JC Penney messed up. The board of executives didn’t use their common sense.
The executive board’s first mistake was letting Ron Johnson take the reins. Sure he had some experience. As a VP of merchandising at Target, he was part of a team that helped build Target’s current image. Yes, he did do a good job with the Apple Store and helped Apple gain ground in the electronics market. This didn’t make him qualified or knowledgeable for the job of JC Penney CEO. In fact, at no time in his professional career did he hold a position higher then Senior Vice-president. He had no experience working at a decision making capacity, or that gave him any knowledge of the clothing industry.
The second mistake was allowing him to the pleasure of reaping the spoils system. Even though JC Penney was a successful company, he fired experienced executives and replaced them with people that had no experience in the clothing industry. By doing so, he ousted most of the know-how that would have resisted him incompetent attempts to change their merchandising strategy.
Then he made the worst move in the history of the retail industry. He tried to “fix” the JC Penney’s pricing structure. It wasn’t broken.
The most important piece of marketing, especially in retail sales, is the perception that the customer is getting a deal. He threw out the tried and true system of discounts and coupons. When the customers pushed back, he responded by indirectly calling the customers ignorant and those they needed to be “educated” about the new policy. In essence, he didn’t listen to his customers.
Ron Johnson was a complete failure. Revenue fell by 25 percent in one year. Even thou he was replaced, the long term damage can only be fixed with time.
What is the lesson? How does one avoid this?
It’s common sense. A lot of business is nothing more than common sense. Most business disasters can be avoided by using common sense.
- Always put competent people up top
- Never get rid of your experienced leadership if you don’t need to. Especially not so someone can implement a spoils system.
- Don’t fix what isn’t broken
- Listen to customers