Evidence
IKEA’s Self-Examination Leads to Success “The company is insistent on creating more from less.” No one forgets the first time they enter an IKEA store. It is a shopping experience unlike any other. There son is a retailing way; then Mikael Ohls d CEO an President there is the IKEA way. IKEA Following its unique vision, IKEA is now one of the world’s most successful retailers. IKEA Group President and CEO, Mikael Ohlsson elaborated on that vision when he spoke to a group of Webster MBA students at a recent Walker Speaker Series event in Shanghai. IKEA is known for making well-designed, functional and affordable home furnishings. However, as Ohlsson illustrated, IKEA sees it differently. The company’s greater purpose is to improve society by “creating a better everyday life.” To this end, IKEA continuously examines its business practices, value chain and customer needs. Ohlsson referred to the company’s philosophy as the “IKEA Way.” For example, unlike most organizations, Ohlsson said the firm pays little attention to its competitors. Instead, it focuses inward, using continuous research and refinement to create desirable products through a practice it calls “democratic design.” The company goes to great lengths to get to know its customers, spending thousands of hours studying their lifestyles and habits. IKEA representatives interview hundreds of people in every local market it serves, from Stockholm to San Diego. The data they collect is then incorporated into the product development process. The end result is an extensive line of products engineered to make life at home simpler and more enjoyable. To keep its offerings inexpensive and accessible, IKEA is obsessed with continually eliminating unnecessary expenses in every facet of its business. It uses thoughtful design to drive down production
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- Mikael Ohlsson and logistics costs, and the savings are then passed along to consumers. For example, Ohlsson explained that IKEA products are designed using durable lightweight materials that not only cost less money, but are cheaper and easier to ship. The supply chain also plays a critical role in IKEA’s never-ending quest for efficiency. IKEA forges close supplier relationships—many of which have been in place for decades—and makes its suppliers key partners in the design process. It encourages its suppliers to invest in new technologies and automation, going as far as providing financing to help suppliers purchase equipment that will keep manufacturing costs low. Ohlsson also explained that while today’s shift toward worldwide urbanization and a growing global middle class bode well for a business like IKEA, they also present challenges from an environmental standpoint. Therefore, IKEA has aligned its low-cost mission with its desire to impact the greater good through sustainability. The company is insistent on “creating more from less,” minimizing the amount of raw materials it uses and producing as little waste as possible. It uses windmills and solar arrays to generate power for its facilities, with the goal of becoming entirely energy independent in the next three years. Does The IKEA Way lead to a healthy bottom line? The numbers speak for themselves. IKEA now operates stores in 44 countries and has annual sales of more than 27 billion. It gained market share in all of its markets during fiscal year 2012, with total sales increasing by 9.5% (including 4.6% increase in sales in existing stores). More than 690 million people visited its stores last year, and its website received more than 1 billion visits. The company opened 11 new stores in nine countries and has initiated a plan to double its sales by 2020. Thanks to its commitment to The IKEA Way, IKEA is proving that value, sustainability and success are not mutually exclusive.