Why Ron Johnson’s JC Penney Experiment Failed

Ron Johnson is credited with delivering two of the most successful retail models of this century as the man behind Target and Apple Stores. So what went wrong with JC Penney?

It seems that Johnson decided to ignore his own tenants and instead chose the path that many other corporate leaders seem to follow today – he simply changed the most superficial aspects of the JC Penney brand – the logo, colours, slogan and physical retail environment and delivered it via a shiny new ad campaign. He completely forgot to change the things that matter more and are responsible for delivering a successful brand experience; the company culture, internal and front-line employee’s buying into the vision and having the training and commitment to deliver on it. And I believe another thing he missed or underestimated, before rolling out his re-invention, was the core JCP customer appetite for the pace and extent of change.

Many corporations still believe that advertising and marketing can compensate for lack of a quality product or a great customer experience. It is a shortcut that will ALWAYS fail. This is an age old battle we in the advertising industry have fought with clients who do not want to spend the time or invest the money to build a truly great brand. They want quick, easy and cheap ways to a successful brand. There is not one. Advertising campaigns can only sell what already exists; they cannot create what does not. In fact, I would argue that you end up damaging your company and brand more by making promises that your product and customer experience do not deliver. In the end, customers are less likely to forgive or try you again. The man who at both Apple and Target was the antithesis to this fast and easy way seemed to succumb to external pressures with JC Penney and try to deliver a massive turn-around in a few quarters rather than over a period of years.

With every brand re-invention you have to start by answering two fundamental questions; what still works for the brand and should be carried forward, and second how far can you move forward without losing your most loyal customers; while ensuring you gain new ones. This is not about finding the best possible compromise but it is about ensuring that you don’t throw the baby out with the bath water and lose your most valuable customers by creating something that is so alien to them, so unfamiliar that they no longer have an emotional connection with the brand. Also, you have to be cognizant of the fact that old brands have a long history and bring with them baggage, so you have to move them forward and update them in ways that do not allow you a totally clean slate, like Mr. Johnson had with Apple Stores. Perhaps, Mr. Johnson decided to try and re-invent this old brand like he had a clean slate, without understanding what worked and what his most loyal customers would not be willing to live without, at least in the short-term. As a result he alienated his most loyal customers before he had the time to attract a new customer.

Mr. Johnson should have spent his first year simply unveiling his vision with internal management and employees with an aim to start building support, passion and committed to delivering this vision to customers; while taking time to study JC Penney’s brand history and better understand their most valuable customers. All this much before any shiny new ads and re-designs hit TV channels and store shelves. One thing I will say in his defense is that Wall Street is responsible in large part for creating an environment of quarterly results mentality; where CEO’s are under tremendous pressure to deliver growth every few months. This is simply not the way you can ever build a successful company and brand. It takes time and years of investment and management commitment to create the likes of an Apple, Amazon, IBM or American Express. That said, there will always be external pressures and corporate leaders also need to push back (on Wall Street and investors) so they can take the time to bring all the stakeholders on board with their vision, before leading the way in executing it on far more realistic timelines.

Marissa Mayer and The New Yahoo Employee Policy

Marrisa Mayer is absolutely right that real and meaningful relationships cannot be built purely from behind computer screens, via email, or over the phone. I don’t care what anyone says about the proliferation of technology and the ease-of-access it has provided for an increasingly mobile workforce, and it has, but it is still not close to being a substitute for face-to-face contact and the casual in-person encounters in lunch rooms or other parts of an office that form the intangibles of building human relationships.

I admit that people can be extremely efficient working remotely. It is easy to interact with various departments, have meetings over Skype and pretty much complete every task you need to, in order fulfill your job responsibilities. I also know many companies today are entirely virtual, and are thriving, but I bet even their CEO’s will admit that with more money (or much lower travel costs) they too would want their employees to meet more often, in-person. Ultimately, every company leader realizes that you cannot create that highly intangible yet extremely valuable thing we call “culture.” Corporations that have it feel more familiar, warmer and more like a home away from home for employees. They provide a common purpose, and those that do it better, create a sense of belonging to a tribe.  Just think about the amount of time we all spend working …

Here the rub; you simply cannot build meaningful relationships with people you have never sat across the table from, shared a latte with or broken bread with. A very wise CEO once told me that “everything that happens after 6pm is far more important than what transpires during the workday; this is where the magic happens.” He was absolutely right. It is during these moments; when you share the experience of having faced an abusively irate client, discuss the dressing down your boss got in front of you, or have a colleague offer to do something for you, so you can leave early, because they overheard it was you anniversary– these are the things that form the bonds that make up the intangible glue of real relationships. And these moments only transpire when you let your hair down, share a laugh, throw out a random idea based on something you just overheard, or because someone confessed a problem they were facing over lunch. Try taking your finance guy out for a coffee and ask him what he thinks of your latest project, and you will start to understand what I mean.

So while Ms. Mayer was right to bring people back into the office, it seems she may have relied a little too heavily on data to drive he decision and therefore failed miserable on how she executed Yahoo’s new policy (source: Business Insider). As much as I have talked about the virtues of being in the office, I feel equally that there needs to be a balance. People should be able to work from home a few days a week, and this is where technology has provided the ability to do it seamlessly (just not all the time). It should not be one or the other. If I were Ms. Mayer, I would have made it mandatory to be in the office every day for the first six months, for new hires, and then three days a week after that.

The most ironic thing about Ms. Mayer’s approach is that while she may have used data to inform and even make her decision, she clearly needs to learn that she also needs the human touch when executing and implementing policies across the organisation; especially when her objective is try and get people to build better inter-personal relationships.