CNBC: Target CEO hits the bull’s-eye
Target‘s CEO, Brian Cornell, is no stranger to difficult decisions.
In 1981, Cornell stood in his UCLA dorm room, struggling with the biggest choice of his life. He could attend his college graduation, or he could fly to London to chase the girl who had “absolutely stolen his heart.”
Thirty-four years later, Cornell faced another difficult decision. While dining with CVS CEO Larry Merlo, he and Merlo hatched a plan to sell Target’s pharmacies and its in-store clinics to CVS.
In both cases, he made the decision to choose the important over the immediate.
The partnership with CVS represents yet another opportunity for Target to build its business. The transaction frees up resources for growth priorities — wellness and healthy foods, e-commerce, and new store formats like Target Express, small stores near college campuses and in urban areas. The move will also bring more guests to Target stores as CVS owns Caremark, a pharmacy benefits manager with over 70 million users.
Since taking the helm just ten months ago, Cornell has moved quickly to enable Target to regain its mojo, which had steadily slipped away in the past five years. He did so by making hard choices and refocusing the company on its roots that gave it the cache to be known among guests as Tar-Jay.
When Cornell took over, Target was not in good shape. Since 2007, the percent of Americans who say they’ve visited a Target store in the past four weeks has dropped by 30 percent, according to Kantar Retail. Its thrust into food was achieving mixed results; its long overdue e-commerce initiative was cumbersome to use; and its expansion into Canada was failing, as that division had lost $2 billion since opening in 2011. Then in December, 2013, the Target data breach burst into the open, affecting up to 70 million of its credit-card users.
Facing these difficult challenges, Cornell wasted no time in putting them behind him. After spending his first month touring stores, he announced that Target would focus on four key categories: fashion, kids, babies and wellness. Recognizing that Target’s headquarters staff had become bloated, he slashed 2,300 positions. And he ventured into London to recruit Tesco’s Mike McNamara as CIO, giving him a broad portfolio that includes Target’s digital platform, information security, and its omnichannel strategy.
Cornell’s toughest decision came last January. After visiting several of Target’s Canadian stores, he announced the liquidation of the Canadian division, closing all 133 stores. I realized what courage he had not to throw good money after bad, and to reinvest south of the border. He described the decision as “the toughest of my career.”
Hard decisions like these characterize great leaders. They build upon their company’s roots and its strengths, and don’t try to do it all. As my Harvard Business School colleague Michael Porter teaches, “Strategy is all about choices and deciding what not to do.” That’s precisely what Cornell has done at Target.
Freeing up investment dollars is enabling him to sharpen merchandising in focus categories, expand Target’s presence in urban areas with TargetExpress, and invest $1 billion in Target’s digital platform.
These moves are also enhancing Target’s same-store sales and profitability. Since Cornell took over last August, Target stock is up 40 percent, while rival Wal-Mart has declined 4 percent. As Target’s first CEO to come from outside ranks, Cornell is reaching out to the local community, vowing to continue Target’s policy of giving 5 percent of its pre-tax income to philanthropic causes.
For Cornell, “It’s all about people.” Upon arriving at Target, he moved from the 26th floor CEO corner suite to a smaller office down the hall. He then moved the majority of the executive team to the 26th floor to make communication easier.
Brian Cornell has hit nothing but bull’s-eyes in the past year.
And the girl he chased in 1981? He and Martha have been married for twenty-five years.
Disclosure: Bill George does not own any of shares of Target or any other companies mentioned here, nor does have any other business relationships with them.