When a Bold Plan Fails: Why JCPenney’s CEO Lost His Job
Ron Johnson may have played a key role in creating the innovative Apple Store, but a bold business strategy didn't work out so well at the retail chain. Here's what you can learn.
We spend a lot of time talking about bold strategies, but sometimes those strategies just don’t work the way they should.
Case in point? JCPenney CEO Ron Johnson, who lost his job with the department store chain just over a year after he left Apple to take on big-box retail. While his reputation for groundbreaking strategy preceded him (the Apple Store was something he conceived and helped grow), the approach didn’t work so well when he moved to a company in turnaround mode.
More details on what you can learn from Johnson’s ouster:
Start slow, then move faster: In November 2011, Johnson left Apple and accepted his role with JCPenney. By January 2012, he announced his move to simplify the company’s marketing approach—40 percent, across-the-board price cuts that would be paid for by cuts in advertising, and a transition to a boutique-style branding approach. This may have come too quickly for consumers. Many consumers were not aware of the change more than two months after it was announced, and the company struggled in the wake of the move, with sales dropping 26.1 percent in a single quarter. Had the move been taken at a slower place, it might have given consumers more time to make sense of it.
Perhaps now isn’t the right time: A former CEO, Allen Questrom, suggested that Johnson’s plan might have worked at a different time, but by launching it at a time the company was struggling, he limited its chances of success. “I would have told him, ‘You can’t take a middle-market store in the middle of a recession and not have sales,’” Questrom told Bloomberg Businessweek. “It’s never worked before. If you want to do that, you have to do it over a long period of time and certainly not in a recession, when people want value more than ever.”
Avoid sideshows: At the same time JCPenney announced its plans, the company spent millions to open the boutiques for major brands, such as Jonathan Adler and Martha Stewart Living Omnimedia. In the case of Stewart’s brand, however, the situation may have proved to be more trouble than it was worth, as it led to a protracted lawsuit with Macy’s, which already had a contract with Stewart. The lawsuit, which is still ongoing despite Johnson’s ouster, drew negative attention to a business model that was already struggling to gain traction.
Don’t miss the basics: While Johnson’s approach to selling products may have proved useful for expensive products like computers, it may not have been a good match for selling clothes, where style goes a long way and options are numerous, Forbes contributor Walter Loeb argued hours before Johnson lost his job. “I have long believed that Ron Johnson, CEO of JCPenney, regards merchandise as ‘stuff’ that fulfills an open-to-buy [budget],” he wrote. “Even Joe Fresh, the much heralded addition to the JCPenney assortment, is not presented in a fashion-right way. It appears to me that nobody has an idea about fashion merchandising at JCPenney.” If you don’t have a deep understanding of the industry, the bold approach may fall on its face.
While Johnson wasn’t necessarily a good fit with JCPenney’s culture, the next step may raise more questions: The person to replace Johnson, Myron Ullman, was the same person who Johnson replaced. No matter the person in charge, the company faces many questions, including whether to go private.
What sort of bold changes have you tried in your association, and if they didn’t work, how did you adjust? Let us know your thoughts below.