Assessing Innovation: Incremental vs. Novel Changes Introduced by the New CEO
JCPenney’s former CEO, Ron Johnson, was committed to bringing as many innovations to the company as possible that could make the organization more efficient and productive. However, the changes he introduced were quite drastic, which led to negative consequences that affected the team’s performance (WSJ Staff, 2013). Thus, the proposed innovations could only partially be revealed, leading to their failure.
Johnson’s vision was driven by wanting to completely change the firm’s pricing strategy and overall image. The former executive wanted to increase sales and raise the organization’s rating by targeting his audience more (Berfield, 2013). Under his leadership, the company began to open new stores and gradually spent money massively. The simultaneous adoption of a low-price strategy and the opening of many boutiques was a drastic change that contributed to internal confusion and did not allow the team to adapt. In addition, the failure also consisted of the fact that the stores focused on wealthy young people, which went against the strategy pursued by the company earlier.
Consumer Appeal: Evaluating JCP’s Innovations and Their Attractiveness to Shoppers
JCP’s innovations seem attractive because of their completely different approach to the company’s development strategy. Opening boutiques could be a key point in organizing a new path for the company’s development. Located in a street environment, stores could more easily capture the attention of potential customers. However, at the same time, this strategy should consider that buyers may have different shopping budgets and, depending on this, may ignore unique stores in favor of cheaper ones (Clifford, 2013). I would not shop at this store, as the pricing and positioning as a youth establishment could push me away from the purchase decision.
Understanding Failure: Analyzing the Reasons Behind the New CEO’s Innovations Falling Short
Rapid Change
There are several reasons why the innovations introduced by the then-CEO failed. The primary factor in failure was that the company changed too rapidly without agreements or gradual strategic goals for innovation. Thus, Johnson did not follow the steps of consulting with all stakeholders to ensure a smooth, gradual implementation of innovations (Denning, 2013). The abrupt change surprised the team of employees, and many employees did not know how to act in certain situations.
Pricing Policy Changes
The second aspect that caused the failure of innovations is a sharp change in pricing policy. The transition of pricing to a higher segment harmed the perception of the company, whose target audience was previously considered to be middle-income buyers. The price increase and the opening of original boutiques confused people who could no longer perceive the organization’s stores as where they could buy something (Halkias, 2012). The sudden change in price range was detrimental because many potential new customers may not have known about the existence of JCP before and, therefore, did not risk investing in their products.
Strategic Recommendations: Turning Around JCP’s Performance for Future Success
It is possible to give some recommendations to change the company’s performance. First, JCP must make innovation changes, develop a suitable strategy, and assess potential risks. Thus, the innovations introduced by the organization can become more familiar to employees, and they can find out what they should do in time (Benoit, 2013b). Considering the opinions of stakeholders and large shareholders is also an important recommendation that could steer JCP in the right direction in changing its strategy.
Another important recommendation may be to consider the target audience that the company has formed over a long time (Benoit, 2013a). The abrupt change in price direction led to negative sales results because the organization set its sights on changing the target audience.
Reflection
By directly analyzing the JCP case, I learned how important it is to create the right conditions for implementing changes. Gradual employee training and the optimization of work processes in the organization are prerequisites for the successful implementation of innovations. In addition, I learned how important it is not to change the proven target audience that the company has been targeting for many years of its existence. In the case of JCP, such changes led to the ruin of the company due to rash actions.
References
Benoit, D. (2013a). J.C. Penney to customers: Come back. Wall Street Journal. Web.
Benoit, D. (2013b). Ackman thought Johnson could turn around ‘Titanic’ JCPenney. Wall Street Journal. Web.
Berfield, S. (2013). J.C. Penney rehires Myron Ullman to clean up Ron Johnson’s mess. Bloomberg BusinessWeek. Web.
Clifford, S. (2013). J.C. Penney’s new plan is to reuse its old plans. New York Times. Web.
Denning, S. (2013). J.C.Penney: Was Ron Johnson’s strategy wrong? Forbes. Web.
Halkias, M. (2012). J.C. Penney stock slid on a tough short-term outlook. The Dallas Morning News. Web.
WSJ Staff. (2013). J.C. Penney ousts CEO Ron Johnson. Wall Street Journal. Web.