Consider the innovations implemented by JCP. Would you shop at the CostCo (do not discuss JCP specifically) with these features? Why or why not? Use examples and illustrations from your personal experience.
Mini-Case An Innovation Failure at JCPenney: Its Causes and Consequences Former CEO Ron Johnson designed and tried to implement shaking up the firm. Moreover, he reminded analysts, a new strategy for JCPenney (JCP). However, the firm's tar- employees, and others that he came to JCP to "transform" get "middle market" customers did not respond well to the the firm, not to marginally improve its performance. new strategy and the innovations associated with it. In fact, Describing what he intended to do at JCP, Johnson said some say that Johnson's innovations and strategy alienated that "in the U.S., the department store has a chance to what had historically been the firm's target customers. regain its status as the leader in style, the leader in excite- Johnson came to JCP after successful stints at Target ment. It will be a period of true innovation for this com- and Apple. At Apple, he was admired for the major role pany." he played in developing that firm's wildly successful The essence of Johnson's vision for JCP was twofold. Apple Stores, which a number of analysts say brought First, he eliminated the firm's practice of marking up about "a new world order in retailing." It was Johnson's prices on goods and then offering discounts, heavy pro- ability to establish what some viewed as path-breaking motions, and coupons to entice its bargain-hunting tar- visions and to develop innovations to reach them that get customers. Instead, Johnson introduced a three-tiered appealed to JCP's board when he was hired. pricing structure that focused on what were labelled Comparing JCP to the Titanic, Johnson came to the "everyday low prices." To customers though, the pricing CEO position believing that innovation was the key to structure was confusing and failed to convince them thatthe "everyday low prices" were actually "low enough" functional teams were not used to facilitate implemen compared to competitors' prices. tation of the desired innovations such as the boutique Innovation was at the core of the second part of stores. In essence, it seems that Johnson himself, with- the new CEO's vision, with one objective being to give out the involvement of others throughout the firm, was JCP a more youthful image. The innovations Johnson instrumental in deciding that the boutiques were to be implemented to create this image included establishing used as well as how they were to be established and oper- branded boutiques within JCP stores. To do this, JCP set ated within selected JCP stores. In addition, the values up branded boutiques "along a wide aisle, or 'street' dotted associated with efforts to change JCP from its historic with places to sit, grab a cup of coffee, or play with Lego roots of being a general merchant in the space between blocks." With an initial intention of having 100 branded department stores and discounters to becoming a firm shops within JCP stores by 2015, Johnson asked people "to with a young, hip image were not shared among the firm's envision an entire store of shops with a street and square stakeholders. Finally, Johnson's work as an entrepreneur- in the middle representing a new way to interface with the ial leader was, seemingly, not as effective as should have customer." Disney was one of the brands to be included as been the case. Because of mistakes such as these, the level a shopping destination, as were Caribou Coffee, Dallas- of success desired at JCP through internally developed based Paciugo Gelato & Cafe, and Giggle, a store dedi- innovations was not attained. cated to making "it a whole lot easier to become a parent" by offering innovative and stylish "must-have baby items." Sources: 2013, J.C. Penney ousts CEO Ron Johnson, Wall Street Journal, In addition, and as noted in Chapter 4's Opening Case, www.wsj.com, April 8; D. Benoit, 2013, J.C. Penney asks customers for second chance, Wall Street Journal, www.wsj.com, May 1; D. Benoit, 2013, Levi's, IZOD, Liz Claiborne, and Martha Stewart branded Ackman thought Johnson could turn around 'Titanic' JCPenney, Wall items were to be included as part of the boutiques. Street Journal, www.wsj.com, April 8; S. Gerfield, 2013, J.C. Penney rehires But, these innovations and the strategy used to exploit Myron Ullman to clean up Ron Johnson's mess, Bloomberg Businessweek, www.businessweek.com, April 11; S. Clifford, 2013, J.C. Penney's new them did not work. So what went wrong? Considering plan is to reuse its old plans, New York Times, www.nytimes.com, May 16; the components of the model shown in Figure 13.2 yields S. Denning, 2013, J.C. Penney: Was Ron Johnson's strategy wrong? a framework to answer this question. While it is true Forbes, www.forbes.com, April 9; M. Halkias, 2012, J.C. Penney's Ron Johnson shows off his vision of future to 300 analysts, Dallas News, that Johnson had an entrepreneurial mind-set, cross- www.dallasnews.com, September 19
