Leadership

Case SummaryBackgroundRon Johnson (HBS Class of 1984) created successful retail innovations at Target and Apple and was seen as "the Steve Jobs of retail". In 2011, at the urging of Bill Ackman (an investor holding 18% of J.C. Penney), he became CEO of J.C. Penney with the goal of a complete transformation.

J.C. Penney's predicamentAn old-line department store whose customers were middle-class, price-sensitive suburban mothers. From the 2000s it was squeezed from three sides — discount superstores (Walmart, Target), upscale department stores (Macy’s) and fast fashion (H&M, ZARA) — plus e-commerce (Amazon), and its market share and profitability kept sliding.

Johnson's transformation measuresPricing: scrapped 600 annual promotions and introduced "Fair and Square Pricing", with no more discounts or coupons.Placement: proposed a "Store within a store" concept, like a small town's main street plus square, to create an experience.Product: brought in designer brands and exclusive products and reinvented the private labels.People (culture): eliminated sales commissions and adopted Apple "Genius Bar"-style advisory service.Promotion: a new logo, a new spokesperson (Ellen DeGeneres), and slogans in the colours of the American flag.

ResultsImplemented too fast and without testing; loyal customers were disappointed (they were used to coupons), and new customers never became loyal. In 2012 the company posted heavy full-year losses, the share price fell from US$24 to US$16, sales dropped 20%–27%, and thousands were laid off.

OutcomeIn April 2013, Johnson was forced out and former CEO Ullman returned. The board felt that while the direction of the transformation was visionary, its execution was far too aggressive and bordered on disaster.

Class NotesLeadership AgendaWhy do people want to work for you?What is your leadership style? How is it evolving?What makes leaders effective in different situations & stages?How leaders create a psychological contract with employees?Developing employees who have an ownership?

You can add something new, but do not change the core

Be careful about the RE-BRANDING

What are the ingredients of your receipt?ConnectingCharismaStrategyBrandingPicking prioritiesauthenticlead by examples

When Scaling , as a founder, how do i adapt my model?4. Change takes time.Apple was also a long time journey.JCP moved too fast for all the stake holders, employees, clients, board members

5. Get a team role togetheryou want to listen, but have to be someone who want to say thingshow to get everyone on the same pace?

6. You have to earn the trust through time with people.Takes more time for people to digest ideas of others

7. What should we do when people are not embrace?People in your organization do NOT want to say No to youGet people to actually say what they really think

8. Retail Strategy vs. Change ProcessYou have to do two thingsbuilding new is very important, but…need the cash to fund the new things

9. Culture differenceTaxes center vs Califonia?If you want to run the turn around, you have to be a member of the community.Have to join!

10. If people think they are a community…A transaction business organization?Or you need a people stuff, rely on people to bring their energyyou want to get the best out of themHow they gonna work with me, how they gonna work with each other?Get an agreement, a true agreement.

11. Relationship with Johnson the board member?Great people with integrityNot guaranteed

12. It does not matter whether the Strategy is right or wrong.if your people do not buy in, a good strategy can result in a very bad result.

13. Humble vs Situational ArroganceYou can be a humble person, but also Situational Arrogance, because your experience shows that you understand what makes you successbe careful do not give yourself too much credit

14. Who will be the one that can tell you the truth?Who will be the window of your organization? Assessment of your peopleBuild relationship with the team

15. Look at the mirror, think about your ingredients of your receiptWhat accounts for the successHow are you going to make that happy

16. Is the intuition the best?Or should I bring myself a new model?

Situational Arrogance Definition: Inadvertently assuming your previous approach or actions are equally well-suited to address the current challenge or situation at hand. — RaffaelliWhy does this happen?

Psychological contributors:Anchored on past success; don't adjust to new conditionsAttribution errors about causes of successConfirmation bias