Thoughts on J. C. Penney's Strategy

J. C. Penney, jcp, is making a profound change with implications on its business model / customers. As a result the main question becomes: Is jcp going to convert and / or attract “everyday low price customers” at the same rate of losing their “core high-low customers”? Some may make the assumption that jcp's core customer is not “high-low” at heart and the customer just wants a “fair and square” deal. After talking to numerous jcp customers, let alone watching traffic trends at jcp, it seems that jcp's customers were not after “fair and square” deal but after the “thrill” of a deal and after "that" shopping experience in its entirety. Are they going to succeed? I argue that success is possible but it is also going to require changes in merchandise mix, real estate strategy, and operations. Nevertheless, one must commend jcp's willingness to seek a new direction because the old direction was not working and the projection seemed unfavorable.

Discoveries and Achievements

In the mid 17th century a French monk argued that “2 to the power 67 minus 1” is a prime number and his “theory” remained unchallenged for couple of centuries. In 1903, Over 250 years later, in one of the strangest “talk”' ever given, Cole, a mathematician presenting in a meeting for the American Mathematical Society, wrote on the blackboard: 2 to the power 67 - 1 = 147573952589676412927. Then he wrote 761838257287 and underneath it 193707721. Without speaking a word he multiplied the two numbers together to get 147573952589676412927 and sat down to applause from the audience. Cole later revealed that finding the factors had taken "three years of Sundays”. Lessons:

1) Time has changed and in “no time” computers can make the calculations!
2) Great discoveries and achievements require discipline and determination!
3) Don’t be surprised if your assumptions and “scientific theories” are proven wrong. In fact, to succeed you must challenge them

What we “think”, what we “know”, and what we “prove” are not always the same!

Customers, Employees, OR Shareholders?

Some business leaders may struggle to find appropriate balance between customers, employees, and shareholders. Under the pressure of quarterly reporting some executives may ignore and even sacrifice service, brand image, prices, etc. While there is no “silver bullet” and / or single equation for the trio of customers, employees, and shareholders, it is critical to keep company’s business model in mind as a vital guide to appropriate strategies and tactics. For example, if your business is built on low prices, you may reallocate your resources and reduce benefits to employees on the short run to delight your customers with even lower prices. This will drive business success and allow for rewarding employees afterwards. On the other hand, if your business is built on legendary customer service, you need to think twice before reducing benefits to employees or reducing services that are available to customers in a way that would impact moral and / or customer satisfaction negatively. If the business model doesn’t respond to market changes and profit demands, then interventions at employees and / or customers may extend the life of the organization but will not solve the problem.

In a nutshell, do what you have to do to reallocate resources but never jeopardize your business model because you will lose your core customers, and never bargain to lose some of your customers’ base to gain another sector of customers because in most cases gaining a different customer doesn’t compensate for a loss in core customer as a result of a strategy that ignores / underestimates business model and / or core customers.

Lessons From Action Research

• In a big box retail environment, it is revealing how some employees “fly under the radar” without full understanding of their job requirements.
• Management should not assume things. Management should inspect what they expect, trust but verify, and follow up diligently.
• Humans, let alone team members, usually want to collaborate; it is up to leaders to facilitate collaboration.
• Although leaders should be focused on the big picture, building strategy, executing strategy, and should not micro-manage situations, it is critical that managers observe and improve operations at its micro-levels. In inventory, for example, at SKU level, associate-associate level, associate-process level, and/or associate-customer interaction level.
• People, processes, and polices are three critical components of business. When it comes to inventory in a retail environment, it is vital to focus on “controllable factors” within these components and not be “bothered” and/or “distracted” by what store teams cannot control such as weather, logistics, and technology.
• Although inventory is one of the highest expenses in retail and one of the most important factors to retail success, it is amazing how it could go out of control and / or unnoticed while store's teams and leaders are focused on other areas i.e. "flavor of the week"!

Source: A. Ayad (2008). Optimizing inventory and store results in big box retail environment. International Journal of Retail & Distribution Management, 36 (3), 180-191

A formula for winning

Surprise your team with a kind act. Surprise your team by exceeding their expectations. Surprise your team by doing something meaningful to them, and watch them surprise you by something meaningful for your business. Leaders build a winning culture and the formula is:
Integrity + Action + Accountability + Humility to learn from mistakes = Success

Thoughts on Leadership

Why would anyone execute your direction? Why would anyone tell you what you need to hear vs. what you want to hear? Why would anyone improve their own performance and / or the performance of others while reporting to you? To understand the essence of leadership, ask: Who would I take a bullet for? Who would I follow blindly and why? In most cases if you figured the answer for yourself, it may help you understand others and the essence of leadership.

To me, it is simple: It is about trust. It is about sincerity. It is also about the mind and the heart! You will not be trusted if you can’t trust others. They’ll not work sincerely for you if you don’t work sincerely for them. They will not strive for excellence if you don’t act with excellence.

The essence of leadership is sincerely serving the people that you lead in a meaningful way for them! It is about emotionally connecting with people in a sincere way! It is about intellectually relating to people in a humble way! It is about being thoughtful and mindful of the needs and wants of people that you lead; let alone your customers!

A true leader owns the problem and the solution, and works side by side with the team in different roles to support their efforts to win. The “win” always belongs to the team! If efforts fell short of delivering expected results, and they rarely do for “true” leaders, the leader owns the defeat and protects the team!

The cycle of failure

CEO hires consultants. Consultants meet with different people in the organization. Different executives and different employees provide different views based on their individual silos, biases, and interests. Consultants, based on their view of the world, summarize findings and propose their “packaged” solutions that worked for another business and / or a solution that worked once-upon-a-time.

Truth is when a CEO needs consultants to investigate the business and provide recommendations to redefine the corporation, for example, the organization is perhaps in a cycle of failure.

Of course consultants have a role to play in organizations; however, their role should be “technical” not “ideological”. Or in other words, a consultant should be an expert observer who provides feedback on the game not a referee who ensures the game is played within the rules and / or a coach who defines the role of players and how the game should be played!

The Soul of Business

Even if you have the most productive team in the world, top technology, best locations, best efficiency, and the most loyal customers, your business will be in jeopardy if your business model became irrelevant and / or if it lost its benefits to customers and employees. Your business will suffer and eventually die. Business model is the soul of any business.

Levels of Management

Managing tasks productively is the main function of frontline supervisors. Managing processes and people effectively and efficiently is the main function of managers. Successfully building on the past and leading the present and the future of the entire organization is the main function of leaders.

Store & Corporate Office

Perhaps the most neglected aspect of Big Box Retail Store's Success is alignment with corporate office. Often, Store Management Teams get lost in daily operational tasks, which are critical, but they lose focus on the big picture; specifically aligning store with corporate culture, aligning store with corporate marketing & merchandising initiatives, aligning store with company's structure & technology, and aligning store with brand image.