Yoshikami: The Disaster at JCP
The replacement of CEO Ron Johnson at J.C. Penney caps what has truly been a disastrous turn of events for the 110-year-old retailer.
Johnson was brought in to revitalize the brand and he took bold action that was not readily accepted by J.C. Penney's current customer base. It's as if the focus was to make J.C. Penney like Apple (where he headed up the Apple stores division) and bring the same consumers to that retailer. Clearly with plummeting sales and losses mounting, the strategy was not effective.
So what went wrong?
This fiasco was less about strategy and more about the implementation of that strategy. Apple is notorious for sitting on products for years, making judgments about whether or not the product is ready for the marketplace. The rumored Apple TV has been a ghost for years. The jury is still out on the new team at Apple but the lesson is clear from past Apple behavior; it's important to move deliberately and with careful thought before moving forward with new products and initiatives.
(Read More: Why Ackman's Plan for JC Penney Was Doomed)
Johnson attempted to remake J.C. Penney into a one-price-product marketplace with boutique shops. This "no sale" perspective has not been the standard practice for retailers for the last 100 years. The focus has been on promotional discounts based on events and seasons. The goal was to make J.C. Penney like Apple; products were never on sale but essentially provided the value necessary for consumers to pay listed prices.
That was a big mistake in my view. The reality is J.C. Penney products are not like Apple products. Apple sells 20 different items; JCP sells thousands of items easily purchased at other locations. Commoditization exists in retailing. Additionally, attempting to change one's current customer base virtually overnight is fraught with danger. Clearly (and it's very easy to say this in retrospect), a more methodical approach would have been more appropriate.
A longer testing period on the concept of boutique shops within stores in limited locations would have made more sense rather than a massive overhaul of all stores. Surely the urgency was there to bring a new perspective and a new business model to J.C. Penney after a languishing stock stock price and eroding market share. But urgency does not mean you act in a way that disorients your target customer.
So what are you to learn from the implosion at J.C. Penney?
The lesson for investors is very clear. One not only needs to examine corporate strategy but how that strategy will be implemented. The right implementation is absolutely key in making sure that a strategy is effective and profitable.
(Read More: Cramer: Ullman 'Right Choice' for JCP, but 'I Worry')
Be your own management consultant and audit the strategy of the any firm you are considering investing in.
Always remember that leadership is a collection of people making judgments; that's what you're buying. People make good decisions and sometime bad ones; assess carefully the judgement of the leaders making decisions. They will be spending your money towards the adopted strategy; make sure they are spending it wisely.
Michael Yoshikami, Ph.D., CFP, is CEO, Founder and Chairman of the DWM Investment Committee at Destination Wealth Management. Michael is a CNBC Contributor and appears regularly on the network. DWM is a San Francisco Bay Area-based independent money management firm that provides fee-based wealth management services to institutions and individuals around the world. Michael was named by Barron's as one of the Top 100 Independent Financial Advisors for 2009, 2010, 2011 and 2012.