Customer Growth Strategy

JCPenney’s road to recovery (Part 1): The reality distortion field

Last week the JC Penney story went from bad to sad.

The bad part is well-known by now: financial results dramatically below expectations, thousands of JCP employees laid off, a precipitous drop in the stock price and a debt downgrade amidst mounting liquidity concerns.

The truly sad part, however, is the apparent lack of acceptance of reality being demonstrated by senior management.

Two decades ago Steve Jobs became famously known for what fellow Apple executive Bud Tribble coined the “reality distortion field (‘RDF’).  As Wikipedia puts it: The RDF was Jobs’ “ability to convince himself and others to believe almost anything with a mix of charm, charisma, bravado, hyperbole, marketing appeasement and persistence. RDF was said to distort an audience’s sense of proportion and scales of difficulties and made them believe that the task at hand was possible.”

During his first year as Penney’s CEO (or as he might put it CEO of JC Penney and CEO of JCP), Ron Johnson has frequently alluded to his experience at Apple as being the inspiration for his transformation strategy. While the relevance of those analogies to JCP’s situation seems pretty tenuous (more on this in my next post), it’s beginning to look like the legacy of the RDF is being carried on.

Though it may not seem like it at times, I get no personal pleasure in doing the “I told you so” victory dance or taking pot shots at seemingly easy targets or sitting in snarky judgment. Nobody wants to be that guy.

So to be fair, the Penney’s team HAS taken on an incredibly daunting challenge. They have rightly said that the company needs a transformation, not an evolution. They have begun to put in place a number of exciting and promising initiatives. And as they remind us, this is a multi-year journey and it’s still early.

But the reality is that things are MUCH worse than they thought and most of what they sold the analyst community earlier this year-and in subsequent earnings calls–is simply not proving out.

In some 12 Step recovery programs they talk about a model of change. The first phase is Awareness. Followed by Acceptance and then, ultimately: Action.

I’m not suggesting that Penney’s leadership team is a bunch of addicts (though one analyst recently opined that she thought they were addicted to BS).

Yes, some elements of Penney’s new strategy clearly need time to prove themselves out. But a lot of change remains necessary on key strategic elements to stem the hemorrhaging and get the transformation back on track.

But no major behavioral change is possible unless there is a rejection of denial and a rigorous commitment to reality.

My future posts will detail specific strategy and tactical changes that I believe Penney’s needs to begin making right now. But unless management acknowledges their mistakes and ceases the obfuscation and misdirection, I’m skeptical they will be able to clearly see what they need to do and embrace the requisite urgency.

Moreover, without a big “mea culpa” and a lot more straight talk, they risk losing the trust of vendors and investors.

If that happens, it’s game over.

 

Up next: JCPenney’s road to recovery (Part 2): The intervention

 

 

 

 

4 thoughts on “JCPenney’s road to recovery (Part 1): The reality distortion field

  1. Certainly no question that the results are worse than expected – and I think you’ve heard a decent dose of that from key shareholders (namely Bill Ackman) and also a bit more from Ron Johnson (few CEO’s will come out and say when things are terrible – talking about old JCP and new JCP on the recent call should be clear enough). I’m very interested to hear your ideas on what they might do to stem the troubles with old JCP (accounting for 89% of retail space in transformed stores), as well as your thoughts on the buttons idea; thanks Steven

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  2. ron is handing out 8 million buttons for discounts at JCP.COM.ite and how many items are out of stock? its a large percentage and its easy to check, just look for the grayed out items.

    Ron may come afoulf of strict consumer protection laws, you cant promote discounts unless the item is available for sale.

    Ron says he feels like he is on a reality tv show. If he were on survivor my favorite show he would of been voted out for killing his tribe.

    Ron is either specturcally incompetent or intentially working to kill penneys.

    I just hope the company survives rather than being liquidated like hostess brands twinkies are going thru now, 19,000 employees all losing their job

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