Planning Change: Lessons from the World of Retail

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Planning Change: Lessons from the World of Retail

Brian Kenny: On May 19, 2001 Apple christened its first-ever retail stores. One in Fairfax County in Virginia, the other in Glendale, California. In the first two days they generated $600,000 dollars in sales. The New York Times wrote that Apple had transformed the boring computer sales floor into a sleek playroom filled with gadgets. Today with we will hear from Professor Das Narayandas about his case entitled Ron Johnson: Retail at Target, Apple, and J.C. Penney. I am your host Brian Kenney and you are listening to Cold Call. Das, welcome.

Das Narayandas: Thank you.

BK: I expect most of our listeners have shopped at Target and J.C. Penney and Apple. They can probably relate to this story and some of the things you are going to tell us. Could you start by setting up the case for us. Tell us: who is Ron Johnson?

DN: Ron Johnson is an alum of the Harvard Business School. He has had a very explosive career, I would say, in terms of growth, has gone through a number of companies. At each place, at each part of his career, he has done something very interesting. The case, as the title suggests, is a career in retailing. It highlights his time at Target and then Apple and then at J.C. Penney at various levels in the organization as he rose through the ranks to eventually become the CEO at J.C. Penney.

BK: And he did this at a very interesting time in the retail space. I want to come back to that to talk about how the landscape was shifting under his feet. How did you come to write the case? What inspired you to write it?

DN: I have always been interested in understanding how people make decisions in their careers and it has also been fascinating to observe successful people who have had a series of successes and sometimes have a misstep. The question that comes up is how does one decide to transition in one’s career? Where does one go? How does one make sure that is the right place to go? And how does one keep on building on successes? I wanted to use this case to help people understand how to be good at making the right series of decisions in their careers.

BK: What kind of a leader is Ron Johnson? Can you describe his style to us?

DN: Clearly he is an individual who is very smart. He is also humble. I met him after his time at J.C. Penney, when he had left J.C. Penney. And he saw whatever he had done through his career as learning opportunities. Some plusses, some positives, some negatives. But he was always looking to get better and learn from all actions that he had taken. The other thing I liked about him was the hunger and the desire to try new things. That showed up in the way he made decisions. For example, when he went to J.C. Penney and took over as CEO he invested his own money; so he put money in his actions, behind his actions. I mean he wasn’t playing with other’s resources. He takes ownership. Overall, a very pleasant and good person to work with.

BK: You talk about the fact that he was learning as he went and applying experience from one place to the next. Can you talk about his years at Target and how the landscape was changing in the retail space at that time?

DN: Right. Around the time that he was at Target, you had Wal-Mart coming up with this “everyday low pricing” dominating the low end of the market. Then you had, at the high end, branded products available through high-end department chains. But there was a gap in the middle. There was literally nothing in the middle. So all the players who are trying to—who in the same space as Wal-Mart had to either give up or be different. Target chose to be different. Target decided to offer branded products at low prices, and therefore created an opportunity for themselves because the American consumer did want something special but at budget prices.

BK: And he learned a lot about creating shopping environments at Target that he then brought to Apple. That was part of the reason to how he came to be at Apple?

DN: Right. I think at Apple, along with Steve Jobs and the other leaders of Apple, he was involved in the resurgence of retailing in the world of computers. But the interesting thing there is, at a time when everyone else (like IBM, for example) was leaving the PC market because it was a commodity, Apple took the very opposite view that the PC was not a commodity. Apple saw it as the hub in the digital world. I mean, they foresaw the evolution of the digital world in the last 15 years, by understanding that the Mac could become the source of connection for the average consumer with the digital world. It is critical to provide a touch and feel and that touch and feel does not come from just looking at pages in a computer shop book or the web and reading some flat files on product descriptions. One needs to touch and feel what happens and the brilliance of that—what the Apple team did then was understand that they needed to bring consumers in to visualize the future.

BK: The Genius Bar was one of Ron’s ideas.

DN: Amazing, an amazing addition. I love the title of the Genius Bar. They could have called it a technical bar but they called it the Genius Bar.

BK: Which was very Applesque. And then there is the retail store that I mentioned in the beginning of the podcast. That was pre-Ipod. It was pre-Iphone. It was pre-Ipad. So they were creating the experience at the very inception.

DN: Absolutely.

BK: So tremendous success for Ron at Target, and then moving and taking that experience to Apple and building on that experience, and then the J.C. Penney opportunity comes up.

DN: Right.

BK: What happens?

DN: Initially J.C. Penney was interested in having Ron join the board. Clearly that made sense because he had a lot to bring from other industries into what was then a very tough environment for department stores focused on middle class America. So the relationship that the consumers had with a department store like J.C. Penney was an opportunity to provide the dreams of a family at a low price and it was all about finding these deals on a regular basis. But then that market was beginning to contract and the online consumer is coming in full force in this country. So J.C. Penney and the other retailers like Sears were facing this whole question of: how do we morph an existing model that was brilliant in its design to serve middle class America through the last second half of the last century into the online world? So someone like Ron Johnson was seen as a savior who could transform J.C. Penney from being just another retailer to being a combination of retailer and etailer, serving not only this traditional customer base but also being able to lead these customers into the new world (which was one very different from the historical model that they had).

BK: And he made some assessments early on which drove this strategic plan that he put into place. He really wanted to make some pretty radical changes as related to the J.C. Penney approach to doing things. Can you describe what some of those things were?

DN: He said, “We need to change the retail environment. It has to go away from being the staid old shopping experience to something that is exciting.” So he literally redid the store floors. People were no longer standing behind counters. They were walking around with Ipads and electronic devices that facilitate sales and capture point of sale activities. He changed the people in the environment, he changed the shopping environment. He changed, in a way significantly, the mix of products available in the store. He transformed [it into something] that appears to be much more tuned into today’s world.

BK: But there was some backlash to that.

DN: Like any change in this world. It is amazing as human beings how much we love the status quo. If you ask people to change too fast they do tend to react negatively even though it might be the right thing for them. So yes, there were reports in the news that there were many places where things didn’t work out. It was more a question of: was the firm moving at a faster pace than the consumer wanted to or was it doing things that the consumer didn’t want to do? I think it was more the former. Planning change is one of the hardest things and it has been the kind of hurdle that many a leader has faced—to find the right pace of change and the right amount of change. You might have the right ideas. You might know exactly where we need to get to. But you need to plan how you are going to bring both the organization and the market to with you, because if either one of these entities chooses to move along at a different pace? As a leader you are landed with a problem, which I think is one of the hurdles that Ron Johnson faced in his time at J.C. Penney.

BK: Yes. A hugely important lesson. As you discussed this in the classroom, what are some perspectives that the students bring into the conversation?

DN: This case is meant to be very introspective. As much as this case is about discussing one leader’s journey, my objective is to force individuals to ask: what would I have done in that place? And it turns out to be fascinating because people begin to say, “I now understand how to think about transitions.” We spend a lot of time in the case talking about: how do you decide? What are the things that you learn in one environment that you can take into another world? What are those things that will not transfer from one world into another? Right, and then what are the new things that you have to learn? So the whole case is meant to force this decision of: how do you build on success? And how do you expand and grow as an individual?

You know, during the time that I have been here at HBS, I have seen an innumerable number of cases where there are brilliant people—there are really smart individuals who have achieved an enormous amount of success who suddenly trip up. In hindsight it is so easy to for someone to look and say, “my god, how could that happen?” But when you are in that position I can tell you one thing every individual I have spoken with on this issue tells me is it is extremely hard to identify. For example, in Ron Johnson’s case in the previous assignments he was working in a team and when he came to J.C. Penney he was CEO. Now being a first-time CEO is not easy. You need to find the right people to surround yourself with; not just the ones who can make change happen, but the ones who will keep you informed about what you need to hear (not on only what they think you want to hear). So lots of issues that come up about what it takes to be a leader and what it takes to grow as a leader over time.

BK: Das, thank you for joining us today.

DN: Oh, pleasure. Thank you very much.

BK: You can find this case along with thousands of others in the Harvard Business School case collection at HBR.org. I am Brian Kenny and thanks for listening to Cold Call, the official podcast of Harvard Business School.

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Planning Change: Lessons from the World of Retail

Brian Kenny: On May 19, 2001 Apple christened its first-ever retail stores. One in Fairfax County in Virginia, the other in Glendale, California. In the first two days they generated $600,000 dollars in sales. The New York Times wrote that Apple had transformed the boring computer sales floor into a sleek playroom filled with gadgets. Today with we will hear from Professor Das Narayandas about his case entitled Ron Johnson: Retail at Target, Apple, and J.C. Penney. I am your host Brian Kenney and you are listening to Cold Call. Das, welcome.

Das Narayandas: Thank you.

BK: I expect most of our listeners have shopped at Target and J.C. Penney and Apple. They can probably relate to this story and some of the things you are going to tell us. Could you start by setting up the case for us. Tell us: who is Ron Johnson?

DN: Ron Johnson is an alum of the Harvard Business School. He has had a very explosive career, I would say, in terms of growth, has gone through a number of companies. At each place, at each part of his career, he has done something very interesting. The case, as the title suggests, is a career in retailing. It highlights his time at Target and then Apple and then at J.C. Penney at various levels in the organization as he rose through the ranks to eventually become the CEO at J.C. Penney.

BK: And he did this at a very interesting time in the retail space. I want to come back to that to talk about how the landscape was shifting under his feet. How did you come to write the case? What inspired you to write it?

DN: I have always been interested in understanding how people make decisions in their careers and it has also been fascinating to observe successful people who have had a series of successes and sometimes have a misstep. The question that comes up is how does one decide to transition in one’s career? Where does one go? How does one make sure that is the right place to go? And how does one keep on building on successes? I wanted to use this case to help people understand how to be good at making the right series of decisions in their careers.

BK: What kind of a leader is Ron Johnson? Can you describe his style to us?

DN: Clearly he is an individual who is very smart. He is also humble. I met him after his time at J.C. Penney, when he had left J.C. Penney. And he saw whatever he had done through his career as learning opportunities. Some plusses, some positives, some negatives. But he was always looking to get better and learn from all actions that he had taken. The other thing I liked about him was the hunger and the desire to try new things. That showed up in the way he made decisions. For example, when he went to J.C. Penney and took over as CEO he invested his own money; so he put money in his actions, behind his actions. I mean he wasn’t playing with other’s resources. He takes ownership. Overall, a very pleasant and good person to work with.

BK: You talk about the fact that he was learning as he went and applying experience from one place to the next. Can you talk about his years at Target and how the landscape was changing in the retail space at that time?

DN: Right. Around the time that he was at Target, you had Wal-Mart coming up with this “everyday low pricing” dominating the low end of the market. Then you had, at the high end, branded products available through high-end department chains. But there was a gap in the middle. There was literally nothing in the middle. So all the players who are trying to—who in the same space as Wal-Mart had to either give up or be different. Target chose to be different. Target decided to offer branded products at low prices, and therefore created an opportunity for themselves because the American consumer did want something special but at budget prices.

BK: And he learned a lot about creating shopping environments at Target that he then brought to Apple. That was part of the reason to how he came to be at Apple?

DN: Right. I think at Apple, along with Steve Jobs and the other leaders of Apple, he was involved in the resurgence of retailing in the world of computers. But the interesting thing there is, at a time when everyone else (like IBM, for example) was leaving the PC market because it was a commodity, Apple took the very opposite view that the PC was not a commodity. Apple saw it as the hub in the digital world. I mean, they foresaw the evolution of the digital world in the last 15 years, by understanding that the Mac could become the source of connection for the average consumer with the digital world. It is critical to provide a touch and feel and that touch and feel does not come from just looking at pages in a computer shop book or the web and reading some flat files on product descriptions. One needs to touch and feel what happens and the brilliance of that—what the Apple team did then was understand that they needed to bring consumers in to visualize the future.

BK: The Genius Bar was one of Ron’s ideas.

DN: Amazing, an amazing addition. I love the title of the Genius Bar. They could have called it a technical bar but they called it the Genius Bar.

BK: Which was very Applesque. And then there is the retail store that I mentioned in the beginning of the podcast. That was pre-Ipod. It was pre-Iphone. It was pre-Ipad. So they were creating the experience at the very inception.

DN: Absolutely.

BK: So tremendous success for Ron at Target, and then moving and taking that experience to Apple and building on that experience, and then the J.C. Penney opportunity comes up.

DN: Right.

BK: What happens?

DN: Initially J.C. Penney was interested in having Ron join the board. Clearly that made sense because he had a lot to bring from other industries into what was then a very tough environment for department stores focused on middle class America. So the relationship that the consumers had with a department store like J.C. Penney was an opportunity to provide the dreams of a family at a low price and it was all about finding these deals on a regular basis. But then that market was beginning to contract and the online consumer is coming in full force in this country. So J.C. Penney and the other retailers like Sears were facing this whole question of: how do we morph an existing model that was brilliant in its design to serve middle class America through the last second half of the last century into the online world? So someone like Ron Johnson was seen as a savior who could transform J.C. Penney from being just another retailer to being a combination of retailer and etailer, serving not only this traditional customer base but also being able to lead these customers into the new world (which was one very different from the historical model that they had).

BK: And he made some assessments early on which drove this strategic plan that he put into place. He really wanted to make some pretty radical changes as related to the J.C. Penney approach to doing things. Can you describe what some of those things were?

DN: He said, “We need to change the retail environment. It has to go away from being the staid old shopping experience to something that is exciting.” So he literally redid the store floors. People were no longer standing behind counters. They were walking around with Ipads and electronic devices that facilitate sales and capture point of sale activities. He changed the people in the environment, he changed the shopping environment. He changed, in a way significantly, the mix of products available in the store. He transformed [it into something] that appears to be much more tuned into today’s world.

BK: But there was some backlash to that.

DN: Like any change in this world. It is amazing as human beings how much we love the status quo. If you ask people to change too fast they do tend to react negatively even though it might be the right thing for them. So yes, there were reports in the news that there were many places where things didn’t work out. It was more a question of: was the firm moving at a faster pace than the consumer wanted to or was it doing things that the consumer didn’t want to do? I think it was more the former. Planning change is one of the hardest things and it has been the kind of hurdle that many a leader has faced—to find the right pace of change and the right amount of change. You might have the right ideas. You might know exactly where we need to get to. But you need to plan how you are going to bring both the organization and the market to with you, because if either one of these entities chooses to move along at a different pace? As a leader you are landed with a problem, which I think is one of the hurdles that Ron Johnson faced in his time at J.C. Penney.

BK: Yes. A hugely important lesson. As you discussed this in the classroom, what are some perspectives that the students bring into the conversation?

DN: This case is meant to be very introspective. As much as this case is about discussing one leader’s journey, my objective is to force individuals to ask: what would I have done in that place? And it turns out to be fascinating because people begin to say, “I now understand how to think about transitions.” We spend a lot of time in the case talking about: how do you decide? What are the things that you learn in one environment that you can take into another world? What are those things that will not transfer from one world into another? Right, and then what are the new things that you have to learn? So the whole case is meant to force this decision of: how do you build on success? And how do you expand and grow as an individual?

You know, during the time that I have been here at HBS, I have seen an innumerable number of cases where there are brilliant people—there are really smart individuals who have achieved an enormous amount of success who suddenly trip up. In hindsight it is so easy to for someone to look and say, “my god, how could that happen?” But when you are in that position I can tell you one thing every individual I have spoken with on this issue tells me is it is extremely hard to identify. For example, in Ron Johnson’s case in the previous assignments he was working in a team and when he came to J.C. Penney he was CEO. Now being a first-time CEO is not easy. You need to find the right people to surround yourself with; not just the ones who can make change happen, but the ones who will keep you informed about what you need to hear (not on only what they think you want to hear). So lots of issues that come up about what it takes to be a leader and what it takes to grow as a leader over time.

BK: Das, thank you for joining us today.

DN: Oh, pleasure. Thank you very much.

BK: You can find this case along with thousands of others in the Harvard Business School case collection at HBR.org. I am Brian Kenny and thanks for listening to Cold Call, the official podcast of Harvard Business School.

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