Struggling retailer JC Penny hired former Apple executive Ron Johnson as the CEO to save the company. Seventeen months later, he was ousted in what many consider a colossal failure. Why? Not because he failed to take action, but rather because he tried taking the same actions that worked for him at Apple. He was guilty of a managerial bias called stereotypy – the tendency to believe that what worked for you in the past will work for you in the future. From Time:
Johnson pictured coffee bars and rows of boutiques inside JC Penney stores. He wanted a bazaar-like feel to the shopping experience, and for JC Penney to be “America’s favorite place to shop.” He thought that people would show up in stores because they were fun places to hang out, and that they would buy things listed at full-but-fair price. Essentially, Johnson wanted JC Penney and its shoppers to be something that they’re not. He wanted them to be more like the scene at Apple Stores, or even Target, when in reality, there was probably more overlap with Macy’s, or even Walmart.
And why didn’t Johnson understand what JC Penney’s core customers enjoyed? Well, one reason is that he didn’t really ask them. When Johnson floated plans for the chain’s radical makeover, he was asked about the possibility of trying the new pricing strategies on a limited test basis. Johnson reportedly shot down the idea, responding, “We didn’t test at Apple.”
In medical terms, stereotypy is a repetitive or ritualistic movement, posture, or utterance. Stereotypies may be simple movements such as body rocking, or complex, such as self-caressing, crossing and uncrossing of legs, and marching in place. In managerial terms, it is a blind spot caused by force fitting your current situation into past situations, causing you to believe that what worked before will work again. Consider research by Posavac, Kardes, & Brakus (2005):
“MBAs were asked to consider four marketing strategies for increasing market share for an established product: increasing advertising, cutting prices, hiring more sales representatives, and investing in research and development. The MBAs were told that, to save time, they would be asked to focus on one randomly selected strategy and to judge how likely it was that this was the best strategy. In addition to overestimating the likelihood that this randomly selected strategy was the best, they predicted that the majority of the executive board would also prefer this strategy.”
People focus too quickly on a single option, even when the option is selected randomly and there is no a priori reason for preferring this option. Worse, when we actively evaluate the situation using pseudo-diagnostic information, we make erroneous choices. We get into a new situation like Ron Johnson did. We look at the current situation to see what elements are the same or similar. Despite the differences between then and now, we convince ourselves that the new situation is close enough. We embrace a single option and fail to appreciate how different the new situation is.
For innovation practitioners, the message is clear: ignore what you have done in the past. Innovate systematically around the new situation to create combinations of strategies you never would have come up with on your own. To do that, apply a method like Systematic Inventive Thinking to give yourself strategy options that are right for the moment. Forget the business model that worked well for you in the past. Create new business models that capitalize on the situation at hand.