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Sunday, June 09, 2013

J.C. Penney Circles the Drain


Every once in a while, a reporter calls me up and -- more often than not -- succeeds in at baiting me into a rant about a popular brand in play.  God only knows how many Great American Brands have suffered on Death Row at the hands of incompetent management -- Kodak, Maytag, Woolworth, Sears are just a few of the more notable casualities. 

And then there's J.C. Penney.

Years from now, JCP will likely be the textbook case illustrating how clueless corporate boards can be about the businesses they've acquired.  In the case of JCP, the naiveté and outright ignorance is nothing short of astounding.  If you don't know the story, the abridged version goes something like this:

J.C. Penney's board was essentially taken over by outside financial investors, who weren't at all pleased with its financial performance.  In their eyes, despite J.C. Penney being a long-standing staple of generations of Americans, the entity as a whole was an under-performing asset.  Ostensibly, this was the main reason for the financiers to wrest control of the board:  After seizing control, they'd install new management and show everyone exactly how it's done.

So the old managements got the boot.  The board hand-picked its new CEO, Ron Johnson, for one reason alone:  he was the guy responsible for designing Apple's retail stores.  Keep in mind that at the time of his appointment, Apple stock was soaring on a weekly basis, the digital darling that weaker minds perceived as proof that "you can succeed in a recession if you know what you're doing."

Clearly, that wasn't the case with this decision.

While Johnson certainly has talent and success with Apple (and retail clients prior to that stint), the board became so blinded by Apple pixie dust that it neglected to notice Johnson had absolutely no experience or talent in branding or operations.  They simply expected him to wave his Jobs-like wand over their operations and wake the next morning to find Americans embracing J.C. Penney as the "Apple of household retail."

Johnson was given a carte blanche to do whatever he wished, beginning with his forté -- redesigning floor space.  In an unbelievable escapade of sheer hubris, Johnson went to the full court press and re-designed every store in the chain without ever testing the concept on a limited basis.  That was Mistake #1, because in short order, consumers proved worse than indifferent -- they hated the new environment because it wasn't the J.C. Penney they knew and loved.  They could sense this was Mr. Hollywood consdescending to Middle America -- and they didn't like it one bit.  A failure that could have been less public and less traumatic actually failed large scale -- and very publicly.

Mistake #2 was Johnson underestimating the slow, grinding pace of brick-and-mortar retail.  JCP wasn't iTunes and it wasn't Apple.  J.C. Penney is as old as retail gets in America.  Things happen over time, often at a glacial pace.  Once again, the Apple pixie dust proved illusory.

Mistake #3 -- the most important one -- is the Johnson never understood brand strategy.  He never took the time to understand JCP's brand, nor did he have the skills to create and implement any changes to it.  Let's face it: if you don't understand how a car works, you're really in no position to dictate how to repair it.  Johnson rode his successes based on his design skills.  Getting its staff and its public to understand why J.C. Penney should be perceived as the only solution was far afield of his abilities.

Ron Johnson lasted a total of 17 months at J.C. Penney.  The board replaced him with the very same managers they'd booted to bring in Johnson.  But the story doesn't end there, either.

Recently, JCP launched a mea culpa ad campaign, essentially apologizing to the American public for being as stupid as they'd been.   Proving they're still as stupid as they'd been, they published a report in the Wall Street Journal of "research" claiming that JCP's efforts to improve its brand was working .

Surveys?  Really?  I don't think so.  The only surveys that count are those that ring the cash register, and that won't be happening at JCP any time soon.  Surveys are what inept corporate spin doctors wheel out to cover their own inability to get things done.

In the corporate world especially, this is what happens when decisions are overly reliant on data rather than smart, strategic judgment.  Generate enough statistical garbage and the decision-makers can avoid accountability because they can always blame the data.

J.C.Penney is hosed until they articulate a clear brand strategy and execute it smartly.  That doesn't happen with thirty second band aids proclaiming how stupid you've been.  It does, however, do a good job of proving just the opposite.

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