Ron Johnson: Business Lessons From Apple’s Success and JCPenney’s Nearly $1B Failure | Entrepreneurship | E417

20:29Hala Taha:There's all that pressure of now Steve's in the room. And Steve looks at everyone and goes, well, Ron just told me that our store is all wrong. And he's right. And so we're going to start over. But I'm going to leave now and leave it up to you guys to figure it out. You guys figure it out. But he told the story then really affectionately to the group that every great thing he'd done, there became a moment in the project when you did the courage to do a u-turn yeah or to start over and he told a story about toy story you know one of the great movies first great movie with pixar and he said you know we gotta have the courage to do it right and that delayed the first store about six months but it allowed us to create a place that really became the apple store we still see today.

21:20Yeah.

21:20Hala Taha:What a cool story. I love that story. What did that teach you about decision-making and being flexible enough to change direction while also being like firm in your original decisions? Like what did that teach you about decision-making? Well, it became a lesson that I really learned from Steve. Steve used to say, if you think through any problem hard enough, you'll come to the inevitable only answer. And everyone will agree with you. Super counterintuitive to what companies like Facebook do today, where let's just get stuff out there and test it and the customer will evolve. Steve believed in thinking things through with a small group of people and putting your best, best foot forward.

22:07That's how he designed products. That's how he created movies. That's how he created this store. And Steve was never in a hurry. Now, he wasn't driven by product timelines. You know, there were a lot of products we thought, is it ever going to come out?

22:23Hala Taha:Yeah. The phone was actually quite a bit beyond when we initially thought we could bring out a phone at Apple, right? So the lesson I learned from that was you get one chance to launch a store. You get one chance to launch a product. Do it great. If you have a better idea, have the courage to make a change. So you came up with the concept of Genius Bar, correct? Mm-hmm. Yeah. What was your initial reason for it? I know that people were not familiar with computers, so obviously to educate. But what else beyond that? Yeah. Well, first, you know, I get credit for the Genius Bar. But I wouldn't take ownership.

23:04Everything is done by groups of people. Yeah. And so I had been in a meeting at Offsite, which was really fun, with 18 people talking about, how do we build the store? What's the service philosophy? And in that conversation, it became very clear that people felt like they get sold to its stores, but great services in hotels, especially five-star hotels. So we asked the question. I said, right, okay, let's just spend two days designing the Apple Store service as if we were a five-star hotel. what we do.

23:37Hala Taha:What a great activity. It was really fun. Yeah. And it led to, and the reason we decided, you know, stores, once you leave, we don't know you're coming back. So stores tend to try to close these commissions and things to get someone to buy today. Hotels, you've already booked the hotel. You're not leaving. Yeah. You know, they depend on you coming back same time next year or telling a friend. So they're truly in the service business. And I knew at the time that people would take four or five visits to buy a Mac. So in many ways, we were going to be like a hotel. You're not going to sell anybody on the first visit.

24:14So why not do that? And as we looked at the hotel, we ended the first day, had a great day. And I said, tomorrow we're going to talk about customer service. You know, it's something that most people hide in a technology store because you don't want the customer to fear. They're already scared of technology. You don't want them to say, well, this thing's not going to work. Look at that big service counter you have, right? Yeah. And that night I was sitting there thinking about it. I said, so what is there in a hotel that could be a metaphor for service? And I said, well, every hotel is a great bar.

24:49And, you know, think about bartenders. They're really friendly. And if I want to learn about what I can do for dinner, Bartenders tend to know because they talk to people all the time. And, you know, they dispense alcohol. What if we dispensed advice? And I came in the next day and said, what if we build a bar for service? And let's make it the most important part of the store. Let's stick it out, you know. And, you know, people kind of reacted pretty well to the idea. And I called Steve and told him about it. He said, that sounds like a great idea. What are you going to call it? I said, I don't know.

25:24Hala Taha:He goes, well, tell me, then you have a name. I said, okay. And a few days later, I was kind of watching like I love to do. For some reason, I turned on the old Apple Great Think Different ad, which we all know. Yeah. That Steve used when he came back to Apple to motivate the teams. And the last line said, well, some people, we see genius. And I said, genius bar. It just seemed to make sense. And so I called Steve and I said, Steve, I got the name. I'm going to call it the Genius Bar. And I explained why. And he said, you can't do that. And I assumed it was because, you know, you didn't want to leverage the genius branding.

26:07He said, no, because anybody you find who can talk about technology is a geek. So if you want to call it the Geek Bar, maybe that would work. But you should think about another name. And this was during the day sometime. And Steve, as I said, would call every night at 8 o 'clock. We had an agreement to do that for a year. And he called that night, and I was prepared. And I said, Steve, I want to talk to you about the name again. I said, the main reason I want that name is I want to be in a position where we have everyone in every city we put a store fighting to be one of the geniuses. Because who wouldn't want to be the smartest Apple person in Minneapolis?

26:46The smartest Apple person in New York City. Because that's what the genius is. I said, then we won't have any trouble getting people who can serve and help with technology. Steve said, interesting. And the next morning, I went into work, and I was going up to my office, and I walked by our general counsel, Nancy Heinen, and Nancy said, Ron, what's a genius bar? Steve asked me to trademark that name. You know, so Steve, you know, quickly, as always, you know, if you had a good idea, he was the first to get behind it.

27:22Hala Taha:It's really cool that he was able to kind of change his mind and that you guys actually had a relationship where you could challenge him and then end up getting your way. But everyone did on the ET. What's ET? Executive team at Apple. You know, this is unique to me. If you were talking to Johnny Ive or Phil Schiller or Tim Cook, they'd all say the same thing. Steve wanted the best ideas to win, and he loved having a vigorous debate, a conversation with people that were really smart and passionate like him to get to the right answer. Nothing, you know, I think, I don't want to use turned him on, but got him excited, you know, than a good debate about something that hadn't been done before.

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31:25Hala Taha:Think of AT &T Business as your go-to for reliable business connectivity. They help your team, devices, systems, and day-to-day operations stay connected so you can focus on the important stuff, serving your clients and growing your company. You work way too hard to let a shaky signal slow down your momentum. Give your business the rock-solid foundation it needs with AT &T Business so you can step into your CEO energy. Powered by AT &T Business, built to work. Get AT &T Business at business.att.com. So Genius Bar was really innovative. The way that you guys laid out the Apple stores were really innovative.

32:05Hala Taha:And you talk a lot about, like, what does it truly mean to be innovative? Help us understand your opinion on that. Yeah, to me, this is the big mistake people make, is they don't understand the difference between improvement and innovation. In my mind, innovation always is doing something that has never been done before, right? And things that have never been done come out of someone's imagination. And that's what makes them disruptive. Most people, you know, are comfortable. They pay attention to what's going on in the world, especially at their competitors. And they take an idea competitors down, and it's new to their company, but it's mere improvement.

32:48Hala Taha:Yeah. Right? And there's nothing wrong with that. We should be doing that all the time. paying attention to what our competitors are doing, shamelessly taking their best ideas and using them. Apple's done that many times. Facebook does that all the time, right? There's nothing wrong with that. That's competition, but it's not improvement. Yeah. It's not innovation because everyone's doing that. So the real question when you're trying to improve is, can I improve faster than somebody else, right? Innovation starts in the imagination, and it takes a whole different level of courage and a whole different level of skills to pull it off.

33:23And some companies are great and some aren't, as I learned when I went to JCPenney.

33:28Hala Taha:Yeah. And I definitely want to talk to you about how to test innovative ideas and what the right approach is. But first, let's talk about your time at Target. So you worked at Target before Apple. And you were really responsible for, like, the whole, like, Target movement, right? where Target became sort of like the fancier Walmart, the more like design-forward version of Walmart. And I remember growing up, we used to call it Target, and it was like a nicer store. So when you first started at Target, what was your initiative? What were you charged to do? Again, let me not just be humble, let me be really honest.

34:10I didn't come up with Target. You know, I think if you read the Target history, someone in Duluth or Minnesota in the third store called it Target. You know, it's just kind of the French pronunciation of that word. And it kind of stuck below the surface. In the 90s, when Target really took off as a company, I was there from 90 to 2000. The stock went up 12 times because Target really got its footing and emerged. changed, filled that gap between what people thought they could find at a discount store and what they're finding at the specialty stores in the mall or department stores, which were really the leaders and where you go to find new ideas.

34:53And Target took that over. When I got there, you know, the CEO, Bob Ulrich, a great CEO, said, let's differentiate from Walmart because Walmart now is making this move from rural America. Target and Walmart started the Same year, 1961.

35:09Hala Taha:Oh, wow. I thought Target started later. No, 1961. 20 years later, you know, they were the two leading discount stores. There were still 10. You know, Kmart and Venture and Hills and every region had a discounter. Because the only way to grow, there wasn't an internet. You had to open stores. And it was good to put your stores in one area so your marketing got, you know, leveraged. But Target owned suburbs. Walmart owned rural. Well, Walmart was coming into the suburbs because they had pretty much done all the roll stores they thought they could. But Walmart had a lot lower cost structure. Part, they designed, you know, less expensive stores, but they were also better at systems and different things.

35:51So they were a big competitor. So the only way Target could win was by being different than Walmart. And different probably had a little higher price point. But a lot of times different wasn't better. It was just different. So the buyers at Target would take something like a high-volume toothpaste by Crest. And Walmart was so low in price, they'd get some other ounces and assume the customer couldn't calculate and just charge a different price.

36:17Hala Taha:It'd be like a smaller toothpaste, basically. Smaller or bigger, but it was more pronounced. But they got away with it because there wasn't a direct competitive SKU or stock keeping unit. So I came up with the idea that what if we could be different and better? And I called it preferred. You know, something's preferred. You'd probably say it's different and it means more to me. And for the home area that I had at the time, I started in toys and I had old kids and then I went into home. The home was emerging in the late 90s as the category. People were buying homes and moving even more aggressively to the suburbs.

37:01But the retailers that had not dominated the 80s, like the Gap and the Limited, were now being dominated by people like Crate and Barrel and Pottery Barn and, you know, Williams-Sonoma and Restoration Hardware. And so the home era was becoming a hot area. And at the same time, design was becoming a thing in the world. Tom Peters called it the decade of design. Volkswagen did their Beetle. Steve and Johnny were working on the new iMac. You know, just on and on.

37:32Hala Taha:Yeah. And I said, what if Target won on design? Instead of carrying a tea kettle at$9.99, what if we had a tea kettle that was special, that didn't just, you know, boil water? It lifted your spirits every time you looked at it. And so I had this idea to, you know, do design. And I thought home was the perfect place to do it. And coincidentally, met a guy named Michael Graves, who had been a great architect in the 80s and had done home products for companies like Alessi, Italian-made leader in design. And I was introduced to Michael, and I quickly became friends, and I said, how would you like to design for Target?

38:13You design, we build. We'll go make them because we've got great sourcing. And he said, Ron, I'm the head of the architecture practice at Princeton. and not a single one of my students can afford one of my products. I would love to do that.

38:28Hala Taha:Oh, I would have expected him to be like, I don't want to water down my brand. Well, that's what his team said. His team didn't want him to do it. But Michael, I don't know. We just got along great, but he had no objection. And I remember the first time we toured a Target store together, I came with a packet of yellow stickies from 3M in Minnesota nearby. I said, just put one of these on any product you think you could do better. He said, Ron, you didn't bring enough stickies. And so he went through and, you know, just. And then we launched with 140 items. It was probably doing design at Target was as much fun as creating the Apple store.

39:12It really was. It was hard. No one thought it would work. Michael used to say you get 10 great days in your life. And he told me about several of them. And I think the day we launched Michael Graves was one of my great days. We were in New York. Target didn't have stores in the Northeast yet. We had the courage to take over the Whitney Museum, the first floor, for like a week. But for the night of the launch, we invited all the press and influencers from New York. And the press people said, nobody's going to come. and if you're going to say any remarks, do them in the first 15 minutes because they'll stop by and leave.

39:54And we took over the floor. We took all the items, some of the items that were coming in, like the tea kettle and the clock, and we treated them like museum pieces. We had like 50 clocks that made the target bullseye at the entrance. We had chandeliers with stainless steel kitchen tools. Did all these beautiful things.

40:12Hala Taha:That's really cool. And, you know, people came in and you could just feel the energy. was packed we didn't talk for an hour and a half because people were too busy wandering around and there was alcohol which maybe helped too but you know the thing started about seven when michael got up he was really funny and he said a few things when he was done we had given everyone a whistle i don't know because the whistle's on the tea kettle you know and all of a sudden everyone starts blowing whistles. It was this moment where you knew it was going to work. Yeah, you knew it was going to be a success. And everyone was shocked.

40:51We finally kicked people out, turned the lights on about 10 o 'clock. It was like an event. It was a moment. And it's kind of like the first Apple Store when we opened. You kind of had a sense it was going to work. And I've been lucky to be a part of some great moments in my career.

41:08Hala Taha:Yeah. And that was one of them. Really cool. So you decided you were going to do home goods, fashion, from what I read in your book, like the trends changed too quickly. But you did innovate. Well, here's what I'm trying to, in the book, the point I was trying to make in the book. Yeah. And this was the business case for design. Because when you do something innovative, you're in the business to make money. You've got to think, why does this make sense? So Target had in their business model two categories of merchandise. We'd say we had basics. In basics, you had to price with the market. Whatever Walmart charged, we charge.

41:44Okay. And therefore, the prices, the margin tends to be low, but they drive a lot of volume. Then you have fashion. And we had, you know, 30 % of the store in things like apparel for kids and family and men's and women. That you can take a high markup. But you got to mark it down every season. You know, unfortunately, summer goes away.

42:04Hala Taha:Yeah. You know, then we have fall and then we have holiday. So fashion for a store like Target, you know, it's not a luxury brand that gets 80-point markups. Yeah. Would, you know, make a little higher margin than basics, but not a lot. Mm-hmm. I viewed design, you could get the markup of fashion because it's got that same appeal, but a great item would be an assortment 10 years from now. You'd never have to mark it down. Mm-hmm. Right? So whereas we were making, if you fudge your eyes, 30 points on basics, 40 points on fashion, we could make 50 points on design. So if design became 10 % of our volume, that would add one and a half points of margin to Target's bottom line.

42:48Hala Taha:We could fit that in and grab a new customer. So it was a good business case. But convincing people at Target to do that was hard because they saw our big competitor being cheaper, Walmart. and now we're going up further? This is going to change the image of Target if you're successful to where no one from Walmart's coming. Yeah. But we did it, and Target, what it really did is it reinforced the idea of Target. Yeah. And then people were all... Premium, all that, yeah. Just, you know, we got the customer who was shopping at the mall to come to Target and buy home and more apparel and more discretionary purchases.

43:28Hala Taha:Yeah. You did something pretty innovative with children's fashion, too. I did. The story goes, from what I understand, is that the sizes were really off and people were having trouble finding the right size of clothes for their kids. Yeah, yeah. I guess, let me try to, if I could. And this goes back to, because this is an example where I'd say we improved Target's kids department, but it's a radical change. Okay. So I had admired the gap from the 80s. I mean, Mickey Drexler was, you know, if you're a young retailer, he was it. I remember one time I was in Hong Kong at the Regent Hotel, and he walked through the lobby.

44:10And it's kind of like I later would see Steve walking into Macworld. You know, Mickey was pretty the guy. And they had LaunchGap Kids. Most beautiful kid store you'll ever see. But what they did is they made every product from size 2, a toddler size 2, to size 20, which is big for a boy or girl, end of the range. Every product was available in every size. Well, that let them have clean presentation. They didn't have to break the Gap Kids store into a little toddler area, a little kid's area, a big kid's area. And that's how every department store and discount store was merchandised. So when I took over kids, we had a toddler section.

44:53We had boys. We had girls. We actually had little boys and big boys. And little boy got character T-shirts. And big boys got things that were closer to, like, juniors. But kids weren't naturally that. They're big kids, and they don't want to have characters on. They're a little kid. It was just a mess.

45:11Hala Taha:Yeah. And so I figured Target had a pretty small children's floor. and I said, if we had the courage to do it at the gap, did, we could double our assortment. Instead of offering all these things for little kids and big kids, let's have one kids and let's have the courage to take our sizes and collapse them. So instead of having a four and a five, we had a four or five. Instead of a six, seven, seven, eight, we had a six, seven, eight. They're a little big, but kids could grow into them. But doing that let us double our assortment. But to do this, I got a lot of pushback at Target. Yeah. Because we would have to redo every pattern, everything we're doing, you know, to create that consistency.

45:58So it was a shockingly hard amount of work to do that, but it worked. And Target's kids area ran well ahead of the other apparel areas. after the first six months or so were tough for the next probably decade. You know, because we fundamentally changed, gave Target a benefit that nobody else had. And no one else really did it because they didn't understand it.

46:22Hala Taha:Yeah. You know, and that's what I call it. You know, that was improvement. I found the idea at the Gap. It was pretty innovative for discount stores and department stores to do that. How did you get your ideas? like all these different ideas that you had for the stores that you worked for, the brands that you worked for? How did you generate your ideas? What was your process? Well, there isn't really a process. You just love what you do. You know, if you love what you do, you're immersed in it. You know, I probably have visited as many stores in my lifetime as anybody my age. Yeah. You know, I still do that.

46:58When I came to see you, I had a chance to walk through the stores in front of us. And so when you're in stores a lot, you learn to become a student of stores. And if you have a mind that's always looking for what's next but wanting to do it now, you pick up on newness.

47:17Hala Taha:Yeah. You know, and you get an eye for it. And then when I used to take over areas, I used to ask myself, how can I do something in the time I'm going to be here, like in toys? What can I do in my maybe two years I'll be in toys? that will permanently improve Target's position in toys. So that forced me to think not about, you know, what should I carry in aisle three? What can I do at a higher level that will endure? That's what sizing was. It wasn't about, you know, getting great colors and basic t-shirts and getting a great fashion statement and getting that new dress. Start at a higher level.

47:56What if we sized our merchandise different? That was design in home. It wasn't about, okay, let's make sure we're picking the right things from the vendors and fighting for allocation, which are all good things to do.

48:08Hala Taha:Yeah. But the next person who takes over will try to do the same thing. They might not be as good at it as whoever had it before. Design was a permanent change in how Target competed that no one else was doing. Yeah. Right? So I think it's more how you frame the problem that leads to the innovation. Okay? So being loving what I did, being in stores, combined with how I framed the problem, plus courage. I just always have had courage to do things. And I think you've been in retail for a really long time, so it's the expertise in retail. So I'm an expert in podcasting, and similarly, I can easily spot the trends.

48:56Hala Taha:Well, that's why you have a network. You know, so it's like easily be able to like spot the trends because I'm always reading about it. I'm always curious about how to grow, how to do this, how to do that. And like we'll find things that like people wouldn't notice. But it's probably very similar where you're just such an expert in retail that you walk into a store and you're like, oh, that's interesting. Well, that's what, you know, you probably get asked all the time by friends, can you talk to my daughter or son who are thinking about a career? And my advice to people all the time is, you know, when you think about what to do, pick an industry you can love for a lifetime.

49:26Hala Taha:and become an expert. That's great advice. You'll never get bored. You're at Target. We talked about your experience at Apple. And after Apple, you got an offer to be the CEO of JCPenney. And when you first initially got that offer, how did you feel about it? Well, I wasn't. I was open for a change. Okay. Because I was turning 50. I'd been at Apple for 12 years, 11 years when I started to think about it. And I kind of was thinking, you know, most things I've done have been in 10-year cycles. And if I'm going to do something other than stay at Apple, now would be a time to think about it. And a couple of guys from New York, a guy named Bill Ackman, who's a well-known investor.

50:13Hala Taha:I think I interviewed him. You probably have. Bill's a very smart guy, risk taker, and a guy named Steve Roth, who was CEO of Vornado, one of the big real estate firms. They had taken an activist position in JCPenney. And as part of their investment, Penny said they could join the board and add one more board member. So I got a call out of the blue. Would you like to talk to Steve and Bill about joining the Penny's board? And so on one of my trips to New York to visit a new Apple store, we were opening a store on the Upper West Side. I stopped over, spent time with Steve and Bill at their apartment, at Steve's apartment.

50:55They didn't have one together. And Bill walked me home, and he was excited to have me join the board. And I thought, you know, why not? I've known Pennies forever. I used to work at Mervyn's and Target and Kids. I know the company, how it competes. I've watched it. and I went out and met all the board members and they were ready to bring me out as a board member. But then the CEO, who'd been there six, seven years, was probably 66 at the time. Unfortunately, he had a car accident and it was pretty bad. And he survived it, which was great, but it made the board think about succession planning. And I don't know where it came from, but I get a call, well, Ron, how would you like to think about becoming CEO instead of a board member.

51:44And I just thought about it. I said, well, that'd be interesting. I want to do something really hard. And I love the department store because I grew up, they were the king.

51:54Hala Taha:Yeah. You know, in the 60s when I grew up, they were the king. And I always thought they had, you know, inadvertently lost their way because they hadn't competed well enough. And traveling around the world as I did with Apple stores, There were great department stores. Harrods and Selfridges in London, Prontam, Galleries Lafayette in Paris, Hong Kong. You know, the department stores in dead, it was kind of dying in the United States. That'd be a big challenge. So I decided, oh, why not? So I did. I think your dad talked to you about that and basically was like, how much success do you need? That's good.

52:32You've read the book. I'm impressed. No, my dad's attitude was, why are you doing this, Ron? You've got a young family, and my kids were in, I think they were 12 and 14, 13 and 15, going into their most important years of their young life for the years that Karen and I, they'd be living with us. And, you know, Apple's doing great. It was kind of a hobby for me because the story, everything we opened worked, and we had built a great team, and the team was doing the work. I was kind of leading and having fun designing new stores and stuff. But I wanted to take on a challenge. And my dad thought it was more pride than purpose.

53:13Hala Taha:Yeah, like the prize of being CEO. Yeah, pride of what you can do. Not even being CEO. Just proving you can turn around the department store. You know, you helped make Target Target. You created the Apple store and no one thought it would work. Here's another one. Yeah, another challenge. And, you know, looking back, there were some truths of that, even though I didn't want to face it. There always is. And you can create in your own head, you know, I know I'm doing this because, you know, I'd like to take a new challenge. I'd like to help all those employees in Texas compete for another century, you know.

53:50You can always talk yourself into it, but you've got to be really thoughtful of what's really motivating you.

53:55Hala Taha:So you went to JCPenney and you wanted to help turn around the stores because, like you're saying, department stores still are kind of a dying breed in the U.S. What were some of the things that you wanted to change about JCPenney? Yeah. Well, it's interesting. The department store is actually having a good little period right now. They are? Yeah. Macy's is, you know, they've got a new team in place and they've got their bold new chapter. And their stock's up maybe double from the floor. Oh, okay. A couple years ago. They're competing better. It doesn't mean they're winning, but they're starting to make more money.

54:28And even Kohl's has gone up a little bit of late. Nordstrom is taking the company private. They're doing a little better, you know. So they're coming back. But they're a lot smaller than they were when I joined JCPenney years ago. They're about half the number of stores in that group. But, you know, I just felt that if we had the courage to reimagine the store, to get at what we needed a younger family customer, we could have another day. You know, because the reality is, like Penny's had 600 great stores that were pretty productive. They just had an aged customer. You know, the customer was 55 to 65 years old.

55:09Hala Taha:Yeah. When I was at Target, they were 25 to 35. And you get a young customer, they're going to have families, and they're going to live with you for the next few decades, where the Penny's customer was going away. And that's why market share was going down. You know, so how do you get a younger customer? Well, we had basically free stores because we're an anchor in the mall, right? And they're 30-year leases. So all we have to do is redo everything about the store, but we could create something quite compelling. So number one, okay, pricing. Everything we sold was 60 % off. We ran 13 ads a week.

55:48Hala Taha:So many coupons. So many discounts and coupons at J.C. Benny. and coupons, and nobody else was shopping that way. If you walk through the specialty stores, it was all full price, and you have clearance when it didn't sell. You know, Starbucks, everything you do. But the department store had this reliance on coupons. Well, imagine instead of telling someone it's worth$40 and selling it for$10, just make it$10 every day. Make every day a great day to shop. Now I've restored my brand credibility on pricing. That would allow me to attract all these people to pennies, new brands from all around the world, but most importantly, direct to consumer.

56:31Back in 2011, that's when people like Warby Parker went online with glasses. That's when, you know, mattresses and everyone was creating these, all these things. Well, they need a place to put stores. And we're in the mall. But we could offer 1 ,000 square feet to each of them at much better prices because we're free. The mall being 100 feet down the road is going to be$60 a square foot. So we could reimagine the interior of the store instead of having 60 ,000 square feet of racks, 100 unique specialty stores, the best of the pennies brands, plus others, and reinvent how you shop. So now we've got great pricing every day.

57:18We've got a whole new environment inside. We've got new merchandise that you can't find somewhere else. And suddenly, shopping at Penny's is like an adventure. You know, it's like the Apple Store. It's a place to belong. And in the center, we're not putting a Genius Bar. We'll put a town square, a place where we'll run fashion shows and do things for kids and families. And, you know, we can make this an experience. And so I wanted to do that.

57:44Hala Taha:It sounded like a great idea. Well, I think most people thought it was a good idea. However, I learned a lot of lessons, right? So I went to Penny's and I basically asked them to implement my idea of America's Favorite Store. It wasn't their idea. And if you're going to make a change, you got to get people to buy in. It starts with trusting you as a leader. They didn't know me. They saw me as the Apple guy, even though I'd spent more time in apparel than technology. they never knew about my working before apple yeah you know and i'm a new guy and i'm well to do and know it all and and and they just didn't buy into it and i didn't have the courage to let people go i don't like firing people yeah you know i said i'll convince them you know the big mistake happened my first month on the job i was at a board meeting and i asked the board a really important question.

58:44One little question. If you're going to make a major change to a retail strategy, the time to do it is February, March, because you've gone through Christmas, you have your most clearance, you have time to get people ready for the next year. If we're going to do it, we have to do it this February, or we wait a year and do it a year from now. If we wait a year, we can focus on our teams, getting the inventory right, and making sure everyone understands it, da-da-da-da.

59:15Hala Taha:Yeah. Yeah. But if we went now, we're not going to go through another year of, you know, kind of tough business. Yeah. And the CEO, Mike Ullman, who I replaced, just said, Ron, from my perspective, what do we have to lose? It sounds great. And the board all kind of nodded. And I made the decision. I made the decision. Let's go. Yeah. And I told the team, we're going to go. In six weeks, we're changing everything. Oh, my gosh. It's not a lot of time. But the team did a phenomenal job. I mean, we had to go through and figure out prices on thousands and thousands of items and change price tags and figure out signing and how to communicate this and create advertisements.

59:54But the reality, we went way too fast.

59:57Hala Taha:Yeah. And so the team didn't understand it. The board didn't truly understand what we were doing. Investors didn't understand it. And most importantly, customers didn't understand it. And so we alienated that coupon customer. And, you know, in many ways, we fired our customer. Your most loyal customers. Our most loyal customer. Now, the one that's not going to carry us to the future, but we had thought sales would be down 15%. They were down 20 % right away. You know, but outside investors didn't know what the plan was because we didn't really communicate as well as we could. Yeah. And they thought, who's this idiot running JCPenney?

1:00:35How are you as a board letting him do this? and all the board members get called by their friends. What are you doing? It was a really tough year. Now, the NPS was through the roof. So sales are down 20%. That means 80 % of the people are buying or new customers are coming. And they were loving it because they found all these beautiful new shops. We had put in maybe 20 shops as we went through the year. There was a Levi's shop. It was the best place to buy Levi's in the country by far. and sales and Levi's were up 40 % year over year, you know. But it was early. But the overall picture was things were going down.

1:01:15And I had real personal trouble with it because I did 25 years of success.

1:01:22Hala Taha:Yeah, you just had one success up the other. But I'd never gone through what I went through that year. And eventually, a year later, I said to the board, look, I'm not having fun. If you're not having fun, you think we're doing the wrong thing here. The sooner you make a change and go back, the better. You know, because every month that goes by with this strategy would be harder to go back to your old strategy because that's what some of the team wanted to do. And after three months, they said, Ron, we're going to go back. And they actually brought back Mike Ullman to do it. And they tried to do a U-turn.

1:01:54Unfortunately, that didn't work either. You know, when Mike left two years later, the stock was down another 50%. And then they brought in Marvin. And after he left two years later to go Lowe's, stock was down another 50%. You know, so Penny's was having trouble when I came in. The failed transformation took it down. The U-turn took it down. So we really missed an opportunity, I think, to save JCPenney.

1:02:20Hala Taha:Yeah. And I think the lesson is, you know, if you're going to make a change, you got to stick it out. You got to stick it out? Yeah. Was there any sort of like testing you wish you did or talking more to the customer? Yeah, you know, I do. You know, it's funny. At the time, I told people I don't believe in tests because by and large, I don't. We didn't test sizing a target. We did it. Sometimes the customer doesn't even know what they want. They don't. That was Steve's approach, right? Yeah. But I look back, Steve changed his mind a few times, you know, like the iPod. And he said, I'm not going to bring that to Windows.

1:03:02Hell will freeze over before I make a Windows iPod. And three years later, he did. And that's what made the iPod. That's what really made Apple. That catapulted our ability to get Windows customers. So Steve changed his mind.

1:03:15Hala Taha:Yeah. You know what I mean? And so I was pretty darn stubborn on the pricing in particular. That was the real difficult part. The no discounts. Yeah. And if I had done it over and we had a year, I would have at least tested the marketing messages. You know, you can do that without testing with a customer. That would have been helpful. Yeah. Yeah. There are a lot of ways we could have rolled out. I was worried about the cost of having two teams, one doing the new pennies, one managing the old. I thought it'd be too much work for the buyers to do both. So I thought of it as an either or. But the big thing, you know, quite honestly, I was arrogant.

1:03:54I was situationally arrogant. Everything I'd done for 25 years had worked.

1:03:59Hala Taha:Yep. You know, and because I had the courage to make change. And so when the board said go, I said, let's go. You know, and on the outside, we should have tested a lot of things. How did that impact your ego? Like, did you feel down or like that you were a failure because you had failed this transformation with Chasey Bunny? I was a failure. Make no mistake about it. When you're the CEO of a company and you do something, you know, that fails in everyone's mind and you walk away from it, you failed. You know, we fail every day. But when you come back to work, you know, you fail to have not a great podcast, you come back, you do another podcast.

1:04:42When you lose the chance to keep going and when it's over, that's when you fail. Right?

1:04:48Hala Taha:Yeah. And so I did. I failed. And it was hard. But I think even today, there'll be times I wake up and my stomach churns about what could I have done different? And why did I go there? Why did I listen to people? Why did I go so fast? Why didn't you fire who you wanted to fire? What could I have done different, you know? Yeah. You agonize over those things. They never leave you. Yeah. That's part of life. Now, I've been lucky. I got lucky, too. The Apple stores worked. Yep. And Target did pretty well. Yeah. You've got a great legacy. Well, I've had, no, I've had, I guess, if anything, I've tried.

1:05:27Hala Taha:Yeah. I've tried. Okay, let's play a game. Sure. So when I was reading your stuff, I thought that you had a lot of quotes. Now, not every quote comes from you, but I thought we could play a game called Quote Goat. Do you know what goat means? Greatest of all time. Okay. Okay? So I'm going to say a quote. You tell us what this quote is. Are these my quotes? Some of them are your quotes. Some of them are quotes that you say. Yep. It's all quotes that you're familiar with. Sure. If there's a story about the quote, tell us that. Sure. Or tell us the meaning behind it, whatever comes to your mind, okay?

1:05:58Yeah.

1:05:59Hala Taha:Good things happen when people come to the store. That's absolutely true. That's absolutely true. And that's the Apple store. Yeah. You know, I mean, I just believed in traffic, right? That's why you build stores, to get customers to come in. And no matter what they're coming for. Now, we ran summer camps for kids. And kids would come in five days a week in the morning. Almost every employer was dedicated to camp. And customers couldn't buy because the kids were over all the computers. But I knew good things would happen from that. So good things do happen when you come to the store. Every hour has its leader.

1:06:36Hala Taha:Every leader has their time. Yeah, that's absolutely true. That's from the Talmud. I don't know if you know that. I didn't know that. That's from the Talmud. I read that in a book by Marianne Williamson, A Return to Love. But the idea behind that is really simple, that leadership is something you've got to give away. And whoever's, like in this podcast, right now you're leading. You've got this thing about the goat, right? Yeah. You're leading. I'm following, right? When I'm speaking to you and answering a question, I'm leading. That's true in a store. when one of our employees or the customer, they're the most important person in the store.

1:07:17It's not the manager, right? They're leading that conversation. And so I think we have to all recognize that we are leaders and we're followers all day long, right? And you got to be willing to give away leadership. You know, and that's a really good life lesson.

1:07:34Hala Taha:Yeah. Make love visual. I really think when you see two people smiling when you see brain cells multiplying like you do in an apple store that's an act of love because together you're improving each other's lives and when you see that in a store you're making love visual so i used to tell my friends the thing i love about the apple store you see love everywhere and i think people helping each other helping each other and it's and it's a beautiful thing. Like when I go to the grocery store, and I do this too, but you see a customer getting out of their car and taking shopping carts that were left in the parking lot, and you're walking into the store, just return them and put them where they belong.

1:08:21When I see that, that's an act of love. And it's visual. That person didn't have to do it. He's securing the good for the store. But it's just the right thing to do. When someone stops down to pick up a piece of paper that's on the floor and put it in a trash can't, that's making love visual, right? When you walk an old lady across the street, that's making love visual. And great stores do that.

1:08:45Hala Taha:I really like this one. The conversational nature of reality. Yeah, no, that's not mine. That's from David White. David White's a poet. But he had this philosophy that everything in life comes from a conversation. And the most important conversation is the one you have with yourself. So think about that. Yeah. You know, every day you're thinking. Yeah. Well, what are you thinking? You're going, okay, like, I've got to go to the airport later today. I'm going, well, if I leave at what time? I look at Uber. If I leave at this time, I'll probably be on time. I'm having a conversation with myself and making a decision I'll leave at this time.

1:09:26When I thought about the Genius Bar before talking to Steve on the phone, I had a conversation with myself, which led to a conversation with Steve, which then led to a decision. So the reality is the world's about a conversation. Now, the best conversations are the ones that have no end in mind. The conversation will reveal knowledge that you didn't come into the conversation with. You know? Too often, unfortunately, we go into a conversation, okay, I want to convince my spouse, I want to convince my kids that this is the way to do it. so I don't go in and seek to understand and then maybe be understood, as Stephen Covey would say.

1:10:08Yeah, that's another great quote.

1:10:09Hala Taha:Yeah. You know, but the idea, I think life is a conversation. And we've got to become better conversationalists. And unfortunately, with all this screen time and social media, we're spending less time connecting. And we need to spend more time convening. And convening is really, you know, it's interesting, the word convene, the root word is of is it's the root of the word convenience and that's the opposite what we do when things are convenient we tend to not convene now we got to go back to convening more having conversations and being aware of how that reveals knowledge chat gpt can't reveal knowledge right it can reveal what the world knows but it doesn't reveal new knowledge that's going to come through conversation.

1:11:01Hala Taha:Okay, last one. People want to do significant things. Yeah, we all do. We're born to have meaning, have impact. You know, there's a great little story in the book, and I forget the name of the guy, but years ago, someone ran an experiment, and they, in an infant, you know, I should know this, I'm a new grandparent, but in the baby's crib. Okay. They put one of those mobiles. Okay. And once I was up there, a little kid would touch it and they couldn't stop touching it because they loved it. If I touch this, the thing moves, right? By definition, we enjoy having impact. We like to influence things, right?

1:11:43The bigger the influence we have, the more excited we get, right? And I think everyone wants to do significant things. And that takes encouragement, that takes kindness that takes a vision so i've always practiced with my teams you know you know you got to set a north star and the higher that star the bigger the vision the easier it is to accomplish it if you have something relatively small it's just another thing on the to-do list the thing about a north star is they're up which is the direction of values but it's also is so far out, we're never going to get there. And that means you have a strategy that will never end.

1:12:23The Apple store kept innovating, even to this day. 25 years later, the Apple store feels new and vibrant. It's got a heartbeat. You walk in the store, you feel the soul of the store, right? That's because we had a great North Star.

1:12:38Hala Taha:What was the North Star? It was to enrich lives. Very simple. Enrich the lives of the employees and the customers. and everything was designed around that objective in mind. So I want to switch gears a bit. I want to talk about AI. So when you started the Apple store, people thought stores were going to go extinct because of the internet. Now a lot of people think AI is going to be impacting work in general, perhaps retail. How do you think AI is going to impact retail? It's going to have a huge impact. It's going to impact the in-store experience and it's going to impact the online experience.

1:13:17However, it's not going to change where we shop. I don't think it'll change at all how often we go to stores. It's just going to let both be better.

1:13:26Hala Taha:The biggest change you'll see will be in online shopping, in my opinion. I think the idea of having a website with all these little tiles, you have to navigate through men's, ladies, what's new, what's on sale. It'd be a lot easier to have an agent just say, hey, I'm looking for something new and exciting. I'm a guy. I am willing to take fashion risk. And it comes back with, here are the items we have. You know, that's going to happen. Agenic commerce will be a really big deal. And that's going to help online. And it'll be a little bit more like when you walk in a store, because in a store you can talk to an employee and say, you know, what do you think?

1:14:03What are the hot items? You know, I've got a party tonight. What should I wear? You know, so I think the online will compete in that way. that most of what the stores do will be things you can't see as a customer, but that'll make it a lot better.

1:14:15Hala Taha:Like what? Inventory management. You know? Recommendations to the employees, you know? You know, employees will see, you know, what are the best-selling items in the store? And they'll come back with that. And it'll be also because a lot of customers walk in the store, you know they're there. You know, like at the Apple store, you know pretty well. You can flash your thing, you know, your QR code with the employee, and they know everything you own. and it can recommend, oh, you know, I see a lot of photos. You know, we got this new camera, which has a great camera. You know, you're going to have improvement everywhere in retail, you know, from AI.

1:14:51I'm a real tech optimist and I'm a believer in AI. There's downsides. But every new technology we've launched, we've said there are downsides. But they've always been for good.

1:15:03Hala Taha:Well, this has been such an incredible interview. I end my show with two questions I ask all of my guests. The first one is what is one actionable thing our young and profiters can do today to become more profitable tomorrow? Ruthlessly illuminate hurry from your day. You know, so often we're just go, go, go, go. Too much on the plate. We're running behind. We're feeling anxious. We got to slow down. You know, Steve Jobs did one thing at a time. You know, he would only let Pixar make one movie a year. because he said, you know, we can only do one great movie a year, and we want to do great movies.

1:15:40You know, we had the Mac. We had the iPod. Three years later, we did a phone. Three years later, we did an iPad. It wasn't like Sony that had so many products in his portfolio or Samsung. We did a few things. Steve was never in a hurry. He didn't even carry his cell phone until the iPhone came out. He didn't want to be bothered, you know. Slow down.

1:16:04Hala Taha:It's crazy to hear that because you think of Steve Jobs as being so innovative and you would assume that he's just like all about like deadlines and targets and next thing and new thing. And it's really interesting to hear that he was not into the. He was all about quality. And what would you say your secret to profiting in life is? And this can go beyond business and finance, however you want to take it. When I came out of Harvard Business School, I was going to pretty close to accepting a job with Goldman Sachs. I'm an A. Department. That was one of the jobs. You know, you get the status of working on Wall Street and mergers and acquisition.

1:16:40It'd be like now. You know, right now that segment of the business is really hot. And it was back in 84.

1:16:45Hala Taha:Yeah. A guy who was a CFO at Dayton Hudson said to me, Ron, the net present value of a life has nothing to do with how much money you have. He said, you got to pick the net present value of your life, not your career. And that was interesting. me. And that led me to figure out, I'm going to pick an industry I can love for a lifetime. I'll start at the bottom. I unloaded trucks at a Mervin store and I got started. And that's a retail store? Retail store. And at the time it was very popular. But even, you know, I told Steve, you know, I'll take the job, but, you know, I'm a parent. I'm going to coach all my kids' sports teams.

1:17:27Hala Taha:He said, I don't care. Just get your job done. But I would leave Apple at four o 'clock every day in the spring to go coach my son's little league baseball team as an example. But the net present value of a life is your whole life. It's your work. It's your family. It's your friends. It's the hobbies you love. You know, it could be your faith. I think that's an important thing for most people, no matter what faith it is. Now, you got to find a way to be fulfilled in all of those things. Right. And that's what I think is the most important thing. That's so beautiful. Another quote from the quote goat.

1:18:08Hala Taha:Well, Ron, where can everybody learn more about you and everything that you do? Well, I actually have a little website called Ron Johnson Shops Different. It's the name of the book is Shop Different coming out September 22nd. It's really about the Apple store, but goes back into some of the things we talked about, I'd like my time at Target, my time at Pennies, and more. But if you go to ronjohnsonshopsdifferent.com, you can have access to all the little interviews I do, podcasts I do like this one, and that'd be where I'd go. Awesome. Well, thank you so much. Pleasure's mine. It was so great to speak with Ron Johnson today and learn more about what it really takes to build a customer experience that people truly love.

1:18:50Hala Taha:Here are some of my favorite lessons that he shared. First, the best customer experiences are about belonging. not transactions. When Ron and Steve created the Apple Store, they asked a simple but brilliant question. What can a store do that the internet never could? That's why the Apple Store was not just built to sell computers. It had classes, training, face-to-face support, and the Genius Bar. Like he mentioned, the products only took up a small portion of the store, but they had huge stores for a reason. It gave people a place to learn, connect, and feel taken care of. Next, real innovation takes imagination and courage.

1:19:25Hala Taha:Ron made such a clear distinction between improvement and innovation. Improvement is taking what already exists and making it better. Innovation is imagining something that has never been done before. And that's what happened when the Apple Store team realized that the store should not just be organized around products, but around the digital life that people were starting to live. And I just loved the lesson Ron learned from Steve Jobs. If you realize there's a better way, you need to have the courage to make a U-turn. Finally, bold leadership only works when people understand and believe the vision.

1:19:55Hala Taha:Ron was very honest about JCPenney and how moving too fast without enough trust, buy-in, and communication created one of the hardest lessons of his career. That part of the conversation was so important because past success can make any of us think we already know the answer. But great leaders stay humble enough to bring people with them. For entrepreneurs, this episode is such a great lesson in how to think bigger about your customer, your team, and your own decision making. Innovation is not just about having a bold idea. It's about creating something people truly need, communicating the vision clearly, and having the humility to keep learning along the way.

1:20:29Hala Taha:If you listened, learned, and profited from this episode of Young and Profiting, share it with somebody who's building a business, leading a team, or trying to create a better experience for their customers. You can also check out Ron's new book, Shop Different, for more of his lessons on Apple specifically. And if you enjoyed this show, please drop us a five-star review on Apple, Spotify, or CastBox wherever you listen to the show. Nothing helps us reach more people than a good review from you. You can also find me on Instagram at Yap with Hala. Our Instagram is on fire right now. You can also find me on LinkedIn.

1:20:58Hala Taha:Just search for Hala Taha. This is your host, Hala Taha, AKA the podcast princess, signing off.