Question

Former CEO Ron Johnson designed and tried to implement a new strategy for JCPenney (JCP). However, the firm’s tar- get “middle market” customers did not respond well to the new strategy and the innovations associated with it. In fact, some say that Johnson’s innovations and strategy alienated what had historically been the firm’s target customers.

Johnson came to JCP after successful stints at Target and Apple. At Apple, he was admired for the major role he played in developing that firm’s wildly successful Apple Stores, which a number of analysts say brought about “a new world order in retailing.” It was Johnson’s ability to establish what some viewed as path-breaking visions and to develop innovations to reach them that appealed to JCP’s board when he was hired.

Comparing JCP to the Titanic, Johnson came to the CEO position believing that innovation was the key to shaking up the firm. Moreover, he reminded analysts, employees, and others that he came to JCP to “transform” the firm, not to marginally improve its performance. Describing what he intended to do at JCP, Johnson said that “in the U.S., the department store has a chance to regain its status as the leader in style, the leader in excitement. It will be a period of true innovation for this company.”

The essence of Johnson’s vision for JCP was twofold. First, he eliminated the firm’s practice of marking up prices on goods and then offering discounts, heavy pro- motions, and coupons to entice its bargain-hunting tar- get customers. Instead, Johnson introduced a three-tiered pricing structure that focused on what were labelled “everyday low prices.” To customers though, the pricing structure was confusing and failed to convince them that the “everyday low prices” were actually “low enough” compared to competitors’ prices.

Innovation was at the core of the second part of the new CEO’s vision, with one objective being to give JCP a more youthful image. The innovations Johnson implemented to create this image included establishing branded boutiques within JCP stores. To do this, JCP set up branded boutiques “along a wide aisle, or ‘street’ dotted with places to sit, grab a cup of coffee, or play with Lego blocks.” With an initial intention of having 100 branded shops within JCP stores by 2015, Johnson asked people “to envision an entire store of shops with a street and square in the middle representing a new way to interface with the customer.” Disney was one of the brands to be included as a shopping destination, as were Caribou Coffee, Dallas- based Paciugo Gelato & Cafe?, and Giggle, a store dedicated to making “it a whole lot easier to become a parent” by offering innovative and stylish “must-have baby items.” In addition, and as noted in Chapter 4’s Opening Case, Levi’s, IZOD, Liz Claiborne, and Martha Stewart branded items were to be included as part of the boutiques.

But, these innovations and the strategy used to exploit them did not work. So what went wrong? Considering the components of the model shown in Figure 13.2 yields a framework to answer this question. While it is true that Johnson had an entrepreneurial mind-set, cross-functional teams were not used to facilitate implementation of the desired innovations such as the boutique stores. In essence, it seems that Johnson himself, with- out the involvement of others throughout the firm, was instrumental in deciding that the boutiques were to be used as well as how they were to be established and operated within selected JCP stores. In addition, the values associated with efforts to change JCP from its historic roots of being a general merchant in the space between department stores and discounters to becoming a firm with a young, hip image were not shared among the firm’s stakeholders. Finally, Johnson’s work as an entrepreneurial leader was, seemingly, not as effective as should have been the case. Because of mistakes such as these, the level of success desired at JCP through internally developed innovations was not attained.

1. The new CEO tried to be innovative. Were the innovations introduced, more incremental or more novel? Please explain.

2. What are the reasons that the innovations implemented by the new CEO failed?

3. What recommendations do you have for turning around the performance of JCP?

Answer 1

Definitely the new CEO tried to be innovative in this specific situation but he misunderstood the market requirement earth created a complex pricing structure which was hard to understand by the customer.

Innovations which were implemented into the organisation were more incremental then they were discussed by the CEO. If the suggestions work correctly implemented in the organisation that it would have definitely helped your organisation to create a more productive working environment and attracting more customers.

Pricing structure was too complex to understand by the customer that's why they shifted to another retailer which was proven to be harmful for the company.

The main reason behind failing innovation implemented by the CEO what's the complexity of the decision. Pricing structure was too complex to be understood by the general public and differentiation in the price created confusion as well as also failed to attract new customers which was the main motive behind changing the strategy. This implementation was a very confusing decision made by the ceo for the organisation.

If JCP applied less complicated pricing strategy and implemented this specific change in pricing using social media tools via advertising, it would have been very effective as well as provided extensive support to the overall organisational structure by reducing the impact of complicated decisions which were less understood by the customers which type of approach also have helped organisation to be more productive in the same situation and improve its working capabilities for the same market segment. It would have been very beneficial for the organisation as these new decisions regarding simplified pricing structure would have been created a positive impact on the market availability of the company and improve its sales.