In sports, teams that are in danger of losing resort to high-risk strategies. Desperate football teams throw deep passes even though their opponents know it’s coming. Hockey teams pull their goalie for an extra skater.
Another thing sports teams occasionally do is hire the famous coach who is going to turn things around – which leads us to JC Penney.
JC Penney, or JCP, as it is now known, hired Ron Johnson as their new CEO in 2011. In addition to his successful re-shaping of Target, Ron was most famous for developing the Apple retail strategy that went from zero to $18B in less than a decade. JCP was desperate for a shot of energy and put together an attractive package to lure Johnson to their company. Investors cheered.
JC Penney was a place we shopped when I was growing up, and it was the natural place for me to go when I graduated from college and needed to buy suits and ties. In fact, it is part of the family lore on my Mom’s side that my great-grandfather knew James Cash Penney, the namesake of the venerable chain.
While there are many good recaps on what happened and why, I’d like to focus on one issue that leaps out to me: culture.
JCP has been perceived by it’s core shoppers as a place that marked up prices dramatically so that they could have attractive sales every so often. Loyal shoppers knew this and waited for the sales and – once they took advantage of the sales – left the store with a sense of satisfaction.
Ron created a new approach where everyday retail prices dropped, but the big splashy sales went away as well. He also brought in a number of radically different merchandising approaches and an announced move toward futuristic technologies to replace traditional Point Of Sale (POS) technologies. All of these represent great cultural shifts, none more so than expecting shoppers to change their habits.
As it turns out, JCP shoppers like sales. A lot.
Companies with an established brand have a much trickier time changing things. Their customers and employees are all used to doing things a certain way. Investors are screaming for returns. In short, if you’re famous for something already, it ain’t easy to “creatively destruct” yourself before it’s done to you.
Just like the hockey team that pulls its goalie, companies that expect a big cultural shift to happen quickly are betting against the odds. What might have described JCP’s culture, from an employee and shopping perspective? I would use words like “value”, “selection”, “sale”, and “mall” (approximately 80% of JCP stores are anchor tenants in shopping malls).
Here are a few thoughts that I take away from this:
- Apple is famous for NOT asking customers what they want next, because customers can’t conceive of the next device. As Ron Johnson can attest, that strategy works better for technology companies than it does for retailers.
- Too much change too quickly has always been hard for humans, and when business success requires humans to do something different – whether changing their shopping habits or their personal technology habits – management teams can be seduced into overly optimistic planning assumptions.
- The bigger and more well-known you are, the harder it is to change. This is the multiplier for market insurgents. They can position and focus while their larger competitors are lamenting the difficulties common to business model changes and market retrenchment.
- Although I don’t have any particular insight into JCP’s specific situation, I have noticed that the “rock star” CEO – a somewhat common affliction of many technology companies – can lead to bad habits in the rest of the organization. Their ideas are not challenged as strongly as those of other leaders. People think that the company’s future will be great simply because the new leader was successful elsewhere. It can lead to bad habits, and habits are an indicator of culture.