Ronald Johnson

Innovation Gone Wrong

Sometimes businesses need a kick in the pants. For whatever reason--poorly engineered products, an uninspired culture or a myriad of other factors--struggling companies sometimes need to rapidly change course to strike a chord in the marketplace.

This can work. Like when Steve Jobs (the stereotypical wunderkind when talking about innovation) returned to Apple and, in fairly short order, set the company on a path to incredible success.

This can also fail miserably.

Last week, Ronald B. Johnson was removed as CEO of J.C. Penney only 17 months after he was brought on to take the struggling retailer in a new direction. Formerly the head of Apple Stores, Johnson was seen as a risky but potentially innovative hire, someone who could turn the clothing retail industry on its head by introducing approaches that had proven successful in a different market.

Johnson's ideas were intriguing: introduce designer boutiques, simplify products and, most significantly, stabilize prices and do away with coupons and sales.

When this was first announced, it definitely caught my attention. Fewer sales and the elimination of coupons that discount products from obviously pre-inflated prices? It sounded like a step in the right direction.

Did I think it would work? Probably not.

As outlined in a New York Times article that describes his rapid rise and shockingly non-shocking fall, Johnson quickly proceeded to make changes within the company. Many of the top executives were removed. New executives—including others from Apple as well as Abercrombie & Fitch—were brought on. Products were changed, coupons were slashed and the company even introduced a new logo.

But what looks like innovation isn't always innovation and, even more important, what is considered innovative isn't always positive.

First, innovation is not simply disruptive change. New leaders shaking things up by creating turnover at the top is not innovative. Innovation requires something new or the application of something that already exist in a new way. New blood and a shifting environment can beget innovation, but if not managed with that intent and supportive alignment with the organization's culture and goals it can easily do more harm than good.

Second, innovation is not innately positive and even positive innovations can be implemented poorly. In this case, taking a market strategy from one industry and applying it to another can be considered innovative but, as noted above, that isn't enough to make it worthwhile and definitely shouldn't be the only factor in green lighting a change initiative of this magnitude.

i4cp's latest report, Human Capital Practices That Drive Innovation, outlines 10 human capital practices for managing innovation that are vital for sourcing, refining and eventually implementing innovative change. In J.C. Penney's case, the practices related to external sourcing and vetting of ideas, building cultural alignment, and having a go/no go evaluation process seem to have misfired or been missing.

Johnson brought in ideas that worked in a different market with different customers and boldly pushed forward with his plans to implement them. Conviction is great, except for when it is misplaced. J.C. Penney may have been struggling, but by not sourcing or heading customer input, not inspiring other stakeholder buy-in, and not properly managing implementation, Johnson's efforts—innovative or not—had little chance for success.

J.C. Penney is now in a much more precarious place than it was a year and a half ago. Johnson is gone, replaced by former CEO Myron E. Ulman III—as the New York Times article mentions, "a move seen as a stopgap measure that did not instill confidence in the 111-year-old retailer's future." The programs he put in place are going to be challenging to fix—from remodeled stores to a customer base that has abandoned the company in droves—and it's going to take time to contain the damage. And sadly, with revenues down 25% in 2012, J.C. Penney may not have the time it will take to recover.

Positive innovation requires change, but not all change is innovation and not all innovation is positive. J.C. Penney learned that the hard way.

Erik Samdahl
Erik is the head of marketing at i4cp, and has nearly 20 years in the market research and human capital research industry.