Mickey Drexler announced that he would step down as CEO of J Crew yesterday after a 14-year run at the helm of the clothing retailer. He remains as chairman of the privately-held company and reportedly dropped the CEO title voluntarily. But the 72-year-old's reasons were more than scaling back for semi-retirement. Sales have dropped over the last two years.

Big retailers have been hit hard, with a number drifting toward bankruptcy. Some become addicted to techniques like markdowns that can damage business in the long run.

You could say that Drexler has faced his own addictions -- to particular types of strategies and innovations that worked in the past.

It's a common error in business and the basis for many failures. Harvard Business School Professor Clayton M. Christensen evoked the issue in the phrase "disruptive innovation" and the book The Innovator's Dilemma. What was new in the past no longer is, and if you focus too much on previous successful strategies, you'll miss the changes you need to make.

Drexler had a long history of success in retail. He's frequently given the credit for the great strides The Gap made in the 1990s. After being fired by Gap founder Donald Fisher, Drexler was hired by J Crew to become CEO and make the company more upscale, which he did, bringing massive financial success. He also was instrumental in the look and feel of Apple's retail stores, as CNBC reported years ago.

His influence on Apple's stores is unmistakable. The look and feel of the typical Apple store closely resembles that of the Gap stores that Drexler developed: open, airy floor plans, and the utilization of simple building materials such as wood and steel. Drexler's greatest contribution to Apple's retail business, however, was his insistence that they get it right on the first try.

However, a long run of profit growth turned a couple of years ago, as the New York Times described:

Same-store sales at J. Crew have fallen in 11 of the last 12 quarters, and the company shut its bridal business last year. In March, J. Crew, which is backed by the private equity firms TPG Capital and Leonard Green & Partners, said revenue fell 2 percent, to $695 million, during the three-month period that ended Jan. 28. In April, it announced plans to eliminate 150 full-time positions.

There were two problems, according to Fortune. One was a change in merchandising that Drexler didn't grasp and implement. Retail fashion has been taken over by companies like H&M and Zara that focus on inexpensive clothes released at rapid intervals. Rather than spending more for upscale products, many people pay less per purchase and get more clothes over time. There's a constant turnover in the stores and in consumers' closets.

The second issue was the growth of e-commerce. J Crew has a website, but the corporate merchandising strategy still heavily depended on retail stores to ultimately sell customers on products. It's the same strategy behind Gap's heyday and Apple stores: let the physical appearance and experience of the space help move products.

Drexler had become too dependent on past successes and didn't understand the major changes in consumer preferences. As a result, he directed J Crew to stay the fundamental course, even as the waters became shallow and the shoals began to break the surface.

Interestingly, another example came out of Apple. Ron Johnson, who also helped develop the company's store concepts became CEO of J.C. Penney and tried to move it away from discounting and moving toward being "collections of boutiques for hip brands," as Fortune noted. It was another attempt to extend the lessons of Gap and J Crew. But if you don't follow how the customer wants to do business, you can't win. Innovation is key, and that means innovation for today, not yesterday.

Published on: Jun 6, 2017
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