Steinhafel's departure leaves Target looking for redemption
Heads continue to roll at Target (NYSE:TGT) in the wake of its massive data breach. CEO Gregg Steinhafel abruptly resigned and while Target's data breach wasn't the only reason, it certainly was a contributing factor. Steinhafel's sudden departure helps reinforce the growing importance of IT security and systems in the upper reaches of the executive offices.
A good many pundits are pointing to the data breach that compromised the account information for approximately 70 million Target shoppers as the reason for Steinhafel's departure. Security policy is quickly becoming more critical for retailers. Last month, the New Jersey District Court upheld the Federal Trade Commission's ability to prosecute organizations that experience a data breach due to poor security policy. Target, Michael's, Sally Beauty and Neiman Marcus are all cautionary tales.
"Clearly, the consequences of inadequate data security are increasing in severity for major organizations," said Tony Busseri, CEO of Route1. "Corporations now face the possibility of litigation, financial loss, customer abandonment and executive turmoil due to data breaches." Busseri and Route1 do not work with Target, but offered comment on the issue of data security.
Of course, there are other reasons for Steinhafel's departure, including lagging online sales growth and a market entry into Canada that has been a widely recognized early failure. Target is shopping for a turnaround, and data security and omnichannel IT support are a big part of that.
At least behind the scenes. Publicly, Target is putting on a happy face, reassuring shoppers their information is safe and talking up plans to implement new and more exciting merchandising programs. Interim CEO John Mulligan outlined his top three priorities in a message to shoppers and shareholders.
"We are really focused on three main priorities. The first is delivering our financial results, both in the United States and Canada," he said. "The second is accelerating our transformation, which is a journey that we've been on for some time. We need to continue to invest and enable the team to make decisions that move Target toward becoming a truly omnichannel retailer. The third is ensuring our teams are energized to serve our guests every day. That was a priority yesterday and will be a priority tomorrow. Our most important job is to serve our guests."
Not even a whisper about the breach, but understandable given that Target would very much like to put this episode behind it. The hiring of new CIO Bob DeRodes last week was a step in that direction. Internally, the focus seems to be on accountability and the implementation of chip-and-PIN cards, while externally, even DeRodes is on the public relations bandwagon of reassuring shoppers.
"Any time a consumer uses a credit or debit card there are risks, everywhere in the world. I think of the payment industry as an arms race, where retailers and banks have to stay out ahead of the bad guys," said DeRodes. "Clearly Target is investing in data security and information technology at unprecedented levels, which puts the company at the forefront of that race."
Is it? Time will tell.
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