Three lessons from Ron Johnson’s failed run as JC Penney CEO

April 10, 2013
April 10, 2013

Ron Johnson is out at JC Penney. His seventeen month stint at the retail giant will go down in history as one of the great leadership fiascos of the decade.

We can learn a lot from Ron Johnson’s tenure at JC Penney. Here are three of the key lessons:

It is easier to lose your existing customers than it is to gain new ones

JC Penney proved that it is pretty easy to lose your customers. The company basically told people that the days of deep discounts were over and anyone looking for big sales should go shop at Kohl’s.

They did.

It is very hard to attract new customers, especially to a well-established brand. JC Penney tried to bring in people who were younger, more stylish and less price sensitive. They made some progress, apparently, but not very much and certainly not enough.

This isn’t a surprise; getting someone to rethink a brand takes time. Repositioning is an enormous challenge. It takes time and money and success is never certain.

Set low expectations

People evaluate results by comparing them to expectations. Is profit of $500 million good? Well, if the goal was $400 million, a profit of $500 million is terrific. If the goal was $800 million, a profit of $500 million is a disaster.

Johnson failed to set low expectations at JC Penney. His plan was going to hurt sales and profit in the short run but he didn’t predict the size of the drop. When results were weak, investors lost patience.

Meg Whitman at HP has embraced the idea of low expectations. As she began her tenure as CEO, she basically said HP won’t make anything for many, many years to come, perhaps ever. This is a good approach; it gives her time to make changes and adjust course.

Don’t get too confident

Ron Johnson and his leadership team at JC Penney were very confident. After a successful stint at Apple, Johnson believed he knew the answers. Johnson and his team also apparently thought the people working at JC Penney were somewhat clueless and pathetic.

So Johnson fired many of the existing executives and rolled out a plan that was deeply flawed. Did anyone tell him the plan wasn’t going to work? I suspect so. Did he listen? No.

Assuming you know all the answers is dangerous.

This post originally appeared on Tim’s blog. We welcome your comments at ideas@qz.com. 

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