Wizard of Oz protagonist Dorothy captures the shock of her post-tornado world in the memorable line, “Toto, I’ve a feeling we’re not in Kansas anymore.” Ex-Apple retail wizard Ron Johnson, now CEO of JC Penney (JCP), must be saying “I’m not in Cupertino, California [Apple’s headquarters] anymore” as he discovers the challenges of transforming his new employer’s retail stores. The first head has already been chopped: merchandising and marketing leader Michael Francis left JCP after less than a year on the job. We’ll now see if Johnson, who created the “shabby chic” value promise at Target and the stellar shopping and learning experience at Apple, has the chops to fix a troubled company in a category with excess supply. I thought Johnson had a great idea – reinvent the department store, which had offered wonderful shopping experiences when local high-end stores dominated the…
Reviving local retail through business model innovation
In the new Broadway-bound musical Hands on a Hardbody, ten East Texans seek to reverse their hard luck lives in a competition to win a Nissan truck. In one song, Used To Be, the contestants lament the loss of independent stores across Texas. “How will we know when we’re home,” the cast croons, “in a land filled with Walmarts and Walgreens and Wendy’s?” The musical captures much of what is hurting in America, the retail landscape being but one example. Office Depot, Staples and Office Max for example displaced local office supply stores while Walgreens, CVS, Walmart, Target and other national chains displaced locally owned pharmacies. National retailers then pressured manufacturers for cost reductions, creating ruthless competition that’s driven every last penny and non-essential US job out of consumer goods companies’ cost structures. The change from local to national had advantages. A developer…
Disney’s forward-looking business model innovation
Disney’s recent decision to restrict products advertised on its child-focused media properties might not appear to be business model innovation in the classic sense. But it is. With that one decision, Disney is redefining how, where, and why they will do business with other companies, and offering a leading-edge value promise to consumers. In reading societal tea leaves correctly and taking bold action, Disney will advance its financial and social value. Starting in 2015 Disney will restrict advertising on its child-focused TV channels, website and other media properties to brands that meet a strict new set of federal nutritional standards. The decision will reduce Disney advertising revenue from brands like Capri Sun™ drinks and Kraft Lunchables™, foods that may be fun to eat but not good nutrition. Concurrently, Disney will reduce the salt content of meals served at its theme parks and engage…
MIT-Harvard edX disruptive business model
Higher education in the US has reached a breakpoint, where underlying and conflicting trends force an abrupt and often unexpected change in how a market works. The conflicting trends for education are that families’ and governments’ ability to pay for rising college costs has fallen at a time when individuals, states and our nation need higher education more than ever. Typically, when products become more expensive, consumers buy less. But the demand for college education continues to grow as wages for lesser degrees largely erode. So, what will give? When I was an MIT economics doctoral student, we learned that services like education, healthcare and government would increasingly represent a higher share of GDP because they would never achieve the efficiencies observed in manufacturing and agriculture. One teacher even referred to this expected outcome as the “Europeanization of the US economy.” But today’s…