarters Attractiveness).5

Biomedical Sciences Cluster

Until the 1990s, manufacturing-related industrial development efforts in Singapore had rested on
three pillars: electronics, chemicals and engineering. At the turn of the century, biomedical sciences
was envisaged as a fourth pillar to ensure Singapore's continued economic diversification as well as
long-term competitiveness. The term ‘biomedical sciences’ was interpreted quite broadly to refer to
anything related to the discovery, development and commercialisation of healthcare products and
services ultimately designed to diagnose or treat human diseases. The cluster spanned four different
industries: pharmaceuticals, medical devices technology, biotechnology and healthcare services. The
ambition was for Singapore to ultimately become a ‘plug & play’ location of choice for all related
value-chain activities in biomedical sciences, for both MNCs and domestic firms.6

The Singapore government made significant investments to establish the city as a biomedical sciences
(BMS) cluster over the years (refer to Exhibit 3 for further details on the Biomedical Sciences Cluster
in Singapore). In the BMS sector, in addition to J&J, other leaders with RHQs in Singapore were
Novartis, Carl Zeiss, Philips, GlaxoSmithKline, Bayer (AG), Ferring, and Pfizer.7

As the healthcare industry channelled more and more resources towards open innovation globally,
Singapore responded to the call by building a holistic MedTech innovation and commercialisation
ecosystem that could bring together start-ups, multinational corporations, and providers of various
supporting services.8 The Singapore government also showed keen interest and released several
grants and direct investments in university research with the objective of promoting the development
of new products and systems.

Positioning the J&J RHQ and Innovation Hub

J&J had had a long-standing history in Singapore and started operating its regional headquarters for
the APAC region from the city-state in 1974. As an organisation, J&J followed a somewhat
decentralised strategy. The leadership team and some of the primary functions for APAC, such as
supply chain, treasury, quality, marketing, human resources, finance and accounting and enterprise
engineering services, were managed from the Singapore office, while other initiatives, such as sales,
were handled locally for each country. Ong elaborated,

Our company always strives to be more effective. Being closer to the customer is one way of
doing that. Hence, regional hubs help us strengthen our roots within that market. Our RHQ here
allows us to spearhead and map out strategic initiatives that we feel will give us a competitive
advantage in the APAC region, which is the fastest-growing region geographically for J&J.

5 Ibid.
6 Ibid.
7 “APAC Regional Headquarters, Singapore on Top, But Competition to Increase”, Cushman & Wakefield Research, 2016,
http://www.cushmanwakefield.com/2016_F4.pdf , accessed November 2019.
8 Jennifer Silvi, “How Open Innovation is Transforming Healthcare”, World Economic Forum, 17 February 2015,
https://www.weforum.org/agenda/2015/02/how-open-innovation-is-transforming-healthcare/ , accessed November 2019.

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SMU-20-0002 Johnson & Johnson: Singapore Regional Headquarters

Reflecting on the management decision of the company to locate its RHQ in Singapore, Ong added,

Singapore is politically stable and has a strong rule of law. Singapore also has great connectivity and
a world class airport which makes it a good headquarters location for people travelling within Asia to
US and Europe. The government is open to changing business needs and the innovation ecosystem is
becoming richer and more integrated across industries, adding attractiveness and even more incentives
for us to continue our RHQ from here.

According to a study conducted in 2016, Singapore remained the region’s most established healthcare
hub.9 Although Singapore had some definite advantages to help it sustain that position, in the long-
run, there had been some concerns as well. The challenges that the city-state faced in being the RHQ
choice included its distance from China (the driving market in the region), the restrictions on foreign
labour, high cost of living, high operational costs and limited land supply.10 In addition, there were
other considerations as well, as Ong elaborated,

Singapore has a small population base plus being a much more structured market, it does not
reflect the complexities and composition of larger markets in Asia from consumers’ needs to
healthcare systems. However, this sophisticated, small-sized market and diverse multi-racial
population has its unique value for companies seeking to pilot new ideas, new offerings and
insights to achieving deeper insights into the epidemiology of the Asian population etc., What this
means is that the Singapore workforce has got to work harder to stay relevant, offer skills and
capabilities to capture its unique differentiation and continuously raise the bar.

On the other hand, where Singapore plays a differentiated role compared to other leading cities
in the region is its capability of churning the innovation wheel efficiently and frequently.
Unfortunately, that space requires a set of expertise that the local population does not necessarily
have. The challenge, therefore, is – how do we raise the bar to stay relevant and ahead of the
game as a country that remains the go-to-choice for housing a multinational RHQ?

The area covered by the APAC hub of J&J was quite large and extended from India in the west to
Japan in the east; China in the north to New Zealand in the south. Ong noted, “Corporations organise
Asia Pacific (AP) structure quite differently. Some group AP without China and/or Japan and these
two markets go directly to global. For J&J, AP comprises all AP countries, including China and
Japan.”

From the supply chain perspective, Singapore acted as an APAC hub primarily for healthcare
products due to its location, customs efficiency, connectivity and mature infrastructure. Additionally,
as a strategic port, Singapore was the obvious choice for end-to-end logistics management for the
region.

Marketing of various products in J&J comprised mainly of local initiatives. However, Singapore was
a launchpad and testbed for beauty and wellness products due to its relatively trendy and well-
informed populace. Commenting on the Medical Devices and Pharmaceutical products, Shane Pang,
Head of Government Affairs & Policy Southeast Asia at J&J, added,

For marketing of Medical Devices and Pharmaceutical products, each country has its own team.
However, in the digital age, there has been quite a shift in terms of consumption of information,
and how we engage our doctors and hospitals via digital channels is key. Therefore, we try to

9 Ibid.
10 Ibid.

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SMU-20-0002 Johnson & Johnson: Singapore Regional Headquarters

incorporate analytics to build engagement with our consumers. How is Singapore different for
regulations in marketing?

In the Medical Devices and Pharmaceutical industry, more time is needed for a product to be
developed and obtain all regulatory requirements, before it can be introduced to patients. As a
reference, typical drug development takes 10-15 years. In Asia, culture plays a role as well and
it is sometimes not easy to get things to move fast. Our efforts in Asia are focused on bridging
this gap to allow solutions to reach patients faster once they have been launched.

Expanding J&J’s RHQ footprint in Singapore with brownfield economic investments

In 2018, J&J further expanded its footprint in Singapore and set up its new headquarters at
Singapore’s Science Park. The office housed two new key facilities - a Leadership Lab and a Design
Lab - to spur innovative ways of working in the region and drive deeper collaboration with partners
across the entire healthcare ecosystem, including government bodies, healthcare agencies and
academic institutions. It housed more than 1,400 employees from the Consumer, Medical Devices
and Pharmaceutical businesses, all under one roof.

The Leadership Lab was a state-of-the-art training facility aimed at developing healthcare leaders
with the capability and skills required to thrive in a competitive and changing environment. The
Leadership Lab was designed to serve as a think tank for innovation, research, exchange and dialogue.
It was also accessible to a broader community of healthcare leaders in Singapore and the region,
including companies outside the J&J eco-system. In essence, the Leadership Lab was envisaged as a
platform for people to co-create and drive innovative solutions for the future of healthcare.

J&J’s Singapore headquarters was also home to the company’s first Design Lab outside New York
City. Fuelled by local insights and research, the Design Lab was focused on creating products and
solutions that could spur the growth of a regional pipeline of products designed in APAC for both
the region and globally.

Tapping on the Innovation Ecosystem in Singapore

The establishment of the two labs in the Singapore office had enabled J&J to extend the existing
capabilities of its RHQ. What remained to be seen was whether such initiatives could bolster the
company’s scientific strength and forge new collaborations to change the trajectory of healthcare in
APAC.

Building an innovation eco-system was one of the key strategies implemented by J&J globally. The
company believed that the ecosystem approach to innovation, leveraging talent both inside and
outside of the company, was the best way to respond to a competitive, ever-changing environment.
Ong added,

If leaders want to build a sustainable growth engine for the company, they need to create the
right conditions for the best ideas to get picked up.

J&J’s Singapore RHQ had been especially receptive to this strategy, which differentiated it from the
other key offices of the company in the region. The Singapore RHQ used a variety of approaches to
work with a large number of external partners to tap on their knowledge and technologies. Such
strategic innovation had also helped complement more traditional approaches, including R&D
alliances, licensing agreements and dedicated infrastructure.

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SMU-20-0002 Johnson & Johnson: Singapore Regional Headquarters

From the perspective of being a hub for innovation in the APAC region, Singapore offered a number
of benefits. An effective IP protection strategy was crucial in enabling a firm to forge ahead in
innovation. Ong commented,

Although IP protection laws are country-specific, the IP environment and where and how the IP
is held is a crucial consideration. Singapore has a favourable legal environment for IP, and hence
is an obvious choice for IP ownership in the region.

The outside-in approach of owning the IP of external parties within its innovation ecosystem allowed
the RHQ to advance and enrich the company’s knowledge base through the integration of suppliers,
customers, and external knowledge sourcing.

The ease of doing business in Singapore had also motivated many start-ups to germinate in the city.
One example was the Quickfire Challenge launched by J&J in collaboration with Exploit
Technologies Pte Ltd (ETPL), an arm of Singapore’s Agency for Science, Technology and Research
(A*STAR), and Singapore-MIT Alliance for Research and Technology (SMART) at its RHQ in 2017.
The initiative was established to promote Metabolic Disease Innovation to attract game-changing,
early-stage innovations that addressed this critical health concern. Such inside-out collaborations had
allowed J&J to combine external and internal ideas to advance the development of new technologies.

Collaborative innovation initiatives had other additional benefits as well - participants like
universities and start-ups could access the complementary skills and commercialisation expertise of
J&J. Support from government organisations like the Singapore Economic Development Board
(EDB) further helped J&J support and incentivise innovation. Ong added,

EDB is very active and understands the changing needs of multinational companies. They know
the key stakeholders in J&J despite J&J being a large and complex organization. They literally
go “door to door” to engage key stakeholders to deepen their insights to build the right
collaborations that will fit the organizational mission and vision… what some of us would
describe as strategic key account engagement!

Open innovation was at the core of J&J’s innovation strategy, both regionally and globally. In 2009,
Paul Stoffels, then Chairman of Pharmaceutical Research and Development at J&J, had summed up
the company’s innovation focus,

At J&J, we are shifting our innovation ecosystem toward an open innovation model, tapping into
both institutes of scientific excellence and our research and development centres across the world.
Our scientists are taking a networked approach across internal organisational disciplines and
geographies, including Asia and other emerging markets, and increasingly with external public
and private partners to generate ideas and intellectual property. By working with experts at other
companies, universities, and research institutes, we tap a wider range of expertise, capabilities,
and resources. Together we share in both the benefits and costs of innovation that will yield more
useful technologies and solutions that will contribute to new advances in healthcare. 11

Towards that direction, J&J had tried to build open innovation capabilities by tapping on its
innovation eco-system both in APAC and globally across its offices, as showcased below.

3D printing

11 “The Promise of Open Innovation, Johnson & Johnson, Our Company”, Feb 3, 2009, https://www.jnj.com/our-company/the-promise-
of-open-innovation , accessed November 2019.

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In 2013, Singapore had identified 3D printing as an area of focus and promoted innovation in 3D
printing manufacturing.12 J&J and many other healthcare companies were increasingly using 3D
printing for medical devices, and having accessibility to innovative and more efficient 3D printing
solutions had helped the company target products for unmet user needs in the MedTech area.

To further build knowledge in the MedTech arena, J&J sponsored a bio-design thought leadership
exchange platform in 2019 called J&J Vision, to showcase innovative ophthalmology by researchers
in Singapore. This bio-design programme was a joint-partnership between A*STAR, EDB and
Stanford University. Modelled after the established bio-design programme at Stanford University,
the capability development initiative was aimed at training and nurturing the next generation of
medical technology innovators in Singapore and Asia.13

Data Science and Analytics in Finance

As part of the open innovation drive, the finance team at J&J’s RHQ in Singapore had gone through
a transformation journey and invested in building an AI-based system that integrated all the
operational and financial planning processes under financial planning and accounting (FP&A). The
solution utilised predictive analytics for Profit & Loss (P&L), cash flow and balance sheet forecasting.

For starters, all data were pulled from various enterprise resource planning units and moved to a
Business Warehouse and then to the Finance Warehouse. Data visualisation was a key objective, and
dashboards and scorecards were built using the data, to enable senior leaders to quickly understand
business performance and identify new growth opportunities. The visualisation tools helped deliver
easy-to-absorb insights around KPIs like R&D as a percentage of sales, regional sales variances, or
the number of clinical trials currently in progress. These snapshots could clearly outline how specific
drivers had performed over time and how they were expected to perform in the future.

The senior leadership at J&J decided to roll off the AI-based solutions deployed by the finance
function in the RHQ across all the offices worldwide. While implementing the AI-based solutions,
the focus was on upskilling existing talent rather than retrenching existing staff and hiring new staff
with requisite technical skillsets. Keyur Shah, Senior Finance Director, APAC, explained,

We developed a single data source for all the financial planning and reporting. We then
implemented a third-party workflow solution called Alteryx, which allowed the finance analysts
to design the reporting capabilities in a self-service manner and automate the production of the
final reports. This allowed finance analysts to move from generating manual reports to spend
more time on business partnering and delivering financial insights. We also implemented a
planning system with data analytic capabilities and an automated management review deck, that
is not only efficient but also promotes a standardized review process.

As part of their transformation journey, the finance team at Singapore RHQ also implemented a talent
incubator program to equip finance and accounting professionals with future-ready skills in advanced
analytics and forecasting. Since a lot of the incoming data received by the finance function changed
more or less dynamically, the finance team has had to be nimble and agile. Shah added,

12 “Unleash the Power of 3D Printing”, EDB, News and Events, June 14, 2017, https://www.edb.gov.sg/en/news-and-
events/insights/innovation/unleash-the-power-of-3d-printing-.html , accessed November 2019.
13 Singapore Bio Design, “Enpowering Asia's Healthtech Innovators of Tomorrow”, http://www.ssbiodesign.org/about, accessed
November 2019.

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We created a small sub-team in Asia with Data Science capabilities. The team has now become
our global capability as we are trying to roll out our AI-based automated financial systems across
all our J&J offices.

In addition to building a data analytics platform, the finance team also developed a machine-learning
model to track sales, and in some markets, the model was able to accurately predict sales. Shah added,

In markets like Japan where sales numbers were reasonably stable, the model worked very well.
On the other hand, in markets like China where there are a lot of dynamics involved, the results
from the model were slightly less accurate. Global sales forecasting at an enterprise level is
driving better outcome than the manual forecasts done earlier. We are now moving to a world of
augmented AI, where AI and finance professionals can work together in tandem to improve each
other.

We have multiple proofs of concepts on how we can use natural language generation (NLG) to
generate budget versus actual kind of commentary that every finance division across the world
works month on month to create. Such AI generated commentary gives a head start to the analysts
who will then spend time in enriching the commentaries further with more business collaboration.

The ultimate goal was to prioritise analytics based on feasibility (data availability and ease of process
integration) and impact by identifying the top use cases that could create the greatest value for the
business and be able to do that quickly. By thinking out of the box and incorporating innovation in
solution finding and execution, the finance team at J&J had been able to operationalise analytics such
that insights could lead to direct impact on revenue and cost.

Myopia: First-of-its-kind private-public strategic partnership in Asia

Focusing on building an innovation eco-system advantage, J&J’s Singapore RHQ had also developed
partnerships with Singapore-based research organisations to identify innovative solutions for some
of the most acute unmet healthcare needs of people in the APAC and globally. One such initiative
established by J&J was focussed on targeting Myopia, which was foreseen as the largest threat to eye
health globally. 14 Launched in Singapore in November 2018, the strategic Myopia research
collaboration was formed by J&J’s Vision arm in collaboration with the Singapore National Eye
Centre (SNEC) and Singapore Eye Research Institute (SERI). The collaboration was the largest
Myopia initiative under a public private funding model, and had received joint funding of US$26.35
million from A*STAR and J&J Vision.1516

As at end 2019, one in two children in Singapore developed Myopia by the age of 12. The annual
direct cost of optical correction of Myopia for Singaporeans was estimated to be US$755 million.
Uncorrected distance refractive errors, largely caused by Myopia, were already estimated to cost
global healthcare systems US$202 billion annually, and this cost was expected to rise exponentially
with increased prevalence and severity of Myopia in the coming decades.17

Myopia and was expected to affect half of the world’s population by 2050. Over a billion people were

14 Vision Care is a business unit under J&J’s Medical Devices business that focused on building and commercializing vision and eye
health solutions developed by the company’s eco-system.
15 Singapore National Eye Centre, News, “Singapore Eye Research Institute and Johnson & Johnson Vision Set Sights on Halting Global
Myopia Epidemic”, 12 Nov 2018, https://www.snec.com.sg/news/patient-care/singapore-eye-research-institute-and-johnson-johnson-
vision-set-sights-on-halting-global-myopia-epidemic , accessed November 2019. Bloomberg, SGD to USD exchange rate, November 22,
2019, https://www.bloomberg.com/quote/USDSGD:CUR, accessed November 2019.
16 Singapore National Eye Centre, News, “Singapore Eye Research Institute And Johnson & Johnson Vision Set Sights On Halting Global
Myopia Epidemic”, 12 Nov 2018, https://www.snec.com.sg/news/patient-care/singapore-eye-research-institute-and-johnson-johnson-
vision-set-sights-on-halting-global-myopia-epidemic
17 Ibid.

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SMU-20-0002 Johnson & Johnson: Singapore Regional Headquarters

forecasted to be affected with high Myopia - which could lead to retinal diseases and blindness. Asia
and Singapore were expected to bear the brunt of the threat, with very high prevalence rates,
particularly in the younger population (as high as 80 to 97 per cent in the age group of 6 to 18-year-
olds).18

The objective of J&J’s research collaboration was to understand the development and progression of
Myopia, and study how it could be intercepted. The Head of APAC R&D - Vision Care at J&J, Biten
Kathrani elaborated,

Our Myopia initiative was chosen to be based in Singapore because of a few strategically
significant reasons. The city is home to a world-renowned eye-health hospital and ophthalmology
research institute, i.e. SNEC and SERI, which has a focus on Myopia from the clinical sciences,
clinical practice and Myopia research perspective. It has globally renowned clinicians as well
as world-renowned Myopia researchers. SNEC most recently inaugurated its Myopia Clinic in
‘Bedok’ in the city. Singapore has a huge myopic population, which emphasises an urgent need
for innovative solution and also provides real world evidence for the research. The Singapore
government has focused on Myopia by successfully implementing annual eye screening programs
through the Health Promotion Board (HPB) and a successful implementation of the National
Myopia Prevention Program. As Myopia prevalence and its economic and social impact rises
globally, several countries are looking to Singapore to learn from its experience. Myopia is not
just a vision correction issue, it’s an eye health disorder and Singapore is leading the path for
innovation combined with awareness and access. At J&J Vision, we are a leader in eye health,
with global commitment to eye health and Myopia research. As a broad-based health care
company, we bring MedTech and pharmaceutical capabilities. Singapore serves as our APAC
HQ, wherein our leadership has implemented several business model innovations in eye health
in collaboration with the Singapore eye health ecosystem and eye care practitioner network and
associations. Hence, this collaboration is positioned to tap into the best of capabilities of both
J&J Vision and SNEC / SERI to bring breakthrough solutions to children and their families
impacted by Myopia. It’s a unique example of how a focused approach in a particular disease
state can help position Singapore as an ecosystem leader in Eye Health.

The ethnic and racial diversity of the population in Singapore had proved to be another enabling
factor in helping provide a wider test bed for executing such research initiatives, as solutions/outcome
from the research could be applied globally. Additionally, other long-term longitudinal population
based research studies in the country like SCORM (Singapore Cohort Study of Risk Factors of
Myopia) acted as support mechanisms – creating a potential for valuable retrospective and
prospective data to uncover objective solutions that could be useful globally.19

Beyond 2020: Sustainability of the Singapore RHQ and Innovation Hub

Looking into the future, Ong could see that retaining Singapore as a regional hub had some clear
advantages for J&J. Its connectivity, efficient airports and shipping ports positioned the city
admirably as a logistic hub and regional hub. Singapore was known to be safe and stable city; its
added dimensions of culture, nature, sports and good education system made it an attractive location
for human talent and their families to live and work. On top of that, its pro-business policies and
support from government agencies who strove to proactively foresee the changing needs of MNCs,
allowed Singapore to remain a competitive destination of choice. This in turn helped J&J expand its

18 Bo-Yuan Ding,Yung-Feng Shih, Luke L.K. Lin, Chuhsing Kate Hsiao,I-Jong Wang, Myopia among schoolchildren in East Asia and
Singapore, Elseiver, Science Direct, March 2017,
https://www.smo.org.mx/archivos/smonline/survey_of_ophthalmology/articulos/677%E2%80%93697.pdf , accessed November 2019.
19 Seang-Mei Saw, Anoop Shankar, Say-Beng Tan, et al., A cohort study of incident myopia in Singaporean children, Invest
Ophthalmol Vis Sci, May 2006, https://pubmed.ncbi.nlm.nih.gov/16638989 /, accessed November 2019.

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innovation eco-system and accelerate its momentum in coming up with new solutions in healthcare
and wellness for the APAC region, and in some cases build new solutions for the global market. The
presence of a leadership team in the RHQ that was attuned to the commercialisation of these
innovative solutions, both regionally and globally, further helped address the mission of the
company.20 However, the rising cost of infrastructure and living in Singapore was a concern.21

Although Singapore continued to be the preferred RHQ base for J&J, Ong realised that there were
other attractive locations in the APAC region which were increasingly attracting MNCs to locate their
RHQs there. In 2019, more than 700 MNCs had their RHQs in Shanghai alone.22 China was steadily
rising through the ease of business rankings, and the biggest factor in favour of China was the huge
market base that it offered. In the past, China had an underdeveloped internal market, the dominant
local therapeutic method was Traditional Chinese Medicine (TCM), and consumer care and MedTech
products offered by MNCs were not in the grasp of large swathes of society. Collaboration with
external partners was an issue as English was not a wide lingua franca, and the educational system
did not have a high reputation in the life sciences.23 However, in the last few years, China’s economy
had burgeoned; it had a huge internal middle-class market that was more open to BMS products and
consumer care products that were priced for the upper-middle class. Most significantly, China had
become a global leader in innovation capabilities in many sectors like telecom network design,
logistical platforms, AI, machine learning, deep learning, and quantum computing.24

Other cities in the APAC region that offered both advantages and challenges included Tokyo, Hong
Kong, Sydney and Seoul, though each of these cities provided their own set of challenges to MNCs
for setting up RHQs.

While co-location had been widely recognised as one of the drivers towards the effectiveness of the
innovation ecosystem, emerging technologies like hologrammatic communication could make the
need for the RHQ model outdated. In the R&D space, the need for a skilled workforce could be
alleviated by employing technologies like AI, machine learning and deep learning. There were a
number of firms globally who were using machine intelligence for development and evaluation
models in innovation, and these technologies could aid innovation in the BMS sector as well. For the
purpose of collaboration, blockchain technology could be an important source of cybersecurity,
enabling firms to share data for collaboration more securely over longer distances. The use of Internet
of Things (IoT) was also likely to increase in the BMS sector over time for monitoring and
understanding the evolution of diseases, which would in turn, reduce the need for being close to the
consumer for R&D and market research. The increased use of 3D printing devices could make
Singapore’s advantage as a logistical hub in the region less salient, as designs could be shared
virtually and printed locally.

Would Singapore continue to remain an attractive destination as an RHQ for J&J? Could the
innovation-ecosystem of Singapore be the sustained differentiating factor for the country? As Ong
looked out of her office at the lush greenery lining Science Park Drive, she smiled wryly and wished
that her crystal ball would be as clear as the beckoning landscape.

20 Johnson & Johnson, Vision, https://www.jjvision.com/about-us, accessed November 2019.

21 Ibid.
22 Ibid.
23 Ibid.
24 Ibid.

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EXHIBIT 1: J&J REVENUE BY REGION (2006 TO 2018)

Source: Matej Mikulic, Johnson & Johnson's revenue from 2006 to 2018, by region, Statista, Health &
Pharmaceuticals, Pharmaceutical Products & Market, Nov 9, 2019,
https://www.statista.com/statistics/266429/revenue-of-johnson-und-johnson-since-2006-by-world-region/ , accessed
November 2019.

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EXHIBIT 2: HISTORY OF SINGAPORE’S GROWTH AS CHOICE OF RHQ

Singapore was a small island nation with few resources when it became independent in 1965. The
country had a labour-intensive economy in the 1960s, coupled with high unemployment and a rapidly
growing population. The political and economic leaders of the country initially embarked on an
export-led industrialisation strategy with a focus on low-tech manufacturing. This strategy worked
well until the ‘70s, when Singapore began facing increasing competition from other countries like
Japan, which were moving into the high-tech manufacturing space. In the ‘90s, Singapore decided to
switch gears, shifting from its labour-intensive industry to focus on technology-intensive, skill-based,
and high value-add industries like electronics manufacturing, data storage, pharmaceuticals and
petrochemicals.25 The new strategy marketed Singapore as a place to do business and encouraged
multinational companies in Singapore to move beyond basic production into areas like supply chain
management and R&D.26

As the global economy continued to evolve at the turn of the century, Singapore began to face greater
competition in its traditional economic strongholds that included electronics manufacturing and
petrochemicals. The critical challenge was to find ways to differentiate the country from its economic
competitors in the region and the world. Singapore’s leaders concluded that it must promote strong
intellectual capital creation as a basis for developing knowledge-intensive companies and generating
high value-added jobs for Singaporeans. In short, government officials believed that if Singapore
was to join the ranks of the world’s leading industrialised countries, it must build a knowledge-based,
innovation-driven economy.27

The Economic Development Board of Singapore (EDB) was set up in 1961 to provide long-term
planning and strategic direction for Singapore’s industrialisation program.28 At the time that this case
study was developed, EDB’s mission and vision was to create sustainable economic growth with
vibrant business and good job opportunities for Singapore, through investment promotion and
industry development in the manufacturing and internationally tradeable services sectors. This
involved strengthening already active clusters like chemicals, electronics and transport, and
promoting new knowledge and innovation-intensive clusters like biomedical sciences. Specialist
complexes were built to cater to specific sectors in order to encourage deep knowledge creation as
well as better research-industry interaction.29 The intended transition to a knowledge and innovation-
based economy also involved encouraging local universities and educational institutions, especially
those with post-graduate programmes and active research, to play an active role in applied R&D,
incubator facilities and industry spin-offs.30 Former EDB Chairman Teo Ming Kian had noted,

We cannot rely only on borrowing technology and ideas and translating them into products or
services, even if we were to do so with greater efficiency. We can no longer be just a production
site for multinational corporations. To continue to be relevant to the world we will have to be
able to generate new knowledge and innovation of our own and commercialise them effectively. 31

The National Science & Technology Board was restructured and renamed Agency for Science,
Technology and Research (A*STAR) with a mission to foster ‘world-class scientific research and

25 “Innovation Policy around the World: Singapore: Betting on Biomedical Sciences”, AStar, News, March 30, 2010, https://www.a-
star.edu.sg/News-and-Events/News/Editorials/ID/5052 , accessed November 2019.
26 Ibid.
27 Ibid.
28 EDB Singapore, “About EDB”, https://www.edb.gov.sg/en/about-edb/who-we-are.html, accessed November 2019.
29 Ibid.
30 Ibid.
31 Professor Jasjit Singh, Singapore’s Economic Development Strategy and the Biomedical Sciences Cluster, Case Study, 2011
INSEAD Business School.

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develop talent for a vibrant knowledge-based Singapore’ by promoting research and facilitating
research-industry linkages. Generous financial support was made available for R&D, both public and
private, and for the education of local talent.32

By 2010, Singapore’s average per capita income had exceeded US$ 47,000 - making it one of the 20
richest countries in the world - ahead of countries like Belgium, Japan, France, Germany and the
UK.33 By 2011, Singapore was a leading nation on many key business-related indicators - such as the
ease of doing business, the quality of labour force and intellectual property (IP) protection laws. In
the 2011 Global Competitive Rankings of the World Economic Forum, the country had nudged aside
Sweden to claim the second spot behind Switzerland.34

Source: Author compilation - from various sources

EXHIBIT 3: BUILDING THE BIO MEDICAL SCIENCES CLUSTER IN SINGAPORE

In the early 2000s, the Singapore government invested heavily in setting up the Biopolis - an
international research and development centre for biomedical sciences in Singapore. Enhancing R&D
in the biomedical sciences was another primary driver behind the Biopolis; the complex was designed
to create an ecosystem research institute to develop a centre of excellence in biomedical sciences.
While initially focused on the pharmaceutical industry, by 2019 Biopolis’ resident organisations had
advanced to cover a large swathe of industries including medical technology (MedTech), personal
care, and food and nutrition.35

A potential advantage of targeting biomedical sciences was that the sector was knowledge-intensive
and hence less reliant on volume where Singapore could be at a competitive disadvantage to other
countries. Proponents of the biomedical sciences cluster argued that many relevant capabilities and
preconditions already existed in Singapore at the start of the 2000’s. They included chemical and
pharmaceutical manufacturing, a legal system that protected intellectual property, a first-rate health-
care system and some good universities. Since no other Asian location excelled in this potentially
high-growth domain, they saw an opportunity for Singapore to capitalise on the first-mover advantage
as a regional hub in this field.36

Critics, however, argued that the field required creativity, entrepreneurship and risk-taking, which
Singapore’s education system and hierarchical work model did not encourage. Singapore’s founding
Prime Minister Lee Kuan Yew had aptly expressed these concerns: “Have you met a Singaporean
who does research? His mother, father, brothers, sisters, uncles are in the financial business, does he
make a lot of money compared to them? They will say, ‘So you do R&D…what’s that?”37

Several factors had worked in tandem to make external partnering in innovation a requirement rather
than an option, and firms in the BMS sector increasingly sought environments where the innovation
ecosystem had developed as a cluster.

32 Ibid.
33 Singapore GDP per Capita, 1960 - 2018 | Yearly | USD | Department of Statistics, CEIC,
https://www.ceicdata.com/en/indicator/singapore/gdp-per-capita , accessed November 2019.
34 Klaus Schwab, World Economic Forum, The Global Competitiveness Report 2011-2012,
http://www3.weforum.org/docs/WEF_GCR_Report_2011-12.pdf, accessed November 2019.
35 A*STAR News & Events, “Singapore's Biopolis: A Success Story”, October 16, 2013, https://www.a-star.edu.sg/News-and-
Events/News/Press-Releases/ID/1893, accessed November 2019.
36 Ibid.
37 Han Fook Kwang, “Lee Kuan Yew: Hard Truths to Keep Singapore Going”, Singapore: Straits Times Press, 2011, pg. 158.

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Evolution of Innovation in the Biomedical Sciences Industry: From Internal to External

In the ‘70s and ‘80s, the innovation capability in the BMS sector was almost exclusively built
internally by organisations; firms spent large fractions of their annual revenues on identifying new
chemical compounds and developing and testing them internally. Scores of qualified and highly
skilled scientists and doctors were hired and trained to work on drug development processes, medical
devices and consumer care products. This was the era of the large R&D organization; there was a lot
of prestige associated with working with one of the larger firms in the BMS sector, and qualified
talent was readily available to these firms.

In the ‘90s, the locus of R&D began to shift, owing to a multitude of reasons. First, the locus of
search for new solutions in the BMS sector shifted from chemicals to biologicals, as the number of
chemical compounds with therapeutic properties that were being discovered began to decrease owing
to marginal diminishing returns on innovation investments. Biologicals became the new Holy Grail
for innovation in the BMS sector, and there was a renewed focus on using the self-immune system
to heal diseases. The large firms in the BMS sector found that they did not have the requisite expertise
internally for the exploration of biologicals, and increasingly began working with biotechnology
firms, contract research organisations and universities in their search for innovative therapies.

Second, the process of innovation in the BMS sector was long and complicated, and after investing
large amounts in research, firms often found that they reached dead ends. In contrast, paying larger
amounts of money to acquire innovations developed externally by partners became a preferred model
of innovation. Third, manufacturing capabilities were relatively easier to acquire externally, as
contract manufacturers began emerging from low-cost economies, and they could produce these
products at a fraction of the cost that it took to produce internally. In the consumer care products
business, Procter and Gamble had launched a strategy that they called “Connect + Develop” to
demonstrate a different model of innovation from the traditional R&D model. The Connect +
Develop platform was an open innovation model used by Procter and Gamble to generate innovations
collaboratively and was a resounding success.38

In the Singapore context, the BMS landscape had grown to include major research institutes and
biomedical multinationals, as well as a vibrant pool of local companies. These companies had forayed
in providing innovative products in medical technology, bio-pharmaceuticals, and complementary
health products that included supplements and traditional medicine.

The Singapore government had outlined the transformation agenda in the Healthcare Industry
Transformation Map (ITM) whose objective was to boost the sustainability of the healthcare industry
and the BMS industry at large, by enhancing jobs and skills, raising productivity, and catalysing
innovation.
Source: Author compilation - from various sources

38 Larry Huston and Nabil Sakkab, “Connect and Develop: Inside Procter & Gamble’s New Model for Innovation”, Harvard Business
Review, March 2006, https://hbr.org/2006/03/connect-and-develop-inside-procter-gambles-new-model-for-innovation , accessed
November 2019.

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