By Mike Hoban
The other day on an infrequent trip to the mall, I walked into J.C. Penney (or rather “JCP” as it has been rebranded) to check things out. The chain had been in the headlines a lot lately because of the radical new strategy that CEO Ron Johnson – the former Apple merchandising whiz – had been putting into place. But the game-changing overhaul he envisioned was not quite going as planned. Sales were down – way down. The company was hemorrhaging cash. Customers were staying away. Then last week Mr. Johnson was fired, and the company is now huddling with financial advisors to look at options for raising cash. A lot of cash – fast.
The drama of the cratering of JCP under CEO Johnson will be chronicled in books, blogs and business school case studies for the next few years, and many commentators and analysts will weigh in on what went wrong and what the lessons learned are. A smart executive from outside the immediate industry with a strong track record, who had big and innovative ideas – just the thing a rather ordinary retail chain needed. People in the know say that Penney needed “fixing” but clearly this fix didn’t take. How come?
As I walked through the work-in-progress aisles in the mall store and as I thought about the many articles I had read about the new strategy it occurred to me that what happened was simply a failure of strategic leadership.
In one of DDI’s programs - “Strategic Leader Experience” – we define strategic leadership as having three components:
- Developing a vision of what the business is or should become
- Gaining acceptance of that vision
- Executing the vision by mobilizing resources to achieve the desired results
CEO Johnson clearly had a vision. It was a grand vision, a compelling vision. He refined it and he articulated it and he felt very passionate about it. He earned high marks for that component.
But developing the vision has to be followed with the gaining acceptance thing. The investor community seemed to accept it, as did his board and the hedge fund manager who was Penney’s largest shareholder. Ditto for many of the brands and merchandisers who signed on.
The employee base? Well, since tens of thousands of employees were let go as part of the re-inventing of the company (the company says the official tally is 19,000) it’s probable the managers and associates were less than enthusiastic about the new world order that was on the drawing boards. And the stakeholders who clearly did not embrace the new vision were the ones that mattered the most – the customers. Part of Johnson’s strategy was to go upscale and to also do away with sales and have “fair” everyday pricing. Thud. Overall, he was given a failing grade by his real bosses – the customers.
Lastly, effective strategic leaders ensure the vision is executed by mobilizing resources. The CEO brought in former Apple managers to execute and used the power of the office to get things done. He wrote big checks to reconfigure the stores. The plan was moving forward. But most innovation experts suggest small steps and testing prototypes before jumping in with both feet. The new JCP was to be launched nation-wide with no testing or tweaking of the concept. There would be no “little bets.” After all, that’s how Apple was successful with its stores. Like with the Field of Dreams approach, if you build it they will come. Well, they started to build it and they (the customers) didn’t come.
Despite the overall lack of success for the costly Penney makeover, there were/are some very innovative and paradigm-busting ideas on the table. It is up to the new CEO (who is the former CEO who was replaced by Johnson) to sort out what to move forward with and what to jettison. The vision will need to be reworked if customers are enticed to come back and spend their money. And in the end, it’s still about the simple – but not so simple – equation for strategic leadership: Vision + Acceptance + Execution.