What Retail Legend Ron Johnson Learned from Apple’s Success and JCPenney’s Failure

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0:32I'm Adi Ignatius. I'm Alison Beard, and this is the HBR IdeaCast.

0:43So, Alison, today we're going to look at an executive who has had a fascinating business career, who achieved phenomenal highs and then endured humbling lows. Someone who brought the same playbook to two different companies, and it worked at one and it failed at the other. Okay, I'm definitely intrigued. Who is this? So this person is Ron Johnson, who killed it at Apple, working closely with Steve Jobs to invent and then roll out the Apple Store. He eventually left Apple to become CEO of JCPenney, a more modest department store chain, and there his big ideas simply didn't work. Okay, I followed both of those stories as they were happening, but I don't know all the details, so I'm interested to hear more.

1:22Well, here you go. So Ron is the author of a new book, Shop Different, How Retail Revealed Apple's Genius. And we talked about how he delivered on an ambitious vision at Apple, even bringing along an initially skeptical Steve Jobs. And we talked about what he learned when the same brash approach didn't work at JCPenney. Here's our conversation.

1:42I want to start with your time at Apple. You'd come from Target. You had developed an expertise in retail. Steve Jobs brings you in to create the Apple Store, the challenge of a lifetime, right? Talk about what you learned from that experience, but particularly in terms of how to serve customers. Yeah, well, I had the privilege, as you just said, of creating the Apple stores alongside Steve Jobs. And I had been 15 years in retail, but it was a whole new thing because at that time, there really wasn't a good technology retail experience. They tended to be operated and owned by people that knew technology, but didn't know retail.

2:23So I had the chance to kind of think through what the experience should be from scratch. And the big challenge was, like anything you do in businesses, you know, who's your customer and what problem are you trying to solve? And Steve and I decided that Apple's big opportunity was to go after all the people who had yet to join the computer revolution. You know, in 2000, we were moving from analog to digital. And so we were trying to get people who had never bought a computer before. and we thought the Mac offered a much easier, better-to-use solution and we could differentiate the stores and serve customers by going after people that were technology novices.

3:01So it was on a hunch, right? I mean, you're opening stores in malls for a product that people typically buy once every few years. I know you had a lot of people saying, this is ridiculous. Talk about how you deal with confidence in your vision versus questioning your vision and the lack of certainty. Like, how do you make the decision, we're going to do this? Well, you've got to remember, as you know, Adi, back in 2000, the world had a lot less data to rely upon. You know, I came from Target. We didn't use email. Our sales reports would come in once a week. And all of our data was based on weekly sales reports.

3:41Sure, if I worked really hard, I could find out what I sold yesterday. It was a different world. And so people were trained to operate on their instinct. Steve famously believed that the only way he creates something great was to imagine something that's never been done before and do what you believe is right and people will understand it when they see it. So I was working for a boss who wasn't that much data-driven or going to work with focus groups. So when we created the Apple stores, we had to trust our instincts. So, for example, the question is, where do you locate a store? As you mentioned, the history would say that if someone's going to buy something every four or five years, you want to locate in a low-cost location.

4:25They'll come to you when it's time to buy because it's much more expensive being a place that depends on frequency. The Gap would want to be in a mall because people are buying their clothes all the time. They want to see what's new. A computer will come to you. However, Steve and I knew that it was unlikely that someone would get in a car and drive 10 miles to go check out a Mac. If we were in a mall where people shopped, we had to get them to go 10 feet out of their way. And that seemed like a lot easier problem to solve. And we believed in our bones that if we got people into the store, got their hands on a Mac, talking to one of our highly trained people, we had a chance to win.

5:05But the big thing we couldn't do was afford to open a store and not have traffic. So I want to get back to this instinct versus data question, because Steve Jobs was incredible, right? We know this. He had these visions, but he had failures, right? And our most confident instincts are not always going to play out successfully. So this one worked, but what's your advice in terms of, all right, you'd launch something, and in this case, it's like, we're not going to know until we launch it what we've got and how the market will respond. But, you know, how far could you push that before you have to say, all right, maybe this wasn't the perfect idea?

5:39Well, you'll know. You've got to read the results of what you did. But I am a believer, and I'm pretty well known for this, for trusting your instincts. You know, I really believe that especially now we're in a world with AI where what's common knowledge, whatever's been learned in the entire universe up until today is a query away. Right? So common knowledge is easy to find. If I were creating the Apple stores today and I was going to interview with Steve, I could say, go to ChatGPT. I'm going to build technology stores for Apple. Give me a 10-part strategy. What should I do? Not a single thing it would have recommended back in 2000 is what we did at Apple.

6:22And so it kind of shows the power of what we bring to work is our own inner voice. You know, it's that instinct that is formed through our personal life experience. And it's really important. So example, you wouldn't put stores in a mall, we put stores in a mall. Then the next thing people said, you got to hire really high technology, people who love technology, know technology, and put them on a commission because you're not going to have a lot of traffic. And it's really hard to convince someone to buy a$2 ,000 computer. But we didn't have anyone on commissions. We hired people from bookstores who were love people first, and we taught them technology.

7:00We built a store that was 6 ,000 square feet. In retail, they'd say the size of the store should relate to the number of products you have. And so if you have a small product line, you can have a small stores and be very productive. But when I talked to Steve, you know, we're trying to get people to believe in Apple as a brand. You're going up against Microsoft, which has a 95 % market share. Is the Apple brand as big as the Gap? was the question I asked him. He said, bigger. And I said, well, we're in a mall and we want to look relevant. We ought to have a store the size of the gap. And that got us to the 50-yard line where you want to be in retail.

7:36But none of these things would have been supported by data or by some consultant that we might have hired to go do the stores. So we made all these bets. But the problem we were trying to solve is we had to get traffic into the store. The mall did that. We knew people would take four or five times to buy it. We had to have friendly people to get them back. And we had to get their hands on a computer. And once we solved those things, all started to come. So I really think we've got to be very careful about depending too much on data because data is going to study what's been done before. All innovation stems from your imagination.

8:16By definition, innovation is something that's never been done before, from my perspective. I want to talk a little bit more about Steve Jobs. I think we've written an article called The Leadership Lessons of Steve Jobs and The Real Leadership Lessons of Steve Jobs. You know, people want to figure out, was he unique or are there things that he did that people can apply in their company? So, you know, what was his sort of business genius? Maybe things that you encountered that people even today aren't that aware of that contributed to his success. The thing about Steve, he was never in a hurry. Now think about that.

8:50Look at all he accomplished in his short life. From launching the first computer, to bringing us digital movies through Pixar, to coming back to save Apple, to the iPod, the music player we all owned and loved that had 80 % market share around the world, to reinventing the phone. Steve did all these things in his life, but he did things one at a time. When he was at Pixar, he would only let them make one movie a year. And he said, because we can only do one great movie a year. And we do a great movie, we earn the right to do another one. At Apple, you know, we had four products when I launched the store.

9:30We decided to do another product, the iPod. Steve spent a year plus designing that with the team. We put it out. It took six years until we launched our next product, which was the iPhone. But Steve said we haven't earned the right to another consumer product till the iPod was successful. So one, he was never in a hurry. He did one thing at a time. Steve was always available to his inner core. Anytime I called Steve at night, he would answer the phone. Anytime he called me, I was available to him. He worked with a small group of people who he trusted and worked with them in painstaking detail on every little detail.

10:16So he loved the detail. And he didn't want to bring out a product that was ready. So some of these products, the phone took a lot longer than people know to get it ready to launch. In our stores, we basically were ready to open. And a conversation we had said, they're not ready, they're not right. and Steve said, okay, let's delay the stores for six months and make them right. You know, so he was a perfectionist. Everything Steve did, one product at a time, willing to do things that have never been done before, actually loving to do things that have never been done. That's how you innovate to him.

10:51And then getting it out there and willing it to success. You know, Steve was famous for not backing off on a strategy that he had. You know, These things take time. Steve was very patient. So talking more broadly, I mean, you invented the Apple Store, the Genius Bar within the Apple Store. Before that, you made Target trendy. People who never thought they'd shop at Target suddenly became part of your customer base. What are some things that everyone needs to understand about the customer experience from your perspective? Well, they're very simple. You serve one customer at a time. When you're in the customer service business, the way I always told my team, we're not in the service business.

11:31We're in the relationship business. Everybody that walks in a store is either the first time to the store where you're launching a relationship with that customer. They're coming back again. They might own a product. They might not. You're deepening the relationship. And if they have a problem, you're restoring the relationship. And so I just let people know that, look, we're going to build a great business by converting one customer to ton. Today, there are 2 billion people in the world using Apple products. But I remember every one of those, we earned one at a time. You know, in our stores, when I left, we're getting a million visitors a day.

12:10The vast majority of them had an experience with an employee. And we always told the employee that what you have to do is give them a warm welcome for every customer. You know, what brought you into the store today? How can I help? Answer their question. when you're done, welcome back. You don't worry about what you sell every day. You worry about the quality of experiences you deliver and then the sales will follow. Well, so you just mentioned, you know, good customer service, people in the front lines, but what beyond that? I mean, it can't just be training the staff to be nice. Obviously they have to love the products and they got to love Apple, but ultimately they got to tailor every solution to every unique customer.

12:52That's the other thing. You've got to personalize every experience for every customer. You know, retail business isn't about, you know, here's the formula, here's what you tell everybody, blah, blah, blah. Every customer has unique needs. They've got a different reason why they want a phone, why they're upgrading from. And the employee has to be trained to discover that and then present a solution that can, you know, meet their needs. Sounds like you want to empower people in the front line. You know, It sounds like part of the secret is giving people flexibility to not just have the boilerplate response and have authority.

13:25Leadership, you have to hand out. When an employee is with a customer, they are the leader of that relationship. And they have to feel empowered like a leader. And they've got to be told not to be in a hurry. Figure out what you want to do to make a great experience for that customer. Personalize it. Get to know that. That's what it takes. When we launched the stores, nobody really knew how to convert someone to buy a computer that had never bought a computer before. But we knew that if we were employees and had them talking to customers through those conversations, ideas would emerge. And when good ideas would come up, we'd roll them out everywhere.

14:05So example, customers said, you know, I think I could eventually learn, but, you know, I don't know how I'll ever get started. And one of our employees said, well, why don't I set it up here in the store fee? First time, it probably took an hour. But that customer went home happy. Then we tried it again. And a few years later, every product in the Apple store was set up before the customer left. Whether it's an iPad, a phone, a Mac. But we learned that through a customer experience. That wasn't learned through a focus group. You know, in fact, you're running a focus group every day if you have a way to touch with your employees.

14:42Because they're having real-life experiences every day. So then the art for retail is to stay small enough that those ideas quickly move from the floor to the decision makers to get implemented. So fast forward to the present, 2026. You know, we buy a lot of stuff from our phones. How important is a public-facing retail presence in 2026? You know, and even with computers, we know how computers work now. You know, we've demystified them. It is still the most important way to go to market. If you ask people on the street, are stores dying, they'd probably say yes. But we know that's not true. Look at Simon Mall.

15:18Simon's the biggest mall operator in the U.S. They're at 96 % occupancy. They've never been busier. Their rents and their sales for square foot are the highest they've ever been. You know, Stanford Shopping Center, where I live in the Bay Area, is probably the hardest parking place in the Bay Area, right? People go to stores. Today, 85 % of all retail revenue worldwide is coming from a physical store or the physical store's omni-channel strategy, their online store. So an example, let's take Walmart. People would say Amazon will compete with Walmart more than anybody. They both have broad assortments of low-priced goods.

16:00Walmart's stock today is eight times higher. the market cap is eight times higher than it was in 2000 when the dot-com boom was going and everyone said stores wouldn't exist right it just took a while for amazon to build an online store move to omni channel and leverage that to a better business model so amazon's actually the one that's struggling in retail they struggle to make money in retail the reason they make money now is they They have all these ads on their sites. Now, they've been experimenting with physical retail multiple times over the past decade. Now, right now, they're building a superstore outside of Chicago to see if that can help them compete better.

16:42So the reality, we're in a world today where people have stores and online, and they serve customers omni-channeling. Everyone is doing that. There are very few successful online-only retailers.

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17:38I want to talk about customers and listening to customers. It's conventionalism. You need to listen to customers. You need to be consumer-centric. You know, so many companies don't do that well. Why do you think so many companies miss the mark when we all realize it is essential to business success? Well, because they don't have ways of doing that. And that's the beauty of having a retail strategy. Because when you have stores, every day you have a chance to learn from customers. Look at all these new brands that are coming out like Skims. Skims is opening 55 stores this year. They're funded by venture capitalists, but their go-to-market is physical stores.

18:21Well, every time you want to learn something, all you have to do is go to the score and talk to your employees because they talk to customers every day. So by asking questions of employees on the front line, it's the best way to get real-time feedback on a customer. You don't have to create some artificial focus group or do something online. And that's a powerful thing. And the retailers who have good connections between their headquarters and stores have the most knowledge of what customers want. Like look at Inditex, you're out of Spain. All of their brands are good. They have the best stores and the best communication systems between headquarters and stores to get feedback.

19:01So it's really important to listen to customers, but it's hard to do. And so if you don't have a way to do that, it's not going to be a part of what you do. So when you look around at other retailers now, are there some who just have an experience you just think, wow, okay, that's a model. They really get it. That is exciting. I see it in every category across all retail and luxury. A brand like Xenia, 97 % of their volume is in their stores. But over 50 % comes from a contact between a store employee and a customer that's done digitally. It's not online shopping, but it's reaching out to that customer that they have great relationships with, like the LVMHs, whatever.

19:44It's amazing what they do on serving their customer in a physical store, but through a digital connection, through the relationships they built, through the databases they have. And that'll get better and better all the time. So at Apple, you and Steve Jobs were able to ignore conventional wisdom. It turned out you were spectacularly right with the Apple stores. You know, at JCPenney, which you went to afterwards, you know, in some ways you did something similar and it didn't work out the same way. Talk about what was different in the two experiences. So I went to Penny's after 12 years at Apple, went there to transform the department store.

20:23It was a, it failed. I mean, it failed massively. But the difference was this. When we created the Apple stores, I spent 18 months. I was the only employee. We didn't have a retail store. I built the team. We were all bought in. We launched and we succeeded. When I went to Penny's for a variety of reasons, I brought a vision for the stores that the employees didn't embrace. I was the transformation they didn't want to have. And when I went there, I assumed I'd been told that this company wants to change. But the reality is the employees believe they had survived. You know, all these department stores had failed.

21:04In 1960, there were 150 department store nameplates in the U.S. When I went to Pennies, there were maybe 10. They felt they had survived, and they were the winner of serving lower-income middle Americans. So the employees didn't feel a need for change. And I misread that. And so if I did it over again, I would have taken at least a year working with that team to understand, do I have the right people to lead a transformation like this? To get people on the same page, because everyone's got to believe. to hear their input, to spend time with customers to understand how to best position the changes we're making so they would understand and appreciate it.

21:46But we went so fast. We went way too fast for the stakeholders and they weren't ready for it. You know, and those stakeholders included customers, board members, employees of pennies, you know, investors. Nobody really understood what we were trying to do, you know, other than me and a handful of people. That resistance to change among employees is probably pretty typical, right? I mean, every institution that's survived for a while, the employees think we have special sauce. We, you know, we approach things in a certain way. If an outsider comes in, even if they have great ideas, the initial reaction at least is going to be, wait a minute, this person doesn't get the special way we do things.

22:27This is not novel. You know, were you not coached to expect that, Or did you just think, look, I feel this so strongly. It worked at Apple. We're going to do this. I don't think I'm an arrogant person, but I was clearly situationally arrogant. I did 25 years of uninterrupted success at Target, at Apple. And I went in there thinking that I understood how to reinvent the department store. Nobody on the board challenged me to say that these people are going to be resistant. You've got to navigate this. This is a turnaround. Everything I'd done before was a startup, especially at Apple. And so I could have had better coaching.

23:09But I think they expected me to know that. But I think the board was just kind of intoxicated with the idea that the Apple guy had let Apple, which was the highest performance store in the world, to come to Penny's. And they kind of bought into the vision and figured I knew how to make that work. I was honestly naive. I'll give you an example. Safra Katz is a good friend of mine. She's president of Oracle. After I went through that tough year, I went and chatted with Safra one day. And she said, well, of the leadership team, how many people did you keep of the pennies team? And I said, all of them.

23:45She goes, all of them? I said, yeah, I filled some open positions with people I knew. But I figured they're experienced. I wanted to have their history. She said, Ron, do you know at Oracle, we don't keep a single person from the company we acquire. Wow. We learned at Oracle, all these acquisitions through the years, PeopleSoft, whoever, that all it takes is one passive-aggressive leader who the culture respects, and they are going to derail your transformation. And she said, no wonder it failed. You kept the entire team, and they didn't want to change. Now, I don't know if she's right, but that's an example of where with time or the right guidance, the first thing I would have done is said, okay, how do I build a team that can execute a change of this magnitude?

24:32What would your advice be for first-time CEOs, particularly who are in a transformation setting, beyond change out the leadership team, maybe? Number one, don't be in a hurry. Take a period of time, six months to a year. Get to know everybody. Talk to everybody. Ask them, what are the issues? What do you think? What would help us win? I would go on a listening tour like some of the great CEOs do because you can't afford to start a transformation in the wrong direction. Every journey begins the first step, but you've got to know where you're headed. But those steps are really critical, those first ones.