How did the now-former JC Penney CEO’s strategy result in a decline in sales of 32 percent in the fourth quarter of 2012? That’s not easy to do. Former Apple executive Ron Johnson took over the retailer in January 2012 with big ambitions to blow up the traditional retail model. But, to put it lightly, he failed.

It was announced this week that Johnson has been ousted, and Myron Ullman reinstated at the helm of the beleaguered retailer.

Here are three lessons distributors can learn from the failed turnaround attempt:

1. Know your customers.
I would argue the customer demographics at Apple stores – Johnson’s previous job – are different from those who frequent JC Penney. But a new leader can get beyond that as long as they take the time to get to know the customers of the new venture. Apparently JC Penney has lost a good number of core customers due to the changes made in its stores in the past year and its new focus on “everyday low prices” instead of regular sales. No company can afford to lose its core fan base.

In this 2002 article from the MDM archives, Ross Elliott asks: How well do you know your customers? How well are you incorporating your knowledge of your customer base into your plans for the future? Some elements customer-centric companies have in common include:

• They understand their customers’ culture, strategy and values.
• They tailor their operations to the customer’s needs.
• They institutionalize the customer culture through the use of technology to ensure consistent customer experience and a constantly improving value proposition.

Get more on how to make your company “customer-centric” in this article.

2. Take change one step at a time.
Rather than revamp the stores and JC Penney’s model completely, Johnson should have taken the changes one step at a time. Analysts agree that while the vision he had may have been exciting, it was too much too soon, resulting in changes to the stores and operations that scared away both customers and employees.

Bruce Merrifield recommended in his MDM Webcast, Managing Change: Tactics for Distributors, that distributors start small. Test new ideas to illustrate their potential impact rather than changing everything at once. 

Jonathan Byrnes, author of Islands of Profit in a Sea of Red Ink, tackled the topic of avoiding large-scale change in a recent blog. He said: “In the absence of truly extraordinary circumstances, painful transformations should only rarely be needed. If a company has an effective process for constant weeding, it will stay highly profitable even in the presence of rapidly changing markets. And if it has an effective process for developing and scaling new strategic initiatives, it will carve out a lucrative competitive positioning as the market leader and as strategic partner to the most important customers.”

In other words, distributors can reposition their companies for the future without the need for abrupt, disruptive large-scale change.

3. Balance ambition with resources.
Yes, to make money you often have to spend money. After all, as Mike Marks says, distributors often say they plan to invest if they grow, but this can lead some companies into a “death spiral” where a lack of growth begets a lack of investments, which begets a lack of growth, ad infinitum.

As this article from Yahoo Finance outlines, Johnson had a much larger budget at Apple than he had at JC Penney. So his eyes may have been bigger than his stomach. The cash flow was not there for him to invest so much, so quickly in a struggling retail store.

Marks, in New Year, New Approach to Business, encouraged distributors to be ambitious and break out of the traditional mold of doing business, but to take care in uncovering the needs of the segments they serve first.

Brent Grover, author of The Little Black Book of Strategic Planning for Distributors, says that distributors have to balance a blue sky mentality with front-line intelligence. "No matter how great the plan seems to be, the plan is worthless if it cannot be implemented. Gaps, if any, need to be filled before moving forward," Grover says in the book. That means making sure you have the resources and the employee skills to meet your goals.