Commoditization, control and culture

Probably the most popular post in my more than 1000+ blog entries was the testimonial to Mervyn’s, which died 16 months ago just shy of its 60th birthday. As a retail outsider, I never felt I had the complete picture.

On Monday, I got a chance to ask an industry professional and former Mervyn’s employee, Jenny Ming. An SJSU alumna, she was back at SJSU to speak to the Sbona Honors program. Overall, I think the implied explanation was more convincing than the explicit one.

Once one of Business Week’s Top 25 Managers, Ming was best known as the first president of Old Navy: her 2006 departure was seen as a major blow for Gap Inc. (Since that time, she joined private equity firm Advent International, which bought her a company to run and even moved it to San Francisco for her.)

After after graduating from San José State, in 1980 Ming began her retailing career at Mervyn’s — a working class oriented clothing retailer — after turning down competing offers from Macy’s (then the big kahuna of department stores) and Bullock’s (an upscale retailer).

At Mervyn’s, she worked herself up from manager of a store department, to assistant buyer and eventually Mervyn’s buyer for teen girls’ denim wear. She moved over buying knit sweaters for juniors, until in 1988 she was stolen away to Gap by its legendary CEO Mickey Drexler. In 1994 she joined the founding team at its new Old Navy division, which grew to $1b in four years.

From this perspective, I asked her what went wrong at Mervyn’s and how Old Navy got it right.

She gave the conventional answer: Mervyn’s lost its way when it shifted from its original focus — discounted brand name products — to the lure of private labels. At the same time, it was not ready to cope with the challenge posted by Kohl’s.

But the story between the lines was much more interesting, a story of dysfunctional corporate culture. Ming said she suspected that Mervyn’s never would have promoted her past buyer, but under Drexler she made VP, EVP and president in fairly short order.

Both Mervyn’s and Old Navy promised good prices for average Californians — commodity distribution in a mature industry. Ming joined Mervyn’s in its middle age, after the founder was gone and it had been gobbled up by Target’s parent, Dayton Hudson. After driving the company into the ground, Target eventually sold it off in 2004.

Ming brought the same talent and initiative to Gap Inc, where it was recognized and rewarded. She eventually led newborn Old Navy during an exciting high growth period, with a clear strategy and a free hand in a small startup. (I’m guessing that she did not explicitly cite the corporate culture because — like a fish in water — the Gap executives thought such a can-do attitude was the only logical way to run a company.)

Not all founding CEOs are effective CEOs, but the best ones have a consistency of vision and purpose that leave the lost bureaucracies behind. They hire well and empower their people to realize their potential.

As a former manager, I’m most proud of bringing numerous college students (and a few high school students) into the computer industry. After they left Palomar, they went to places like HP, IBM and Microsoft. Fifteen years later, one has started his own company and another is tenured at MIT. (Alas, another is still enabling the evil empire.) Their success is their own, but I’d like to think our corporate culture gave them a sense of their own potential.