What’s Hurting J.C. Penney? Lack of Change and Clarity

By Kathy Gersch, VP at Kotter International kathy@kotterinternational.com

After the larger-than-expected 12% drop in quarterly revenue J.C. Penney posted on Tuesday, I believe that the company’s time is running out. The drama among the Board, swapping CEOs, and new lines of credit are just distractions from the core problem. J.C. Penney has failed to make the big changes in its strategy to prosper in today’s retail environment – changes they need to make in order to survive.

The retailer’s leadership has made clear statements about future: They are going to stop following the path laid out by former CEO Ron Johnson and they are moving away from his no-coupon strategy. In other words, they have clarified what they aren’t going to do, but as I’ve said in the past – this is not a path forward. J.C. Penney’s leadership must make clear what they are going to do.

One key problem is that they have yet to identify who their target customer is. They haven’t clearly defined what’s different about the new J.C. Penney. What will be new and compelling enough about the J.C. Penney retail experience to draw the customer in? What will they deliver to keep these customers coming back in a world where there are lots of options – online and off?

If J.C. Penney doesn’t want to fade into history like retailers Circuit City and Borders, they’ll need to focus on three key actions:

1. Clearly define the path forward. So far, J.C. Penney has spent far too much time focusing on the problems that have brought them to where they are, rather than how they plan to move forward and get out of their slump. It is imperative for CEO Mike Ullman to clearly define a vision for where the company is headed and what it needs to do to compete. This vision must be specific, it must be actionable, and it must be communicable.

2. Communicate this vision to the company. Whatever the path forward is, the retailer must clearly communicate the new vision internally to its employees to create urgency around the new strategy. Most leaders fail to communicate their visions adequately. J.C. Penney must frequently and continually share compelling reasons for their own employees to believe that this future path is one worth supporting and working toward. If their own employees don’t understand and believe in the new vision – if the retailer can’t win their hearts and their minds – then any efforts to develop brand-loyal customers will fail.

3. Make a dramatic change. This is the most crucial step for J.C. Penney. The company must do something dramatic enough to draw customers back into its stores. Bringing coupons and promotions back is not a significant change. In fact, it’s far from it. If J.C. Penney continues to make small, incremental changes that largely involve going back to pre-Johnson-era practices, it will continue to lose ground to its competitors – which it was doing even before Johnson took over.

J.C. Penney has been on the ropes for quite some time now. Until they follow these steps, they will continue to spiral. Even if they start now, it may be too late.

Kathy Gersch is an executive VP at Kotter International, a firm that helps leaders accelerate strategy implementation in their organizations. She can be reached at kathy@kotterinternational.com.

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