Tuesday, April 9, 2013

Ron Johnson – Questions about Innovation & Change

Did the Apple fall too far from the tree?

I live in Dallas.  My personal case study for the past two years has been Ron Johnson as the CEO of JC Penny.  The business section of the local paper tells me that my study is over.  Johnson has been fired.  His style, innovations, and vision of change managed to drive the stock from $35 to $15.  Oooops!

Most people know Ron Johnson as the genius behind the Apple Genius Bar.  He’s the guy that changed the face of retail.  He gave us wide-open spaces, a place for kids to play, and chest high tables to play with our tablets.  I’ve been to his flagship stores in New York City and London, not as a customer but as a tourist. 

Ron Johnson has gravitas.  So when he took over JC Penny in June 2011 I bought a front row seat.  I’m a change and innovation practitioner.  I wanted to learn at the foot of the master.  Closing out 2011 everything looked good.  Johnson announced: 

  • his vision to make JC Penny “America’s favorite store;” 
  • new people he wanted on the bus; 
  • “fair and square” pricing supported by a new logo dominated by a “square” – no more confusing coupons and complex pricing, just everyday low prices and value; and 
  • shift from a promotional department store to boutique stores within the store.

It didn't work.  What was left of JC Penny’s loyal customer base abandoned the store in droves.

I don’t know Ron Johnson.  I’m not his apologist.  But what did he do wrong?  Why did he fail?  Didn’t Johnson do all the things that change managers and innovators implore of their clients? 

  • Set a vision, commit to it, and get in front of it 
  • Change out the old executives with their defense of legacy
  • Challenge orthodoxies like coupons, discount pricing, and spiff’s 
  • Know the unarticulated needs of customers – like Apple has done so well

All of this advice resulted in failure, but I can only find two rationalizations for why it didn’t work: 

  1. Change is a journey – even in an exponentially changing world.  The impatience of the Board for shareholder returns trumped this needed transformation
  2. Test and learn – the innovators mantra.  Johnson seems to have pushed ahead with the arrogant leaders mantra of “got-a-hunch, bet-a-bunch”

But is this the full explanation?  Maybe there is a part of the real world that says that organizations, like natural species, have a shelf life.  Maybe the world just moves past the installed base of business.  Maybe death is natural, and should be accepted.

When we study success we ascribe it to the actions we want to observe.  When we study failure we do so to make the point that the leader didn’t follow the certified game plan.  That’s not the Ron Johnson case, from what I understand.   

Can we, as change agents and innovators, learn from JC Penny, or are we afraid to?

1 comment:

  1. Bud, like you I have been watching this saga play out. While I agree with the two possible contributing factors you raised, I think there is more.
    1. Culture trumps strategy and change every time. Johnson and his team may have had the vision, but the rank and file JCP employees did not. There is evidence that they felt disconnected to the change.
    2. Johnson never consolidated his gains or did much to anchor the change in the culture. 3. Even a great execution of a faulty strategy can be devastating. There is no evidence that JCP brought its loyal customers along for the ride. The company owns the logo, but the customer owns the brand, and Johnson was moving the brand beyond where customers wanted it to go.

    There will be a number of case studies written about this one.

    Randy Pennington