Why Did J.C. Penney Fail Under Ron Johnson?

The Short Answer

Why Did J.C. Penney Fail Under Ron Johnson?

J.C. Penney failed under Ron Johnson because he changed the whole company at once. He dropped coupons and sales for everyday low prices in every store, ran no meaningful pilot, and did not ask the customers who loved the old way. Revenue fell 25 percent in one year.

This is the cautionary tale in Chapter 4 of Become Your Version of Rich by Dr. Paul Borosky, DBA, MBA. It sits at the end of the leadership chapter, right after the two-week vacation test. For the process side of rolling out a change, see what change management is. The whole set lives inside the Become Your Version of Rich guide.

What Happened

A Bold Plan, Rolled Out All at Once

Dr. Paul keeps the focus on the decision. The man was talented, and the plan looked elegant on paper.

• Late 2011J.C. Penney hires Ron Johnson, the executive who helped build Apple’s retail stores.
• 2012He replaces coupons and most sales events with everyday low prices, across the chain.
• The following fiscal yearRevenue falls 25 percent as long-time customers drift away.
• April 2013The board removes Johnson and rehires his predecessor, Mike Ullman. Coupons and weekly sales return.

Sources: MPR News, JC Penney ousts CEO Ron Johnson (April 2013). Time, The 5 Big Mistakes That Led to Ron Johnson’s Ouster at JC Penney.

Different outlets count Johnson’s tenure as 16 or 17 months. The point does not change.

The Decisions

The Vision Was Not the Mistake. The Rollout Was.

Three choices explain most of the damage. Each one is available to a leader at any size.

The diagnosis in the book is one flawed assumption: that a leader can impose a sweeping change on customers and staff faster than the evidence, the communication, and the organization can absorb it. Dr. Paul stresses that the collapse had other causes too, including the pricing message, the merchandise, the store experience, and a brutal retail market. They gathered under that one assumption.

Listening

He Led From His Own Vision, Not His Customers’ Reality

Time reports that Johnson put the reaction down to customers needing to be “educated” about the new pricing. That is the sentence to remember. When a result disappoints, there are two readings. Either the customer is wrong, or the plan is. Only one of those can be tested cheaply.

This is the authority and trust gap from the chapter, seen at the scale of a public company. A title let Johnson order the change. It could not make customers want it. See why BlackBerry failed for the mirror image: a company that kept asking the same question after the world changed.

The Fix

The Pilot Rule: Test Small, Then Scale

A pilot does not slow a good idea down. It tells you whether the idea is good.

1. Shrink the change to one place. One store, one team, one region, one customer group. Pick a place that is typical, not your best.
2. Write the success test first. Name the number or behavior that means yes, and the one that means stop, before you see any results.
3. Ask the people who like the old way. Their objections tell you what the new way must replace.
4. Run it long enough to learn. Weeks, not days, unless a safety issue forces your hand.
5. Scale, change, or stop. Roll out only what passed. Keep the old model alive until the new one has proved itself.

Here is how Become Your Version of Rich sums up the lesson.

What the Research Says

Big Changes Need Early Proof

Harvard professor John Kotter studied failed transformation efforts and listed the common errors. One of them is failing to create short-term wins: visible, early evidence that the change is working. A pilot is a short-term win you create on purpose, and it keeps the organization from bracing for a long bet it cannot see paying off.

Entrepreneur Eric Ries made a similar point for startups. His build, measure, learn loop treats a new plan as a set of assumptions to test with the smallest real version, which is the same move as step seven in the creativity method. Neither idea is a promise. Both are habits that make expensive mistakes cheaper.

Sources: Kotter, J. P. (1995), Leading Change: Why Transformation Efforts Fail, Harvard Business Review, 73(2), 59-67. Ries, E. (2011), The Lean Startup, Crown Business.

How This Helps a Manager

Use the Pilot Rule on Changes You Roll Out

Managers inherit plans and announce changes. Three moments call for a pilot before the announcement.

One Honest Caution

Hindsight Makes Every Decision Look Obvious

Do This Tomorrow

Three Steps for This Week

1. Pick one change you are planning. Write down the smallest version you could test in one place.
2. Ask five customers or frontline people what they like about the current way. Write down their answers word for word.
3. Write the stop rule and the scale rule on one line each, with dates, before you start.

Listening costs nothing but a little pride. Do it before you announce, not after the results come in. Then read how power goes wrong when nobody can say no in what went wrong at Uber, or see leadership done well in Madam C.J. Walker’s story.

The Book

Chapter 4 Has the Full Leadership Method

This page covers one cautionary tale. Become Your Version of Rich places it beside three people who led without needing a title.

• The seven-step leadership method, from direction to successors
• Madam C.J. Walker, Benjamin Franklin, and Napoleon, three leaders with no title that mattered
• A quiet garlic farmer who kept good people for years
• The two-week vacation test
• Daily Actions and a 30-day check on whether your standards hold through other people

Get the Book on Amazon →

Keep Going

More From Chapter 4

FAQ

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