J.C. Penney's Recession Investment Strategy
Retailer J.C. Penney plans to accelerate its investment in strategic business initiatives where technology plays a major role. Our columnist, Charlie Feld, talks with CIO Tom Nealon and CEO Mike Ullman about their plans.
CIO — Charlie Feld: Times are turbulent in retail. What are your thoughts about getting through this era in a quality way?
Tom Nealon: We have a five-year plan for the business that is very clear. Given the environment, though, we've created a "bridge plan" that is a practical response to the climate, without walking away from the objectives of the long-range plan. The economy has impacted decisions around the pace of new store openings, as well as around inventory levels, just to give you a few examples. What it's not impacting at this point is investment levels that set the future capabilities of the company.
Mike Ullman: The way that we created the bridge plan was pretty straight-forward. We created three buckets. In the first bucket were the things that we decided to slow down or moderate. Things like our capital investment spending, inventory commitments and SG&A expense. In the middle column were the things that we intended to maintain our focus on—things like our power brands, our key initiatives around merchandising, and our commitment to our dotcom strategy. And in the third bucket were many of the strategic initiatives. These were the things that we intended to accelerate. Technology is essential to many of the initiatives in this category.
Feld: I assume you are not setting your priorities in a vacuum. Are the business leaders bought in?
Nealon: Absolutely. The priorities line up against the business priorities that are laid out in the long-range plan. There have been a few things we've taken off the agenda. We're not being as aggressive on a back-office ERP implementation, for example. So I would say that 80 percent of our application spending is aligned explicitly with strategic initiatives and 20 percent is the "must do" compliance kind of stuff.
We've been able to hold the IT budget essentially flat without impacting our strategic projects. One of the things that we've done that is working really well is what we call our BILT, or Business Infrastructure Leadership Teams. What we were trying to avoid was the model of IT steering committees. What we wanted was an ongoing forum where the business leaders and the IT leaders were setting the priorities, discussing business issues around processes, systems, organization, implementation and change management. There's a BILT team for each of the strategic initiatives.
