When I was a little kid, I used to read the JC Penney catalog. I never looked like the kids in the pictures. This bothered me the way a scab on my knee would bother, and need picking. In different ways, both hurt. But even though my mom had to nip in the waists of my trousers, the clothes were practical and durable, a little nicer than Sears. Year in, year out, I wore them until my dad bought me my first pair of Levi's.
Until last year, I used to love going to Apple stores. I thought it was funny when my kid (age 6) asked of the newly opened Covent Garden, London store: "Is this a church?" So I was intrigued when Ron Johnson was appointed CEO to JC Penney, and watched with curiosity. Could Johnson revamp the store?
Soon after, I read (somewhere - the link escapes me) that Johnson's first video interview as CEO included 60 mentions of Apple in as many minutes. But the Apple he was referencing wasn't the one that celebrated consumers' abilities to Think Different - but the more imperial firm it had become since the iPod, iPhone and iPad.
At an investor day in January 20120 (the largest, apparently, in JCP's 110-year history), Johnson promised a breath of fresh air. Specifically, Johnson pledged immediate changes to pricing, promotions and personality.
Fresh air? Or hot air?
2012 was full of lurches. H1 2013 was even worse. Now Johnson is out and the CEO he replaced, Mike Ullman, is back at the helm. Roger L Martin (Dean of Rotman School of Business and one of my favorite voices for how 21st Century businesses should be led) writes in HBR: "Under Johnson, JCP had nothing even vaguely resembling a worthwhile strategy and its path to get to where it wished was comically disastrous."
Why? Because "JCP had a plan for betterment and not winning".
Under Johnson, it seemed JCP had a notion of what aura it wanted to create in its revamped retail zones. But no clue about the consumers it would attract, or how other segments currently shopping at JCP would respond to being repositioned.
Martin makes the point: low-cost is a strategy, low pricing is not. Others have written about the problems JCP faced with manufacturers who either couldn't or wouldn't change to suit Johnson's master plan. What I wonder is: who was looking at reality while the Apple-esque vision was being sold to the Board?
StoryFORMs intrinsically has the flexibility to capture the needs and wants of both consumers (taking segments, each in turn) and manufacturers...in relation to reality. Surely, it's not the only tool, but it is one way to test the corporation's "offer" against their needs and the current reality. When an approach doesn't make sense in StoryFORMs, my hunch is it won't work in practice.
Anyone want to StoryFORM JCP 2013?
I'd say start with red. Not because of JCP's poor performance, but because in StoryFORMs, red is for reality. What is the reality of shopping, retail, clothing, household goods?
The world is online. As Adam Hartung writes in Forbes: JCP is still trying to compete with "on-line merchants which have lower fixed costs, faster inventory turns and wider product selection." And as Hartung surmises: "Fighting to be the last remaining fixed store is going to be a loss-producing, painful game with no winner."
In economic terms, the American population is changing. The middle class is shrinking. The population would map more like an hourglass than a bell curve, according to the Gini Index. In other words, a wealth distribution more commonly associated with Mexico or the Philippines. According to a Wall Street Journal article in autumn 2011, Proctor & Gamble realized this as far back as 2009.
After issuing a sharply lower-than-expected earnings forecast for the company's 2010 fiscal year, then-CEO A.G. Lafley said the company would take a "surgical" approach to cutting prices on some products and develop more lower-priced goods. "You have to see reality as it is," Mr. Lafley said.
Over one-third of all American adults are obese, according to the CDC.
Why eliminate extended sizes, as Johnson's team did in 2012? Or ship merchandise to stores without considering historic purchase data about what shoppers in specific stores had previously bought? (See this article in the Dallas News.)
If ever there was a case for sensibly applying big data, surely it's around clothing sizing. People won't buy items that don't fit their body shape. It seems that JCP has moved slowly to bring their Foundry Big & Tall spin-off into the fold as an accessible private brand.
JCP's problem isn't only about bricks-and-mortar in the digital age. Or, in any simple sense, about shrinking wallets or expanding waists. The approach Johnson advocated fundamentally misunderstood what shoppers were looking for, wanted and are willing to pay for.
Writing in HBR in April 2013, Rita McGrath observes:
I think Penney's management needs to once again get back into the heads of its core consumers. They need to understand those consumers' entire sets of experiences and make doing business with Penney's better again. But they also need to decide where they are going to find growth again. In an hourglass economy, it's unlikely to be their traditional middle-income consumer. Who could they appeal to and how?
When JCP leadership knows the answers to that question - and appreciates how many StoryFORMs it will take to map the different kinds of customers - then they'll be much closer to a resilient strategy.
Your turn to StoryFORM
So that's my start. What would you add (or take away) from JCP's StoryFORM?
Given that the board still hasn't figured out the real problem they have - which, as Martin points out, isn't simply execution - there's bound to be yet another new CEO after Ullman steps down the second time. Maybe s/he can use the insight?