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Tech and exec disasters put J.C. Penney in a bind

Kim S. Nash | Nov. 25, 2014
J.C. Penney's moves in the last few years stand as prime examples of how not to manage, how not to implement technology and how not to respond to looming business threats.

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Credit: Reuters/Natalie Behring

Many retailers count on the winter holiday season to deliver sizeable sales and profits. For J.C. Penney, this year will be a test of survival. Since 2011, the 112-year-old department store chain has lost $3 billion as two different CEOs whipsawed employees and customers alike with radically different business strategies. Now a third CEO is due to take over in August. Along the way, J.C. Penney's IT group has seen three CIOs, one CTO and three ecommerce leaders.

Staggering executive turnover has left technology projects unfinished and priorities in flux. IT staff members were told to jump on work deemed urgent by one CEO, such as a mobile checkout system built for iPods and iPads. Then they were told by the next CEO to stop. A three-year, $300 million technology overhaul was halted, parts of it aborted.

"It was all about the change and not about thinking it through," says Greg Buzek, founder and president of IHL, a retail technology consulting company.

J.C. Penney declined interview requests and wouldn't comment on a list of questions except to say that it has a "commitment to regaining omnichannel leadership." But financial documents and public transcripts, as well as interviews with retail and management experts and insiders who requested anonymity, reveal how some bad decisions by company leaders induced bad technology outcomes.

No one knows whether J.C. Penney will live, as Marvin Ellison, former executive vice president of stores at Home Depot, prepares to take over as CEO next summer. He was due to join as president in November, working with current CEO Mike Ullman to make the transition. Ellison "is well-equipped to return the company to profitable growth," J.C. Penney's board said in a statement. But the company's moves in the last few years stand as prime examples of how not to manage, how not to implement technology and how not to respond to looming business threats. Heed the lessons.

How It Got So Bad
In the past few years, the retail industry has faced the greatest time of transformation since the Web emerged as a commercial force, Buzek says. That's enough stress for any company. But J.C. Penney was already in a bad way, losing money, shoppers and reputation. Then 2011 was the year it all exploded. Financial results had drastically deteriorated when the recession hit, as a 2007 profit of $1.1 billion turned to a loss of $152 million in 2011.

While other retailers were installing new technologies to catch rising online sales and satisfy customers demanding omnichannel retail options, J.C. Penney was moving slowly, hamstrung by hundreds of custom applications whose maintenance, company executives calculated, ate up 95 percent of the $400 million IT budget.


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