Ron Johnson Saga Showed Why Data Still Matters

May 15, 2013 1:44 AM  By

Retailers watched for 17 months to see if J.C. Penney’s woes have been a mere “implementation slump,” or just a down-and-hard belly flop. The board of directors made that decision for us in April 2013, but what can we really learn from the retail giant’s machinations?

Don’t blow it. That’s probably the first (and least helpful) takeaway from Ron Johnson’s tenure at J.C. Penney.

After Johnson left Apple’s retail group, we all watched with bated breath to see if he had channeled Steve Jobs’s spirit of genius foresight. I think we would have considered his success as some sort of vindication for instinct-driven decisions. We needed to know that human-born ingenuity still trumps cold, hard math. It would have given us the hope that we business leaders are indispensible, that we are at the helm because we possess a je-ne-sais-quoi for retail, and that our job couldn’t be accomplished by a twenty-something undergrad looking at a dashboard. It all hinged on Ron Johnson.

But we were disappointed. Ron Johnson failed. So what happens next?

Why Should Retailers Turn to Data?
Enter: the discussion on data. But this time, it’s not just about the data or what siloes they do or don’t exist in. Johnson gambled on predicting customer need before they needed it, but he did it with little to no data points, ostensibly on the premise that there was no data to help make those decisions. Retailers have to cultivate the ability to predict need, but data-driven decisions will trump instinct every time.

One of my favorite examples of using data is from a retailer I recently met on behalf of Domo. The executive team was about to kill a product line that they felt had run its course.

Shortly before pulling the plug, the VP of commerce wanted to see what a dashboard-like solution could do for his business. Once he brought sales data out of numerous silos into a more visual and unified format, he saw the business in a way that was never before possible. He also quickly realized that the product line they were about to cut was actually their hottest seller in Oklahoma and Texas, and killing it would cost the company between $250,000 and $500,000.

Yes, they had the data; but inaccessible data is just as useless as no data, and the company almost made a gut-based, half-million dollar mistake.

Does Data Replace Intuition?
The answer, first and foremost, is no. Data does not replace decision-makers and their intuition, because data doesn’t pull the lever. Data doesn’t make the decision. No dashboard or business intelligence (BI) tool can ever secure your business for you forever, and you should ignore any company that tries to tell you otherwise.

Johnson was highly criticized throughout his entire tenure (and now more than ever) for his unwillingness to test his new pricing strategy, and for his complete ennui for customer data points. Had he moved in stages, evaluating data on decisions they made and making informed adjustments along the way, pundits may have called his work genius instead of arrogance.

Nothing replaces the value in seeing your company’s data in real-time to identify strengths, weaknesses, opportunities and threats. Wall Street works the same way—brokers are always attached to the numbers so that every decision they make is based on real-time stats. Making business decisions that are based on gut-instinct rather than data, then, is like trying to pick stocks based on how you like a shirt you bought at a some store back in February.

If You’re Going to Roll the Dice, Rub Them First
When Vivien Bohme co-founded Bohme Boutiques, she was not about to pick a location, select apparel, or expand her business until she had numbers to make an educated decision. To get to that point required some extra effort on Bohme’s part, however, when the malls wouldn’t give her traffic data when she asked about available locations.

Undeterred, Bohme took matters into her own hands and scouted out the malls herself, counting traffic patterns at every store. She even asked each retailer about their sales per square foot.

But then her POS system, her accounting software, and her inventory data all began to get tangled. Bohme had more than a dozen stores before she implemented a dashboard, and she had been spending multiple hours each day just getting to the data in different systems.

Two weeks after she implemented a dashboard solution, she got her store managers involved. Managers, finally armed with real-time data, knew where they were against their daily goals at any given time. They also could see how their store compared against the others. Managers started a healthy competition to reach their targets, and they began sharing tips and best practices to help other stores increase sales performance.

Within the first month of getting the data into the hands of the store managers, revenue increased 15 percent. And that’s more than J.C. Penney can say after Q1 2013 profit margins dropped 14.2 percent.

If you’re not operating by the data, you’re writing your business obituary.

How to Not Blow It
Use your data, and get it all in one place where you can see it.

No business leader can succeed if he or she is uninformed. Maybe Steve Jobs had the ability to propel his company based on gut instinct, but for the rest of us mere mortals, we shouldn’t tempt fate. As for Johnson, he was playing Russian Roulette without the data, and pulled the trigger one too many times.

Steve Wellen is COO of Domo.