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  • Removing a Superstar Executive from the Comfort Zone

    March 1st, 2013

    So consider the possible logic of the situation. Palm hires a former Apple hardware executive, John Rubinstein, to head the company. Not long thereafter, Palm releases a new line of smartphones featuring the Web OS, but it’s too little and too late. The iPhone has turned the market on its head, and it would take several years before one company, Samsung, emerged as a worthy competitor.

    HP, hoping to make a dent in the mobile space, bought Palm, and released the TouchPad tablet in 2011. The marketplace said no, so HP killed the product, and staged a fire sale. At $99, HP cleared the stock quickly, but it was too late for the WebOS. Rubinstein split from HP (he is currently a member of Amazon’s board), and, still seeking a strategy, HP has since sold off the remnants of WebOS and the Palm team to LG.

    If anyone expected Rubinstein to make magic at Palm, they were dead wrong. There was no silk purse in that sow’s ear. But I’m only getting started.

    Just this week, the news arrived that J.C. Penney, the venerable retailer, is suffering big time. Founded in 1902 by one James Cash Penney, the midrange retailer had long been seeking a path to relevance in the 21st century, so they hired Ron Johnson, Apple’s retail chief, in 2011. Flush with the very unexpected success of The Apple Store, Johnson was seen as a superstar retail executive who could make miracles.

    But his reign at JCP has been a case of struggling to find a workable strategy, any strategy. In reporting a net loss of $552 million for the last financial quarter, Johnson admits he “made some big mistakes” in trying to make the company a relevant competitor. Indeed, it seems JCP has had so many makeovers, it’s hard to figure out just why anyone should bother shopping there. Whether it was special discounts, everyday discounts, coupons, stores within stores, or what-not, it didn’t seem to matter. The company continued to hemorrhage cash, and that could end up creating big troubles by summer unless Johnson can somehow turn the huge ship around.

    You wonder in retrospect how JCP might have fared had they just left well enough alone, and allowed the retailer to just stumble along, making minor course corrections along the way. That, in fact, may have been a better strategy for Johnson, although I do not pretend to know anything about running department stores. I’d have enough trouble, for example, distinguishing Macy’s from Dillard’s without the branding. It’s very possible Johnson grew overconfident because of his huge success at Apple and came to believe he could walk on water.

    But it’s one thing to build a retail chain from scratch without any baggage and, in fact, without any expectations from customers or the financial community. It’s also true that Johnson didn’t create The Apple Store all by himself. It was a highly collaborative effort, with heavy participation from the late Steve Jobs.

    At JCP, Johnson had to deal with an entrenched bureaucracy and hundreds and hundreds of existing stores that would be expensive to renovate. Even after renovation, there were tens of thousands of employees and existing relationships with suppliers to deal with. Making miracles was not something that could possibly occur overnight, although it’s possible Johnson and JCP’s board mistakenly felt otherwise.

    Don’t forget that Steve Jobs didn’t save Apple from ruin in days or weeks. It took years and lots of bloodletting to set things right. Jobs arrived at Apple in 1997. The first iMac was introduced in 1998. OS X and the iPod arrived in 2001, the iPhone in 2007, and the iPad in 2010.

    And these days, just reporting record profits isn’t enough for Apple. Even though it has traditionally taken a few years to overturn a product segment in the face of strong criticism from the media and financial community, the skeptics are now expecting Apple to start revolutions each and every year. Apple, however, continues to operate by a singular standard that isn’t based on what you or I expect or hope will happen.

    With JCP, and even with Palm, it’s clear that just hiring an executive with a stellar reputation for performance comes with no guarantees. But that’s not just true for former Apple executives. Take a look at HP, which hired Meg Whitman as CEO, no doubt, in part, because of her success in building eBay. But running an online retailer/auction house is quite different than managing a multinational corporation that builds tech gear. Today, HP’s best strategy appears to involve making products that may or may not have been successful for other companies, such as plans to release a line up of tablets running Android. And it’s not as if those tablets have anything about them that distinguishes them from dozens of other products from other companies beyond the HP brand name. Is that a strategy?

    Meantime, I do hope that Johnson and his team at JCP can find a way to save the company. I’d hate to see yet another retail chain falter and perhaps go out of business. Consider all the employees who will lose their jobs. Consider the original vision of founder James Cash Penney, which nobody remembers anyway.



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