BUS 4476 Troy University Causes & Consequences of Innovation Failure at JCPenney Case Discussion : An Innovation Failure at JCPenney: Its Causes and Conseq

BUS 4476 Troy University Causes & Consequences of Innovation Failure at JCPenney Case Discussion : An Innovation Failure at JCPenney: Its Causes and ConsequencesRespond to question : Do the innovations implemented by JCP sound interesting to you? Would you shop at a store with these features? Why or why not? Use examples and illustrations from your personal experience.around 800 words 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 that
Chapter 13: Strategic Entrepreneurship
437
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 & Café, and Giggle, a store dedi-
cated 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 implemen-
tation 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 oper-
ated 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 entrepreneur-
ial 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.
Sources: 2013, J.C. Penney outs CEO Ron Johnson, Wall Street Journal,
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,
Ackman thought Johnson could turn around “Titanic’ JCPenney, Wall
Street Journal, www.wsj.com, April 8; S. Gerfield, 2013, J.C. Penney rehires
Myron Ullman to dean up Ron Johnson’s mess, Bloomberg Businessweek,
www.businessweek.com, April 11; S. Clifford, 2013, J.C. Penney’s new
plan is to reuse its old plans, New York Times, www.nytimes.com, May 16;
S. Denning, 2013, J.C. Penney: Was Ron Johnson’s strategy wrong?
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,
www.dallasnews.com, September 19.

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