The job of leading a corporate reinvention isn't an easy one, as evidenced by recent turnover at the top of two of Minnesota's biggest companies.
Supervalu ousted Craig Herkert as chief executive this weekend, turning over leadership to the firm's non-executive chairman. He joins Brian Dunn of Best Buy Co., who was sent packing over allegations of personal misconduct but who was also shadowed by questions about the company's direction and performance.
While these companies are in different industries, they are both in markets undergoing fundamental changes that require a corporate leader to do nothing less than reimagine the business -- and bring employees and other stakeholders along with him.
What Herkert and Dunn also share is that neither one took anything other than incremental action, even as the need for fundamental change became more and more apparent.
Herkert came to Supervalu in 2009 from Wal-Mart and inherited operational challenges, many of which had come in the 2006 Albertsons deal that added more than 1,100 stores. His initiatives -- such as a local fresh produce program -- may not have been inherently flawed, but they did not lead to improved results, as same-store sales declined.
Herkert told the Star Tribune less than two weeks ago that he had been given the resources and a timeline by the board to implement a new pricing strategy to blunt rivals. Clearly, there was not enough time to reach any sort of conclusion about the strategy, so the most likely explanation is that the board decided that Herkert's plan was too little and much too late. Either that, or they had lost confidence in him to implement it.
Dunn resigned in April amid an investigation into whether he had an inappropriate relationship with a younger female subordinate. While he had just announced a restructuring plan, its limited scope fell well short of what would be necessary to fix the company. "Showrooming," the practice of customers who treated Best Buy as a place to check out products but then bought cheaper from the likes of Amazon, is not really news in 2012.
For shareholders, that was probably far more worrisome than Dunn's firing off 149 text messages to his young friend while on an overseas trip.
Rohit Deshpandé is a Harvard Business School professor who said that "the most successful companies reinvent themselves all the time." Of the consumer and retailing flops he has studied, the common theme is that "they are product-centric and not customer-centric, and they just don't see the change coming."
By product, he does not just mean defining yourself by what you sell to customers. Supervalu, for example, sells hamburger buns and dry pasta and thousands of other products. It can't really operate 1,101 traditional grocery stores and not sell groceries. But "product" means the items offered on the shelf, as well as the look and location of the store and the experience of getting through checkout.
Deshpandé said a classic failure is Blockbuster's unwillingness to change its product quickly enough in response to the threat from Netflix. It was a strategic failure and a cultural one as well, as the leadership could have learned all it needed to know by interviewing store clerks who had stopped seeing their favorite customers.
The companies that are the most successful are entrepreneurial even though they may be large companies, Deshpandé said, adding that "they are companies that are rewarding employees for coming up with customer-centric innovations."
It is the job of the leader to relentlessly focus the organization on the customer and what he or she is doing, and foster a culture that rewards employees for innovations that serve the customer. And, most importantly, move fast.
A contrast with Herkert and Dunn's approach to change is the bold pricing strategy underway at J.C. Penney Co. Its leader is Ron Johnson, a former Target executive who led the Apple retailing effort from its first store opening in May 2001 to what it became, the envy of retailing, with annual sales per square foot of more than $5,600. He will either remake J.C. Penney into a growth company or lead it into bankruptcy, and today it is not clear which way to bet.
With his Apple experience, investors greeted his appointment at J.C. Penney last year with great enthusiasm, but much of it had leaked out of the balloon by the time 2012's first-quarter earnings were reported. Johnson had tossed overboard a pricing strategy that had led to an average markdown of 60 percent, on grounds that it had run its course and that the magnitude of the promotional pricing had gotten to nearly absurd levels.
He wanted to simplify prices and win back customers with presentation, service and product selection, not another "sale" when the company was up to something like 590 announced sales per year. The customer reaction was, no sales, I'm staying home. Same-store sales in the first quarter were down 18.9 percent.
But in June, Johnson was taking investor questions in New York at the Piper Jaffray consumer conference, sounding not a bit worried.
"A decade of trying hadn't delivered long-term economic value, so did we have the courage to make a bold pricing change to enable a very different future?" he said. "These things are really hard to go through. You've just got to have the courage to move forward rather than be trapped in the past."