Tim Calkins, Kellogg School of Management at Northwestern, Business Insider

Ron Johnson is out at JC Penney.

His seventeen month stint at the retail giant will go down in history as one of the great leadership fiascos of the decade.

We can learn a lot from Ron Johnson’s tenure at JC Penney.

Here are three of the key lessons.

It is easier to lose your existing customers than it is to gain new ones

JC Penney proved that it is pretty easy to lose your customers. The company basically told people that the days of deep discounts were over and anyone looking big sales should go shop at Kohl’s.

They did.

It is very hard to attract new customers, especially to a well-established brand. JC Penney tried to bring in people who were younger, more stylish and less price sensitive. They made some progress, apparently, but not very much and certainly not enough.

This isn’t a surprise; getting someone to rethink a brand takes time. Repositioning is an enormous challenge. It takes time and money and success is never certain.

Set low expectations

People evaluate results by comparing them to expectations. Is profit of $500 million good? Well, if the goal was $400 million, a profit of $500 million is terrific. If the goal was $800 million, a profit of $500 million is a disaster.

Johnson failed to set low expectations at JC Penney. His plan was going to hurt sales and profit in the short run but he didn’t predict the size of the drop. When results were weak investors lost patience.

Meg Whitman at HP has embraced the idea of low expectations. As she began her tenure as CEO she basically said HP won’t make anything for many, many years to come, perhaps ever. This is a good approach; it gives her time to make changes and adjust course.

Don’t get too confident.

Ron Johnson and his leadership team at JC Penney were very confident. After a successful stint at Apple, Johnson believed he knew the answers. Johnson and his team also apparently thought the people working at JC Penney were somewhat clueless and pathetic.

So Johnson fired many of the existing executives and rolled out a plan that was deeply flawed. Did anyone tell him the plan wasn’t going to work? I suspect so. Did he listen

No.

Assuming you know all the answers is dangerous.

For more on this story go to:

http://www.businessinsider.com/3-lessons-ron-johnsons-jc-penney-ceo-2013-4?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29

Please read following story:

Flailing JC Penney Seeks To Raise $1 Billion

By Max Nilsen Business Insider

JC Penney needs money after big losses during an attempted turnaround by ex-CEO Ron Johnson, who was fired last week.

The Wall Street Journal reports that the company hired bankers at Blackstone for advice on how it can bolster its cash pile. The report cites bond analysts who don’t think the company will be able to generate enough cash to keep itself running beyond this year.

At the end of 2012, JCPenney had $930 million in cash and cash equivalents, according to an annual filing with the SEC. The year before, it had $1.5 billion — so it’s basically losing half a billion a year in negative cashflow.

This cash crunch could severely limit what new CEO Mike Ullman can do. He has to do something to bring customers back to the store, whether waiting for Johnson’s transition to boutiques to pay off, or returning to more heavy discounting.

Notably a cash crunch would limit the ability to offer big deals and advertise them or to continue Johnson’s renovations.

Either way, the company looks like it will need to sell a minority stake or find a significant investor, sooner rather than later.

For more on this story go to:

http://www.businessinsider.com/jcpenney-bleeding-cash-2013-4?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29