A breath of fresh air indeed

February 7, 2012  |  by Kent Stones

I've been casually following the J.C. Penney strategy story over the last week, as I'm curious to see just how CEO Ron Johnson will apply his Apple experience to a department store initiative. Business reporters have been skeptical, as have I, because it is hard to imagine how the retail formula for a vertically integrated specialty brand could be applied to a general department store. I hadn't watched the full “In Praise of Fresh Air” presentation that Johnson made in NYC and now I'm glad I did, because I believe J.C. Penney will succeed far beyond what anyone expects, based on three concepts outlined in the presentation:

1. Finding the core problem

2. Not getting distracted by too many things

3. Choosing specialty brands as the model to follow

Integrity isn't an important thing, it's the only thing

Half the battle in strategy is diagnosing the real problem, and Johnson spent a lot of time explaining his team’s conclusions. He illustrated them through an expanded set of marketing "P's" - price, promotion, place, product and two additions, personality and presentation. Products were stale and fragmented. Stores (place) were outdated. Pricing and promotion were out of control. Merchandising (presentation) was out of sync with the times, and the brand personality was overwhelmed by the constant promotions. One would have expected the announcement to be all about how JCP is going to fix these specific problems. But this team did something admirable: they took time to think about what was causing the issues. That allowed them to discover all these issues were being caused by a deeper, fundamental problem of pricing integrity.

One step at a time

Don't get me wrong, the presentation did outline strategies that would address many of the problems: updating the stores; the introduction of everyday pricing; revamping product lines; refreshing the brand. But Johnson revealed those initiatives are going to be solved over time. The first focus will be addressing pricing integrity, which has "infected" the company and created a culture of discounting and constant promotions, draining both resources and morale. The sheer number and logistics of promotions required at every level left little time and money for anything else. The decision to focus on simplifying pricing and eliminating the associated resource-consuming activities is smart, as it will eventually liberate a flood of capital with which to address other things. Johnson referenced a key lesson he learned from Steve Jobs: focus on the most important things first and don’t try to do it all at once. 

Whom to emulate? Specialty brands!

The inspirational archetype that Ron Johnson used for J.C. Penney was not best-in-class department stores, it was specialty brands! He wanted to emulate the "curated merchandising" approach, believing that shoppers will appreciate and seek stores that take the time and effort to select, organize and care for items they believe their customers will love. The focus will be on creating an experience that encourages customers to come to the store before they are ready to buy as well as when they are ready to buy, and then supports and services them after they buy. As Johnson continually emphasized, he simply wanted to create a woman's favorite store. Note he didn't say department store, he said favorite store, period. The only way this will happen is making her feel it was it worth her time and effort, which is exactly why specialty brands are successful. They deliver an intangible feeling that makes it worth spending more time or money on that brand.

A breath of fresh air

I do believe we're about to witness another remarkable retail story, and there are some valuable insights from which we can all learn. First is the importance of getting to the real problem. It's tempting to be action-oriented and just start doing something. But a little bit of thoughtfulness can lead to the ability to focus on fewer actions with greater impact, moving an organization from frenzy to cadence. The second lesson is that success doesn't necessarily have to mean bigger. By simply focusing on being better, not only will the other elements of success occur but it will all  be more enjoyable for everyone. Ron Johnson also quoted Steve Jobs on this, that the journey is the reward. A breath of fresh air, indeed.