Ron Johnson's Failure At J. C. Penney

When Ron Johnson took over the helm as CEO of J. C. Penney, he came with big expectations. He had previously seen tremendous success at both Target and Apple. However, he left his tenure at J. C. Penney only a year later with the company in much worse shape. Clearly, mistakes were made. Despite his tremendous reputation and his previous successful experience, Johnson failed to practice the three core processes of business. These are people, strategy, and operations. Johnson had ignored all three methods, and it led to his quick departure.
Johnson was brought, to J. C. Penney, to turn the struggling retail giant’s fortunes around. He had led successful business campaigns at Target and Apple; it was naturally assumed that

he would do the same at Penney. When he applied the same types of strategies at J. C. Penney that he had applied at previous companies, the results were disastrous. When Johnson left the company, sales were down twenty-five percent, and shares were down fifty-one percent (Ritson, 2013).
So why did Johnson experience such failure at his helm as CEO at Penney?

Part of the answer involves his failure to utilize the core process of strategy. When Johnson began as CEO, he announced a series of dramatic changes to the company. He wanted to reinvent the shopping experience for customers at the store. Johnson wanted to create a unique design for the store that would draw customers in and keep them once there. He ordered that the busy center shopping sections of the store be redesigned into areas that would offer the customer entertainment, food, and other services leading them to spend more time at those locations. He also changed the pricing strategies that had been used at Penney for years. Instead of steady sales, Johnson had all the prices lowered to what was considered every day low prices. He wanted to get rid of the constant reliance on sales to draw customers and instead wanted the store to offer low prices all the time (Knicki & Williams,

2013).
Instead of drawing customers in, the strategy had the exact opposite effect. One of the mistakes that Johnson made in the core process of strategy is that he did not test his new pricing system ahead of time. Because he did not rely on testing in his previous jobs, Johnson felt there was no need to test the pricing strategy either (Tuttle, 2013). Instead, he had the changes implemented almost immediately. This led to customer confusion and a dislike for the new system (Surowiecki, 2013). Johnson had ignored the core process of strategy in that he assumed strategies that worked in one environment would automatically work in another. Almost every idea that Johnson implemented at J. C. Penney had come from ideas he implemented while at Apple. He failed to take into consideration that the same strategy that worked in one environment might not work in another (Ritson, 2013).
Another core process that Johnson did not take into consideration was operations.

He had the new pricing strategy implemented before the stores could be redesigned and restocked. This had the effect of driving away existing customers, but it didn’t have anything available to entice new ones. Johnson had envisioned making the J. C. Penney name synonymous with hip, young shoppers and wanted there to be coffee bars and unique boutiques throughout the stores. But when customers stopped coming due to the confusing pricing schemes, the stores had not been remodeled leaving the department store void of traditional customers but not yet redesigned for the hipper crowd that Johnson envisioned (Tuttle,

2013).
Finally, Johnson ignored the core process of people in a number of ways. First, Johnson did not take the time to find out what loyal J. C. Penney customers wanted; he assumed he knew. Johnson himself did not care for the traditional process of using sales and coupons to attract business. He believed that everyone felt this way and did not complete market research before implementing his strategies. Hindsight has since shown that J. C. Penney customers do, in fact, like seeing sales and using coupons and did not prefer the every day low prices that Johnson implemented (Surowiecki, 2013). Johnson’s process made the traditional J. C. Penney customer feel “alienated” and gave the impression that he did not personally care for them (Tuttle, 2013).
It is easy to find fault with Ron Johnson’s time at J. C. Penney. He clearly made numerous mistakes in ignoring the three core processes of business. However, if I had to offer advice to what Johnson could have done differently, I would stress the need for market research before any changes were made. Johnson, instead of rushing to change things, should have first spent time finding out what the traditional, loyal J. C. Penney customer liked at the store and what things they would like to see changed. If Johnson had done this first, I think things might have turned out differently. A CEO of a retail chain should never just assume that he or she knows what the customer wants. They should take the time necessary to find out. Johnson had many ideas on how to change the J. C. Penney experience. It appears that none of the changes were what the customers actually wanted, but Johnson did not recognize until it was too late.