J.C. Penney CEO, Ron Johnson
During an analyst conference this week Johnson reminded the audience that in 2000 Michael Dell suggested that Apple should give the cash back to shareholders and shut down the business. When the Apple Store opened in 2001, one retail analyst famously predicted that Apple would turn off the lights on its failed retail ‘experiment’ within two years. The movie took a dramatic twist, however, and Apple became the most profitable retailer in America. This week thousands of people have been camping out overnight for days to be the first to buy the company’s new iPhone 5. What other store generates such intense loyalty?
Retail “experts” missed the boat in 2001 because they were looking at the wrong things. They were predicting Apple’s demise because other computer retailers like Gateway were failing. While analysts were pouring over their spreadsheets, they missed the secret sauce, the reason why Apple ultimately exceeded. “At Apple our goal was to enrich lives,” Johnson told the analysts at Wednesday’s meeting. Enrich lives. Those are the only two words on the front of the Apple Store credo card that employees carry with them. When you begin with the vision of enriching lives instead of “moving boxes,” magical things begin to happen. Today Ron Johnson is applying that philosophy to make magic happen again. After watching Johnson address the analyst community, I came away with five reasons for why Johnson has a very real chance to successfully reimagine the customer experience yet again.
Johnson has a compelling vision. “When you connect with the hearts of employees, they’re going to do great work,” said Johnson. Ron Johnson understands the power of vision to motivate employees, to spark creative ideas, and to generate customer loyalty. The Macintosh would never have been invented had Steve Jobs not had the vision “to put a computer in the hands of everyday people.” The Apple Store would never have been successful if Johnson and Jobs had seen it as a place to move computers instead of a location that would enrich the lives of its customers. Today Johnson’s vision is to “help Americans live and look better everyday.” He has an audacious, yet captivating goal. He doesn’t want J.C. Penney to your favorite ‘department store’. He wants it to be “your favorite store.” How fun would that be?
Johnson is courageous and optimistic. “We had to have the courage to endure a year of transformation,” Johnson told analysts. As sales continued to fall over the past few months and some of his pricing initiatives met with initial skepticism, reporters and analysts decided to write him off completely. The stock got a slight boost, however, when Johnson revealed this week that new shops are performing better than the rest of the store. But imagine being in Johnson’s shoes and reading these headlines about your initiatives.
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“We’re not here to improve, said Johnson. We’re here to transform and transformation is hard.” Johnson’s ultimate transformation of J.C. Penney is still in the first inning. He’s just getting warmed up. It takes courage for a leader to pick himself up and to go after his vision, especially after getting knocked down again and again in the press. It took courage for Apple to succeed (read 7 courageous ways Apple became America’s most valuable company) and it will take courage and optimism for Johnson to keep his eye on the long-term. So far he seems to have plenty of both.
Johnson understands the power of simplicity. Anyone who follows my columns knows I’m a big proponent of keeping communication simple and that I’m a big believer in the magical number three. I was pleasantly surprised to hear that Johnson is focused on just three radical innovations: shops, streets, and square. Johnson’s goal is to have 100 shops within J.C. Penney by 2015. These shops—Sephora, Levi’s, Disney, and many more—will have the look and feel of those brands and the employees in those stores will be specially trained so they are knowledgeable about the products. In other words, each store will be a “pure” and authentic representation of the brand experience.
Johnson is committed to the customer experience. J.C. Penney store aisles will be widened by five feet to include activities and specialty foods. Parents will be able to enjoy Caribou coffee, have a specialty gelato, or check on sports scores at the café while their children can have fun at the Lego table or iPad table. I have two young daughters. The Apple Store is one of their favorite stores in the mall because they get to play with the devices (and the iPads are conveniently filled with games and children’s movies). Recently, however, my girls have wanted to visit a pre-teen store called Justice. Interestingly, Johnson played a video from a focus group taken about twelve days before the analyst meeting. In the video a teenage girl who experienced just a sample of the new J.C. Penney design had this reaction: “I’m going to like it more than Justice.” If my kids have the same reaction, I know where I’ll be doing more of my shopping.
The “Square” will be in the center of the store and act as a dynamic seasonal destination. It’s the place where kids will go to get their picture with Santa. According to Johnson, the destinations in the Square will leave an imprint on the customers’ mind. It’s the place where memories are made. Johnson—better than anyone—knows that customers don’t want to be sold stuff. They want to feel good. The new J.C. Penney is being created to make people feel good and to leave with a smile on their face.
Johnson has seen the movie before. Johnson told analysts a story about Steve Jobs when Apple opened the SoHo store in New York in 2002. Johnson made the decision to open at 8:00 a.m. He didn’t realize that people weren’t shopping in lower Manhattan at that hour. About fifty people were in line. “Steve and I talked about half an hour. He said, ‘you know, nobody cares. There are days I feel like just giving up.” Jobs went back to his hotel. However, at 11:00 a.m. the crowds started showing up and Johnson urged Jobs to come back. From 12:00 noon to 1:00 p.m., more than one thousand customers walked through the door. Another eight hundred came the next hour. Jobs stayed for more than six hours. “He immersed himself in the customer, what he loved.”
Johnson ended the analyst conference by saying, “It’s really hard to transform things. It isn’t always fun. But that’s what we’re going to do. I’ve seen this movie and I’m really excited to see how this one plays out.” So am I.