Testing…. Crucial for Small and Large Companies

Last year I wrote a blog on Testing. . .Reduces Risk and Maximizes Success. It was geared to small Business. I said, “Large companies can absorb a failed product. Small company failures can be fatal. Now I would like to focus on two very large entities who neglected to test their ideas and paid a heavy price due to their ideas’ failure, which could easily have been avoided by testing.

JC Penney

JCP is a large national retailer who has been eminently successful for decades. The 1100 stores can be found in most American cities. In November of 2011, their Board decided to replace their CEO and bring in Ron Johnson as the new CEO to reinvigorate their lagging growth. Johnson had previous success as vice president of Target, but he really made his reputation for the remarkable job he did in heading up the creation and sales of Apple retail stores. In malls where Apple stores were located, customers waited in line to get into Apple stores while the rest of the retailers in the mall were absent any meaningful traffic. Customers started to make appointments to get into an Apple store. Apple became one of the most successful American companies ever. Johnson, early in his Penney reign, decided on some dramatic changes in company strategy. Dana Mattioli in her column of February 24, 2013 in the Wall Street Journal said of Johnson, “Declaring the department store system broken, he eliminated coupons entirely and did away with most of Penney’s sales—popular customer incentives that often drove seasonal traffic. The new CEO also set out to physically refashion stores by installing dozens of branded boutiques. Clearance racks were banished.”

Despite the entreaties of many senior Penney people to test his new plans before rolling out his changes to all stores, Johnson proceeded to ignore their advice and moved  his vision forward nationally with heavy media investment. The results were a resounding failure. In the first year of his changes, sales fell 25%, and the stock dropped 40%.

Between 2011 and 2012, Penney’s market share dropped from 12% to 9.1% while Macy’s, Kohl’s, Dillard, and Belk gained market share.

The Wall Street Journal did a major interview with Johnson shortly before his departure in November 2011. They asked him if he would do things differently a second time. He said, “No, of course not.” So, he wouldn’t listen to seasoned Penney executives who urged him to test, and even after his strategies failed, he still believed he was right in not testing—all because Apple never tested, which put J.C. Penney in serious jeopardy.

JC Penney because of their size and brand will probably recover, but the lesson of the value of testing is clear. As Nike would say, “Just do it.”

US Government

A very large entity indeed. Good testing surely can reduce risk and maximize success. There also is another benefit that rarely gets scrutinized. It is the unintended consequences of your strategy and product introduction. Most actions in life will yield to some extent consequences that were never anticipated, some good and some bad. Testing can illuminate these unexpected problems, which can be averted or mitigated when known. Here is a perfect example of this.

Michelle Obama, with the best of intentions and with her full influence as First Lady, pushed a series of regulations to attack the problem of childhood obesity. . .a worthy goal. A NY Times article January 25, 2012 by Ron Nixon started with this paragraph:

“Hoping to combat the growing problem of childhood obesity, the Obama administration on Wednesday announced its long-awaited changes to government subsidized school meals, a final round of rules that adds more fruits and green vegetables to breakfasts and lunches and reduces the amount of salt and fat.” With great fanfare the program was initiated nationally and soon became a failure. Unanticipated costs to cash strapped schools mounted, and schools began to drop out of the program. The law of unintended consequences reared its head to cause the problem. Children didn’t like the food, threw it out, and stopped buying it. Testing in select areas would have easily illuminated the issue and with some creativity solved the problem and salvaged a good idea.

So whether you are a small or large business, all your plans for new ventures, products, services, or programs should have a Testing component.

 

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