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.

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It Will Last Forever…

Sadly, nothing lasts forever. However, this does not seem to stop so many successful companies from believing that their brands have become so powerful, so unique and so entrenched in the consumer psyche that their companies will never fade or die.

The “it will last forever” syndrome is mostly an affliction suffered by senior management that comes in the latter years of a company’s success. At a time when the company is often functioning as a near monopoly, or commanding a market beating price premium and enviable customer loyalty. From the outside it would look like this company is at the top of the world, and seemingly at the top of its game too. When long entrenched rivals seem unable to touch it and young, agile new competitors talk big but wither away quickly. This is usually when the management myopia sets in. When they bury their heads in the sand and repeatedly ignore the small but unmistakable warning signs of future decline.

Ignorance is bliss because what these managers never experienced was the many years their company’s spent putting the building blocks for success in place. Blocks built by taking big risks that helped them grow, get ahead and stay miles ahead of all their rivals. It was this hunger in the belly and the lessons learned from those many failures that helped develop its never say die attitude and unassailable competitive edge. The company mantra used to be all about innovation, R&D, thinking laterally, entering new markets. Often launching new products on nothing but a calculated hunch and a prayer; not about protecting their bottom-line to please Wall Street, every quarter.

These new managers end up doing nothing but looking inwards in the hopes of protecting their current market share, which in the end has exactly the opposite effect. They create shareholder value through cost-cutting and portfolio reduction; not by innovating or growing their product portfolios. If there is expansion then it is usually driven by buying up competitors and smaller companies, but all too often without any long-term strategic focus or goals. In the end, they simply end up depleting their companies’ once deep cash reserves. Sadly, fear of failure has driven the majority of their decisions, not hunger for success.

This is the reason so many great iconic brands (and hundred year old companies) are dying slow, painful and inevitable deaths today.