Today I was a guest on the featured BlogTalkRadio show “Views from The Top” hosted by Adrienne Graham (@talentdiva). The episode was entitled “Know Thy Customer”.
Ms. Graham and I gave a quick rundown of what seemed to happen with the short tenure of once-Apple employee Ron Johnson (the genius behind Apple Store’s Genius Bar). This Harvard Business Review article has a positive spin on what Mr. Johnson did right. Adrienne and I talked briefly (the show is 30 minutes) about the communication strategies that perhaps Mr. Johnson didn’t use.
My main point in the interview (which is made with the acknowledgment that we don’t fully understand all the details behind Mr. Johnson’s ousting) was that when a business must pivot to match a new economic situation, then the internal communication is as important if not more important than the external communication. Externally I felt Mr. Johnson did a great job. I saw innovative and daring ads, personal letters and valuable spending cash from him.
So why didn’t it work? Adrienne and I pondered if Mr. Johnson had considered the phenomenon of “loss aversion” within the staff and whether or not he dealt with it.
“Loss aversion” is the rule, cited mostly in the study of Behavioral Economics, that people will stick to the status quo as long as possible. The loss of an established possession or process is 2 to 3 times more painful than the loss felt when not receiving a gain that was promised to you. In other words, losing 10 bucks from your pocket today feels way worse than not getting the 10 bucks your friend said was waiting for you at your desk.
JCPenney’s board seemed to want some major changes and innovation to turn the fate of the department store around. Ron Johnson seemed like the instigator extraordinaire for the job. If you have a half an hour, go take a listen to the conversation in iTunes.
I hope JCPenney survives the sad turn of events of this morning. If you’ve been following the story, let us know what you think. Do you think JCPenney gave Ron Johnson a chance?
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Not knowing much about this large US-based retail store — it sounds to me like the board probably expected miracles in a short amount of time. Similar, or in addition to something like the “loss aversion” idea, there is this notion that if there is still money coming in (as per before a change), there isn’t a real problem to solve. You can see this reflected in slow shift to embrace digital in something like the publishing industry. Or big traditional sports footwear giants being slower to catch on to the new trend of “barefoot” running. The trick, I think, is to put a monetary figure to be able to project what we will lose if we don’t make a change, so that any interim losses in strategy shifts can be accounted for.
Your first link to the HBR is interesting — and as someone whose profession is to listen to customers, it’s a notion that I wrestle with. A lot of listening work (whether through qualitative or quantitative) requires us to put our biases aside. When you are dealing with potentially innovative ideas, it’s true that customers may not yet know what they want. I’ve started to realise that intuition plays a great part in figuring out how to extract the potential hypotheses from customer conversations against which you can create testable situations to gauge real interest. More importantly, intuition is what you need to identify that potential opportunity that no one else has spotted yet.
I think Ron Johnson came from Apple with the attitude of “making markets” instead of “measuring markets”. Adrienne Graham’s point was that Ron didn’t survey his customers well enough, but honestly, I don’t think JCP would’ve gotten much innovation from a focus group. Ron was the right choice. I wish I knew for sure what went wrong. I’d shop at any retail store where he was at the helm. It was the first time in a decade I had bought clothes in that store, when Ron changed things up a bit. Now I’m so disappointed it’s going to go back to church lady clothes and baby onesies.
I believe in what Ron Johnson was trying to accomplish. I think of these things as:
* replace the product carried with a higher quality of goods
* cut costs on mailing coupons and create a consistently good price that equates with getting value for money
* modernize the store interiors with the store-within-a-store (gets rid of the 70s fixtures! YES!)
* and as a byproduct of that, make each employee an expert within their department (seriously welcome as well.)
The problems as I see it were:
* trying to do all of these in one fell swoop.
* trying to do all of these when not granted a long enough timeline to fully adopt any one of these.
* trying to run an internal restructure and policy change at the same time, with outsiders. Many of Johnson’s core team remained in CA instead of becoming a part of the JCP community.
Notably, Apple had the same problem when Jobs and NEXT came on. Many Apple people couldn’t accept the NEXTies bringing in DELL machines instead of using Apple computers, and there was large frustration at the idea that Apple bought NEXT but the actions were as if NEXT had bought Apple.
The differences are: Apple didn’t have a prayer back then and the board knew it. Here, JCP saw numbers go down and ascribed them fully to Johnson. They believe they have a prayer without him, and if they fail anytime soon, they’ll blame it on him.
JCP seems awfully short-sighted here, but the internal change management didn’t happen very well, both at HQ and at the store level. I think this is more of a JCP culture problem than a Ron Johnson problem. At Target and at Apple, the employees are younger and either are disaffected by what happens in store, or are emotionally invested in the company’s success – at JCP, the employees are more invested in status quo.
All great points. I agree with your assessment of the tasks Ron Johnson was undertaking. I actually liked him a lot, and I liked the changes in the stores. I was encouraged by them, as were many of my friends (moms in the 35-45 age range).
I didn’t realize that the CA ppl didn’t travel with Ron to the JCP community centers. Even Yahoo knows that people need to be onsite for major changes to happen.
I’m also disappointed in JCP’s short-sightedness here. How can such a big company make such simple mistakes? Doesn’t Forbes, NBR, The Economist, dang, everybody write about change management? I call this lack of innovation “Old White Guy Syndrome”. Tradition and loss aversion hold steady with the typical powers-that-be. I hope JCP survives this. We may have to wait for all the Old White Guys to die off though…