Hubris Maximus – Ron Johnson and JCP

Unsurprisingly, Ron Johnson, the former Apple retail executive, has finally been dumped by the J.C. Penney board after 17 disastrous months, as CEO at the mid-tier department store. He took the Texas-based company from a profit in 2011 to a staggering loss in 2012.

William Ackman the activist hedge fund manager (who owns an 18% stake in the ailing JCP), pushed for Ron Johnson to take over the plodding retail behemoth and got his wish to huge fanfare. He touted Johnson, because of his success at Apple and stint at Target as the divine solution to turnaround JCP. No one doubted the need for an overhaul and Johnson provided a compelling sales pitch of a reimagined JCP.

Entrance to the Joe Fresh Department at JCP

Entrance to the Joe Fresh Department at JCP

Johnson was given free rein to continue living in California and play chess with the lives of thousands of employees, vendors and shareholders while disappointing loyal customers. He laid off thousands, stopped sales promotions and created slick Target-esque marketing before changing lack-luster product lines.

This was a classic case of  big-city-smarty-pants going to show those country bumpkins, how to run a better company. Johnson’s attitude was arrogance unchained and a sense of self-infallibility. This is a perfect case study in “Hubris Maximus” for the B-schools. Ackman imparted and granted supernatural powers on a big coastal ego that had no clue how to create and sell apparel and home products. Let face it, anyone can be a genius (pardon the pun he invented the “Genius Bar” in Apple stores) when you are selling the world’s most coveted products. Apple products will sell out of a shack, peddled on the street or at any ordinary retailer. He didn’t create the magic of Apple, he ran their stores.

A JCP turnaround requires more than making physically appealing stores (he succeeded with better visual merchandising); it is a product issue, reinvention of many private label brands and establishing meaningful creative partnerships that would inspire existing customers and attract new ones. There are a few bright lights, but for the most part the new products, like the revamped Liz Claiborne department, is nothing more than make-up on a very big corpse.

William Ackman isn’t the only guy to hire someone who breathes his same rarefied air. So many companies, only want to hire from their social circles, élite schools or MBA’s without regard to their actual credentials and cultural sensitivities to get the job done. They like smelling their own and like-minded perfume.

Better visual merchandising didn't substitute for the traffic driven by promotions.

Better visual merchandising didn’t substitute for the traffic driven by promotions.

The key to the JCP turnaround was respecting the desires of their loyal customers, a willingness to listen and learn before you shoot, testing before your roll out, building meaningful brands and inspiring and empowering your employees. Success was never going to happen with the blind ego of a mere mortal. Ackman made a fool’s bet and lost his shirt.

Dix&Pond is the blog of www.dixandpond.com Creative and strategic consulting for retail and wholesale apparel, shoe and consumer product companies. Follow me to get the latest posts

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