September 22, 2020

From untouchable to unhirable.

I recently listened to a podcast with Ron Johnson. Ron was the innovator and brains behind the Apple store. He was hired directly by Steve Jobs to design and implement what we now know as a staple of Apple’s brand. During the podcast, I was fascinated as I listened to Ron talk about his time with Steve. They would talk on the phone every evening about the progress of the store. Jobs had the idea to prototype the layout in a warehouse in Silicon Valley. Something no retailer had done before, but Jobs thought of the store in the same way he thought about the computer. Jobs would pop in once a week, leave his feedback, and Johnson would iterate on his ideas until they came up with what we now know as the Apple store. Ron invented the genius bar. Genius! I ended the podcast knowing that Ron Johnson would be on my bucket list of people to call if I could sit down with a great business mind for an hour.

What piqued my interest, however, was a very brief discussion about Ron’s stint as the CEO of a company that many of have almost forgotten about. J.C. Penney.

Though Johnson did not talk much about his tenure at J.C. Penney, the discussion led me down an online rabbit trail of his brief career there.

I was amazed to find out that this man I was so in awe of, who seemed like the savior of retail, had quite literally, single-handedly dismantled all that was working in the 118 year old company and sent it into a unrecoverable downward spiral—one that has still never bounced back. He has been labeled by many, “The man who killed J.C. Penney.

Wow. I closed my laptop in shock.

So what happened? How could one of Steve Jobs’ most trusted confidants do so much damage to what was once a behemoth retail institution? In eighteen months?

I was reminded of three lessons after digging into Ron’s stint as CEO of the once mighty mall anchor.

The Value of Testing.

Johnson had a new approach in mind for J.C. Penney. He wanted to deconstruct the idea that his new project was a store known for daily deals and newspaper insert coupons. He needed to bring down the average age of the customer to gain long-term growth. But instead of examining his ideas, Johnson made top down decisions without testing anything in trial stores.

Brian Ladd of the Observer said this about Johnson’s changes:

Customers had abandoned J.C. Penney in droves, proving that Johnson should have first tested his ideas before implementing them company wide. Johnson’s strategy had driven away the company’s core customers and failed to attract the new customers it so desperately needed.

By failing to test his new ideas in a handful of stores, Johnson abandoned the core customer who had been shopping at J.C. Penney for years. If Johnson would have tested his new idea in even half of the stores, he would have been able to course correct and make adjustments before the company was too far gone. Penney’s stock had fallen nearly 50%.

Past success does not guarantee future success.

Have you ever heard of the term “one hit wonder?” It’s often used to reference a band that has seen huge success on its first outing and then fails to follow it up, no matter how many chances are provided. From Ice Ice baby to the Whip and Nae Nae, it proves that future success is not dependent on past success. Johnson also proved this point with J.C Penney. It’s the classic story of an artist or athlete getting a large sophomore deal, only to go bust. The problem is that Johnson had little accountability after his past success. He was given too much power based on what he had done. Ladd continues:

In a hurry to prove that his vision for J.C. Penney was the right one, Johnson hired a team of outsiders to fill critical senior-level positions; terminated more than 19,000 employees; ended the use of discounts; and ordered that stores be revamped.

The board gave too much leeway to Johnson based on his Apple tenure. Though Johnson is a brilliant innovator, there was too much weight put on what he had done with Apple and not enough weight put toward ensuring what he would do with J.C. Penney.

Just because you can, doesn't mean you should.

Ron Johnson was given almost unlimited power after his unmatched success at the Apple store. Unfortunately, At J.C. Penney, Johnson didn’t have weekly meetings with someone as innovative as Steve Jobs. There was no Tuesday catch-up to help him iron out all of his ideas. Even so, Johnson was given the power to do pretty much anything he wanted. But just because you can make sweeping changes to a profitable business, doesn’t mean you should:

Johnson’s efforts alienated J.C. Penney’s core customers, led to sales and traffic declines and created internal rifts. He was ousted after 17 months in April 2013. In one year, J.C. Penney had seen $4.3 billion, or 25 percent, of its annual sales wiped out.

There is a huge value in testing. Even on a small scale. Data driven implementations are very wise. Test everything.

Leaning solely on one’s past accomplishments in a digital age where tech and strategies change daily is not recommended. Working with people who have succeeded in the past is smart, but work alongside them and trust your gut. Will this past success help guide you to a profitable future?

Having too much freedom can be dangerous. At Apple, Johnson had Jobs to innovate alongside and keep him on the right path. At Penney’s, Johnson was given authority to make major sweeping changes that nearly all analysts said would fail, yet he did it anyway.    

Johnson is a brilliant man. I would love to have an hour of his time. He has a new startup called Enjoy, and is still taking on new innovations within retail. However, it’s good to see both sides of a businessman. It’s good to be reminded that brilliant people can also fail miserably.

As you start your journey toward a sustainable career, test, focus on the future and surround yourself with people who ask why.

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