Former JC Penney CEO on Apple Stores, SoulCycle & Approaching Digital Commerce

By Scott Kirsner |  September 14, 2016

Ron Johnson has been responsible for bringing new ideas — not always successfully — to companies like Target, Apple, and JC Penney.

Ron Johnson, in blue shirt at center, with Enjoy colleagues.

As a merchandising VP for Target, he brought in designers like Michael Graves to create high-style products at affordable prices. At Apple, he worked alongside Steve Jobs to launch the first Apple Store in 2001; the retail outlets now generate more revenue per square foot than any U.S. rival. But his tenure as CEO of department store chain JC Penney lasted less than two years, and included one quarter in which same-store sales dropped by a third. After being ousted at Penney, Johnson launched an e-commerce startup called Enjoy, which has raised $80 million in venture capital funding.

We spoke with Johnson about Enjoy’s unique blend of online selling with an in-home set-up experience, and also the model he sees as most effective when it comes to creating something new within an established company. Hint: keep it small, and make sure the CEO is your champion.

We’re in the early days of what I would call digital commerce. We have all these devices. We buy through websites and apps and Facebook Messenger. It has led to extraordinary convenience. It has become a part of our retail commerce system, but a very small part — about 7 percent of all sales happen digitally.

Most of the digital commerce companies have been started by tech people, like Jeff Bezos, who have focused on digital convenience — making the transaction easier, eliminating friction. If you look at the physical world, [retailers have always had] one of two strategies. Either you’re going to be about convenience, like shopping at Target, or experience, like shopping at Nordstrom or an Apple Store.

What Enjoy Delivers

In the online world, nobody has thought about, how do you deliver a digital experience? When you order from Enjoy, you get the convenience of ordering from any device you want. You pick a time and place, and we will hand-deliver a product to you in as fast as four hours, with a trained expert with exceptional people skills. In a world that has gone digital, we’re not going to give up on help; we’re just going to deliver it in a new way. The old retail adage was “location, location, location.” We think about where you use the product as the location, not the store. How do we reimagine a high-touch service experience, by bringing the product to the customer where they’re going to use it?

Savant makes home automation technology that can control your homes lights, curtains, and home theater. You can buy that in a store, but if you take it home, you have to figure out how to connect the remote to all your devices. With Enjoy, we bring it to you. Our expert sits down and says, “Let’s set up this remote.”

We’re now in cities including Miami, Atlanta, Dallas, Chicago, and New York. In every market, we place a team. They have a physical place where they can meet. We keep the inventory there — it’s like a really nice back-of-house of a store, for our team. Our employees are full-time or part-time, salaried with benefits, but they get to set their own schedule. We just have to have [people] available between 10 AM and 9 PM. Instead of [customers] going to the store, the store comes to you. Our experts might take public transportation or their own vehicle, and we reimburse them. We invest all of our energy into training people and the experience we deliver, whether it’s in a home, an office, or a coffee shop.

Build Small Teams that Function like Startups

Big companies are known for execution; they’re not known for innovation. In many ways, the larger and older the company, the slower you have to move. I learned that lesson at Penney’s. We had a vision for dramatic change, and wanting to move fast — and I moved way too fast for our employees and our board members and our customers.

At Apple, Steve [Jobs] let me set up my own team. I reported directly to Steve. It was like a startup within a medium-sized company at the time. I was able to innovate really quickly, leveraging Apple’s IT and design leadership to really build out a retail chain pretty quickly. Most companies don’t empower new teams to work like that.

When Apple created the iTunes Store, Steve got five engineers and they worked really hard and that’s what they produced. I do think that’s a model that was a big part of Apple’s success in the early 2000s. My guess is that’s probably the best way to do [new ventures.] I think it’s got to be intentional and focused. We were a tiny team at Apple Store. We had one employee at headquarters per store, [at a time when] when we had 100 stores. The whole team stayed small. (Below, Jobs gives a tour of the first Apple Store, which opened in 2001 in Virginia.)

At Enjoy, we’ve assembled a team that primarily comes from successful startups — people who were early at Facebook or Google, or they’re right out of school. Eighty percent of employees at Enjoy come from the startup world, so the only way they know how to work is a lean mode. You get things in the market, find out what customers think. You learn, pivot, react, run sprints. They would be very uncomfortable if we applied a big company process. The people we’ve assembled are more important than any tool or approach that we use.

Buying Experiences, Not Things

Look at a company like SoulCycle. On any device, you pick your class, pick your bike, pick your instructor, and pay for the class. Then you show up and have an experience of exercise that’s pretty magical. You order online, but they deliver an experience. With Airbnb, you don’t call and make a reservation with a hotel’s call center; you you pick a place and experience a neighborhood.

We’re moving pretty rapidly into an experience economy. That’s particularly true for Millennials, who are focused on the life they live today, rather than the life they’ll live in a decade. They don’t acquire things in the same way. But they go out to dinner, they travel more. They increasingly work in this mobile economy where they have more freedom of schedule. Maybe they drive for Uber, or they’re an expert for Enjoy, so that they can pursue a passion, like being a pastry chef or being a musician.

People are living their lives differently. When I grew up, you were expected to go get a job, and work 9-to-5. You were saving money to live a great life in your 30s and 40s, and saving for retirement. Millennials and young people don’t live that way. They care about things they can post on Instagram. It’s the life they create and share every day on social media.

Previously, stuff was a marker of status, at a party or when you showed up at school. Today, the average person spends 25 minutes on Instagram a day. They are looking at images of great brands they follow, athletes and celebrities like Steph Curry, and they’re looking at their friends. You want to share experiences every day. Rather than buying clothes, I’m going to spend more money going to concerts and SoulCycle and restaurants. The idea of doing transactional things is less appealing — buying something and coming home and fumbling with a manual.

The Best Things are Discovered, Not Marketed

An Enjoy expert helps a customer learn to fly a drone.

Primarily, we are focused on helping the consumer electronics companies establish a direct relationship with their customers, so Enjoy is integrated into the websites and buying experiences of our customers. You go to AT&T or Savant and you pick Enjoy. But people also dsicover us through word-of-mouth or social media. But we’re not investing money in building the brand. That is really expensive, and I firmly believe the best things are discovered, not marketed. With the Apple Stores, we wanted people to discover the Genius Bar and tell their friends about it. We always believed that would be more authentic, in the same way that hearing about a great restaurant from a friend means a lot more than seeing an ad with a coupon.

Great Companies Today are Led, Not Managed

When I went to business school, in the 80s, no one had data. You had to have an army of smart people to run spreadsheets. The companies that won were organized to be managed, with Six Sigma and other management systems. Now, you’re in a world where information is instantaneous. You don’t need large management processes. You need nimble work groups to learn and execute. Amazon is the kind of company that grew up in this era when you don’t need management; you need to innovate.

Are Apple and Amazon excellent innovators because they are, or were, founder-led companies? That is probably part of it. But companies established in the last twenty years, after the information revolution had taken place — they have to be led, not managed. Great companies in the 1980s were managed. You had Jack Welch, and books like “The Two-Minute Manager.” All the great companies now are led. Look at Tesla or Facebook. It is a different era.