CEOs
What J.C. Penney's Ron Johnson must do now
March 5, 2013: 10:59 AM ETRon Johnson's strategy must first be grounded in the simple fact that J.C. Penney customers are not the same as Apple's.
By Steven Snyder
FORTUNE -- When Ron Johnson announced his decision to leave Apple for the top position at J.C. Penney, shares for the department store chain shot up 17.5% in a day. Shareholders were eager to see how the genius behind Apple's retail strategy would perform in a sector begging for innovation.
Fast-forward to the present: Shares of JCP (JCP) plummeted 21% last week following the release of the store's worse-than-expected fourth quarter results, and Apple's (AAPL) retail golden boy has yet to hit his stride. Through a series of drastic and decidedly ill-fitted pricing decisions -- from eliminating coupons to halting beloved sales events -- Johnson's tenure so far illustrates the danger of relying on past successes as a compass for new endeavors.
This dangerous pitfall is certainly not unique to Johnson. Consider Carol Bartz, who fell flat on her face as she tried to turn around Yahoo (YHOO) using the same fear-mongering tactics that had worked so well when she was CEO at Autodesk (ADSK).
Executives facing new situations often employ the same strategies and tactics that proved successful in the past without questioning whether those strategies are appropriate for the new circumstances. I call this the "experience blind spot." While this strategy can be particularly perilous for executives who move into a new role or company, this blind spot can also affect tenured executives who face unexpected crises, as we saw with Tony Hayward following the BP (BP) oil spill.
How can today's executives balance the market's demand for agility and confidence while avoiding this pitfall?
Today is not the same as yesterday
Staid retailer J.C. Penney couldn't be more different than Apple, which is known as much for its innovation and brand loyalty as for its steep product prices. JCP had a legacy customer base accustomed to waiting for special sales with hopes of finding a "steal." When Johnson did away with those sales in favor of everyday low pricing, customers lost their motivation to shop there. By relying on his experience at Apple, Johnson overlooked the stark contrast between the two organizations and, as a result, he failed to recognize the desires of JCP's customers.
In approaching any new business situation, it's important to carefully consider what is different this time around. This is exceptionally challenging for successful executives, because their minds immediately gravitate toward the similarities between the current situation and past wins. Yet to break out of the blind spot, executives must intentionally immerse themselves in the contrasts.
Beware of hubris
Successful executives often delude themselves into thinking they are infallible. We saw this kind of behavior when Johnson declined to test his pricing overhaul for JCP prior to an all-store rollout. When a colleague suggested a limited store test of his new strategy, Johnson reportedly responded, "We didn't test at Apple."
Avoiding the hubris trap requires executives to listen to the opinions of others. Executives are subject to many such sentiments, from shareholders, colleagues, and customers. Carefully considering the input of others -- be it agreement or dissent -- is critical to making a fully informed decision. It may not change the path an executive takes in the end, but it offers a beneficial speed bump that ensures that several options are considered.
Face the facts
Amid pressures of an impending takeover by an angry founder, Best Buy (BBY) CEO Hubert Joly spent his first week on the job as a salesman at the company's Minnesota stores. His purpose? To learn the business from those working on the front lines, giving him a better understanding of the company's current state and which strategies may work in his turnaround effort. While the jury is still out on whether Joly will be successful in his new role, he appears to have recognized the importance of focusing on what's actually happening at his company today.
As reports emerge that Johnson may have only six months left to patch up J.C. Penney, it is imperative that, in addition to putting past successes aside, he focus on what's actually going on at his company right now. His strategy at JCP must be unlike anything he has done before; it must be grounded in the fact that JCP customers are not the same as Apple's.
Steven Snyder is the founder of consulting firm Snyder Leadership Group. He is the author of Leadership and the Art of Struggle (Berrett-Koehler, March 2013).
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