ikea benchmarking case study

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Inside IKEA’s Digital Transformation

• Thomas Stackpole

A Q&A with Barbara Martin Coppola, IKEA Retail’s chief digital officer.

How does going digital change a legacy retail brand? According to Barbara Martin Coppola, CDO at IKEA Retail, it’s a challenge of remaining fundamentally the same company while doing almost everything differently. In this Q&A, Martin Coppola talks about how working in tech for 20 years prepared her for this challenge, why giving customers control over their data is good business, and how to stay focused on the core mission when you’re changing everything else.

What does it mean for one of the world’s most recognizable retail brands to go digital? For almost 80 years, IKEA has been in the very analogue business of selling its distinct brand of home goods to people. Three years ago, IKEA Retail (Ingka Group) hired Barbara Martin Coppola — a veteran of Google, Samsung, and Texas Instruments — to guide the company through a digital transformation and help it enter the next era of its history. HBR spoke with Martin Coppola about the particular challenge of transformation at a legacy company, how to sustain your culture when you’re changing almost everything, and how her 20 years in the tech industry prepared her for this task.

• Thomas Stackpole is a senior editor at Harvard Business Review.

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IKEA Case Report - The Performance Measurement and Management System of IKEA AB

The report analyzed and evaluated the performance measurement and management system (PMS) of IKEA based on the 12-question framework suggested by Ferreira and Otley (2009). The focus of the analysis is mainly on six aspects within PMS including the key performance measures, target setting, performance evaluation, reward system, the use of PMS and finally the link between these parts of PMS and the way they are used (Question 5-8, 10 and 12). Information regarding the remaining questions (Question 1-4) within the framework are also included as supporting grounds for the main analysis.

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Company A is an autonomous business unit of one of the largest privately owned companies in the World. The company, now in its 5 th generation of ownership, has a presence in over 70 countries and recorded sales in excess of $5 billion last year. The company operates in the highly competitive home care market, and owns well known domestic cleaning brands. The aim of this research was to critically analyse how effective the Key Performance Measurement system is at the company.. It will be compared to a Best Practice method developed by the authors based on an appraisal of current performance measurement theory. The emphasis will be on conducting performance measurement in a manufacturing environment. The research methodology was a cross-sectional case study involving primary data collection at site in the form of a questionnaire to fifty factory floor staff (20% of the workforce). In addition an in depth interview was conducted with the Manufacturing Manager. The research established that their system was failing to meet Best Practice on a number of levels. It was recommended that they improve their performance measurement practices by increasing direct communication to staff; ensuring reports are updated regularly and on time, and also introduce internal benchmarking across their production plants. Graham Manville is a Senior Fellow at the University of Southampton. He is currently studying for his PhD and has published in two peer reviewed journals. He is currently a reviewer for the International Journal of Productivity and Performance Management. Christopher Burt is a recent graduate of Bournemouth University and spent twelve months on placement at Company A. He is now a Commercial Analyst for City Link. Introduction One of the authors recently completed a twelve month Internship at the research company which will subsequently be referred to as " Company A ". While working there as a financial analyst in the manufacturing division of the company, various project work was undertaken for the Continuous Improvement (CI) team. On one particular occasion the team had been approached by the Director of Operations and presented with the task of implementing a new performance measurement system within the factory.

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Deconstructing The Global Furniture Giant – Absolute Business Model of Ikea Explained

By Aditya Shastri

Quick Read   Explore the IKEA business model in this comprehensive case study. Understand how IKEA’s innovative approach to affordable, stylish furniture drives its global success and market leadership.

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Imagine treasure hunts where the prize is your dream living room – that’s IKEA. Their stores inspire with room layouts showcasing furniture’s potential. The secret? Flat-pack designs that disassemble for easy transport, saving on storage and letting you be your own furniture-building hero.

Efficiency is key. IKEA sources materials globally in bulk to keep costs low. Plus, their multi-use designs appeal to a wider audience. Those checkout impulse buys (hello, cinnamon buns!) add up too!

Sustainability matters at IKEA. They use recycled materials and promote energy-efficient appliances. They also prioritise good working conditions. This approach is a core part of IKEA’s business model, focusing on affordability and sustainability.

Want to dive deeper in this IKEA’s business model case study, just like we did in the SWOT analysis of Wikipedia ? Let’s begin our journey of understanding IKEA from its inception.

Source: Google

Starting small in 1943 with a young Ingvar Kamprad at the helm, IKEA began by selling affordable household items like pens and wallets. Their mission? To make well-designed furniture accessible to everyone.

They hit a home run with flat-pack furniture in the 1960s, making it easier to transport and assemble these stylish pieces yourself. Today, IKEA is a global giant with over 450 stores, keeping Ingvar’s dream alive by offering good design and functionality at low prices.

They’re also champions of sustainability and keeping their environmental impact low. Even though they started in Sweden, IKEA has become a multinational brand, bringing their signature style and affordability to countries around the world. Their stores are known for their unique layout, complete with room displays that inspire customers to create their dream living spaces.

The success of IKEA’s business model lies in this combination of affordability, sustainability, and innovative design. So next time you’re looking for stylish furniture that’s easy on the wallet and the planet, consider a trip to IKEA.

IKEA Case Study: What’s New With IKEA?

Examining IKEA’s business model reveals numerous innovative strategies and developments aimed at maintaining their market leadership. Here’s what was buzzing around IKEA recently:

• New sustainable materials: IKEA is introducing new sustainable materials into its products, such as recycled plastic, bamboo, and cork.
• More affordable options: IKEA is committed to making its products more affordable for everyone, and is introducing new affordable product lines in 2023.
• More online and omnichannel shopping options: IKEA is expanding its online and omnichannel shopping options, making it easier for customers to shop for IKEA products however they want.
• New product collaborations: IKEA is partnering with new designers and brands to create new and innovative products.
• New focus on home improvement: IKEA is expanding its focus on home improvement, and is introducing new products and services to help customers make their homes more stylish and functional.
• New focus on sustainability: IKEA is committed to sustainability, and is working to reduce its environmental impact and operate more sustainably.
• New stores: IKEA is opening new stores in new markets around the world.
• New digital services: IKEA is developing new digital services to make it easier for customers to shop for and use IKEA products.
• New focus on customer experience: IKEA is focused on improving the customer experience, both in stores and online.
• New focus on inclusion and diversity: IKEA is committed to creating a more inclusive and diverse environment for its customers and employees.
• New focus on social responsibility: IKEA is committed to making a positive social impact, and is working to support its communities and employees.

Understanding IKEA’s business model is essential to appreciating how these initiatives align with their mission of affordability, sustainability, and innovation.

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Let’s now understand the target audience of IKEA better with the help of a buyer persona.

IKEA Case Study:Buyer Persona of IKEA

A buyer persona generally refers to the detailed information of an ideal customer of a company. When it comes to IKEA, people from India use it the most. This buyer persona will help you understand the attributes of a regular IKEA user.

Buyer’s Persona

Minneapolis, Minnesota

Profession:

Interior Designer

• Affordable Home Furnishings
• DIY and Creativity
• Sustainability
• Functional Design

Interest & Hobbies

• Interior Design

Pain Points

• Assembly Challenges
• Limited Customization
• Store Crowds
• Product Availability

Social Media Presence

From the table above we can conclude that an ideal IKEA User is motivated by affordable home furnishings, DIY creativity, sustainability, and functional design, with interests in interior design, gardening, reading, and cooking.

Buyer personas are a powerful tool used by countless companies to refine their marketing strategies. Explore our library of digital marketing case studies to see how various companies leverage buyer personas. You’ll discover the wide range of buyer personas employed across different industries, providing valuable insights you can apply to your own marketing efforts.

The marketing strategy of UNIQLO is a fabulous example of this. Their approach is sure to spark your interest – and perhaps even inspire your own marketing tactics.

Business Model of IKEA

Ikea case study: market share & market analysis.

IKEA holds a dominant position in the global home furnishings market, with an estimated market share of around 12% in 2023 (source: Statista). The business model of IKEA leverages its extensive supply chain, economies of scale, and efficient logistics to maintain competitive pricing. Market analysis reveals a growing demand for affordable and sustainable home furnishings, trends that IKEA continues to meet with its product offerings. The company’s ability to adapt to changing consumer preferences and invest in digital transformation ensures its continued market leadership.

IKEA Case Study: Product Offerings

IKEA’s product offerings include a wide range of home furnishings and accessories, from furniture and kitchenware to textiles and lighting. The brand is known for its flat-pack furniture, which reduces shipping costs and allows customers to easily transport and assemble products. This business model of IKEA focuses on offering services like home delivery, assembly, and interior design consultations. The introduction of smart home products and sustainable materials reflects IKEA’s commitment to innovation and environmental responsibility.

IKEA Business Model: Target Audience

Source: ikea.com

Young adults, families, and urban dwellers who prioritise affordability, style, and functionality in their home furnishings form the core customer base of IKEA’s business model. These customers are typically budget-conscious but still value good design and quality.

IKEA offers a wide variety of furniture catering to diverse tastes and lifestyles. This includes modern minimalist pieces, traditional styles, and rustic options. IKEA furniture allows for customisation and multi-use, making it appealing to a wider range of needs.

Demographic segmentation is a key pillar of the business model of IKEA. This allows them to tailor their marketing and product offerings to specific customer groups. One important segment IKEA targets is young, cost-conscious individuals like students or young professionals. These customers, typically with incomes between $15,000 and $50,000, are likely furnishing their first apartments or homes and prioritise affordability.

In essence, IKEA uses demographic segmentation to understand their diverse customer base and tailors its offerings accordingly. This allows them to attract a broad audience seeking stylish and functional furniture at accessible prices.

IKEA Business Model: Funding & Investors

IKEA is a privately held company, primarily owned by the Stichting INGKA Foundation, which was established by Ingvar Kamprad. The company has not required external funding rounds due to its strong financial performance and reinvestment strategy. IKEA’s revenue model is reinvested into the business for expansion, innovation, and sustainability initiatives. This self-sustaining financial model supports IKEA’s long-term growth and stability.

IKEA Business Model: Revenue Model

The IKEA revenue model is based on direct sales of home furnishings and accessories through its retail stores, online platform, and catalogues. In 2022, IKEA reported revenue of €44.6 billion (source: Inter IKEA Group). The company’s affordable pricing strategy, combined with its high-volume sales, ensures substantial revenue. Additional revenue streams include food sales in IKEA restaurants and service fees for home delivery and assembly. The diversified revenue model of IKEA ensures financial resilience and growth.

Business Model Of IKEA: Marketing Strategy

IKEA’s marketing strategy focuses on affordability, sustainability, and customer experience. The brand uses a mix of traditional advertising, digital marketing, and experiential marketing to reach its audience. IKEA’s iconic catalogues, engaging social media campaigns, and in-store experiences create strong brand loyalty. The company also leverages data analytics to personalise marketing efforts and improve customer engagement. Collaborations with designers and influencers enhance IKEA’s appeal and visibility.

Many companies, like IKEA, recognise the power of digital marketing to promote their brand and generate profits. It’s clear that digital marketing is shaping the future of marketing. Understanding its importance, YouTube, a major digital platform, emphasises the value of learning digital marketing skills.

If you believe that digital marketing should be approached strategically and deserves the utmost respect, pursuing a PG in Digital Marketing programme could be the perfect choice.

Business Model Of IKEA: Value Proposition

IKEA’s value proposition lies in offering well-designed, functional, and affordable home furnishings. The brand’s commitment to sustainability and innovation further enhances its appeal. IKEA’s flat-pack furniture and efficient supply chain reduce costs, which are passed on to customers. The IKEA shopping experience, from inspirational store layouts to comprehensive services, ensures high customer satisfaction. The value proposition of IKEA ensures a loyal customer base and strong market presence.

It refers to a competitive solution a company uses to make its products to gain a larger market space.

• DIY system Flatpack: This system is suitable for the present building size required anywhere.
• Using renewable energy sources: It helps to maintain an environmental/commercial balance.

Business Model OF IKEA:Operational Model

IKEA’s business plan includes an operational model which integrates a global supply chain, economies of scale, and efficient logistics. The company sources products from over 1,800 suppliers in more than 50 countries, ensuring quality and cost-effectiveness. IKEA’s flat-pack design reduces transportation and storage costs, enhancing operational efficiency. The company’s investment in digital transformation, including online sales and smart home solutions, ensures seamless operations and customer convenience.

IKEA Case Study: Strategic Alliances & Partnerships

IKEA forms strategic alliances with suppliers, designers, and technology partners to enhance its product offerings and operations. Partnerships with sustainable material suppliers support IKEA’s environmental goals. Collaborations with designers and brands, such as the Virgil Abloh collection, bring unique and limited-edition products to customers. Alliances with technology firms enable IKEA’s business to innovate in areas like smart home solutions and e-commerce.

IKEA Case Study:Technological Innovations

IKEA invests heavily in technology to enhance its products and customer experience. The company uses digital tools like the IKEA Place app for augmented reality furniture placement and the IKEA Home Planner for room design. Innovations in sustainable materials, such as recycled and renewable resources, reflect IKEA’s commitment to environmental responsibility. IKEA’s business plan is to focus on technological advancements ensuring continuous improvement and market differentiation.

However, technology is just one pea in a pod. Just like Uber leverages digital marketing to connect with riders and drivers, this powerful skill set can benefit anyone looking to stay ahead in today’s digital world. Enrolling in the best digital marketing course online can equip you with the knowledge and tools to create targeted campaigns, reach new audiences, and achieve your goals.

Unsure where to begin? Consider attending a free digital marketing certification masterclass . This can be a great way to explore the world of digital marketing and see if it aligns with your interests.

IKEA Business Model: Corporate Social Responsibility (CSR)

IKEA’s CSR initiatives focus on sustainability, community support, and social responsibility. IKEA’s business plan aims to become climate positive by 2030, reducing more greenhouse gas emissions than its value chain emits. IKEA promotes sustainable living through products like solar panels and energy-efficient lighting. Community initiatives include supporting refugees and providing disaster relief. The IKEA Foundation, funded by Stichting INGKA Foundation, supports global humanitarian projects and environmental initiatives.

Business Model of IKEA: Failed Campaigns of IKEA

IKEA more than often grabs attention with its unique marketing. But, there have been a few times when the campaign failed to connect with the audiences and gained backlash.

Here are a few examples of failed campaigns of IKEA:

• IKEA’s ‘Book of Love’ catalogue: In 2012, IKEA released a catalogue for Saudi Arabia that featured photos of women without headscarves. This caused a lot of controversy in the conservative country, and IKEA was forced to apologise and withdraw the catalogue.
• IKEA’s ‘This is How the Many Live’ campaign: In 2013, IKEA launched a campaign in the UK that featured photos of real people’s homes. The campaign was intended to be relatable, but many people found the photos to be depressing and unrealistic.
• IKEA’s ‘The Wonderful Everyday’ campaign: In 2016, IKEA launched a campaign that featured families from different backgrounds living together in harmony. The campaign was intended to be inclusive, but some people found it to be unrealistic and even offensive.
• IKEA’s ‘How to Live Small’ campaign: In 2019, IKEA launched a campaign that featured people living in small spaces. The campaign was intended to be aspirational, but some people found it to be insensitive to the challenges of living in poverty.
• IKEA’s ‘Life is Not an IKEA Catalog’ campaign: In 2020, IKEA launched a campaign that featured furniture being peed and vomited on. The campaign was intended to be humorous and relatable, but many people found it to be gross and distasteful.

IKEA Business Model: Brand’s Top Competitors Analysis

Just like other businesses, IKEA also has its fair share of competitors. While there are so many out there here are some of top competitors of IKEA

• Wayfair: Competes with IKEA in online home furnishings, offering a wide range of furniture and decor with a strong focus on e-commerce.
• Home Depot: Provides a broad selection of home improvement products and services, attracting DIY enthusiasts and professionals.
• Ashley Furniture: Known for its affordable and stylish furniture, competing with IKEA on price and design.
• West Elm: A subsidiary of Williams-Sonoma, offers modern and contemporary furniture, appealing to design-conscious consumers.
• Amazon: Competes in home furnishings through its vast marketplace, offering a wide range of products and convenient delivery options.

The IKEA business model exemplifies innovation, efficiency, and sustainability in the home furnishings industry. Its diverse product offerings, strategic partnerships, and technological advancements ensure sustained growth and market leadership. As IKEA continues to evolve, it remains a transformative force in global home furnishing.

As we wrap up our analysis of the impressive business model of IKEA it’s clear that staying up-to-date with the latest trends and techniques is key to success in the digital marketing world.

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FAQs About Business Model of IKEA

IKEA's business model focuses on providing affordable, well-designed home furnishings through a global supply chain and efficient logistics.

IKEA makes money through direct sales of home furnishings, accessories, food sales in its restaurants, and service fees for home delivery and assembly.

IKEA’s main products include furniture, kitchenware, textiles, lighting, and accessories for home furnishing.

IKEA’s top competitors include Wayfair, Home Depot, Ashley Furniture, West Elm, and Amazon.

IKEA uses technology for augmented reality furniture placement, room design planning, and innovations in sustainable materials.

IKEA's target audience includes young adults, families, and urban dwellers seeking affordable, stylish, and functional home furnishings.

IKEA holds approximately 12% of the global home furnishings market.

IKEA’s CSR initiatives focus on sustainability, climate positivity by 2030, supporting refugees, and global humanitarian projects.

IKEA’s value proposition is offering well-designed, functional, and affordable home furnishings with a commitment to sustainability and innovation.

IKEA markets its products through traditional advertising, digital marketing, iconic catalogues, social media campaigns, and in-store experiences.

Author's Note: My name is Aditya Shastri and I have written this case study with the help of my students from IIDE's online digital marketing courses in India . Practical assignments, case studies & simulations helped the students from this course present this analysis. Building on this practical approach, we are now introducing a new dimension for our online digital marketing course learners - the Campus Immersion Experience. If you found this case study helpful, please feel free to leave a comment below.

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Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs...... [Read full bio]

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Internal Benchmarking at IKEA - Continuous improvements in the Store Development Process

• Karl Johan Servin
• Jeanette Mårtensson

Summary, in English

Department/s

• Department of Business Administration

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• Available as PDF - 999 kB
• Download statistics

Document type

Student publication for Master's degree (one year)

• Business and Economics
• Internal benchmarkin
• Continuous improvements
• Store dimensioning
• Store development
• Internal accounting
• Management of enterprises
• Företagsledning, management
• Per Magnus Andersson

Behind the Scenes of IKEA’s Supply Chain Strategy

As the world’s largest home furniture retailer, providing stylish and functional home furnishings, offering direct shipping of its recognizable DIY items in flat packages, and with stores all over the planet,  IKEA  has differentiated itself from the competition by offering modern products at affordable prices. IKEA furniture items are so popular that even their hard-to-pronounce names have become well-known.

Founded in Sweden in 1943, the IKEA Group now operates over  460 stores in 62 territories and countries , employing 231,000 workers worldwide, who report (on sites like Glassdoor and Indeed) that IKEA’s working conditions, both on the floor and in the warehouse, are excellent.

An IKEA store can be found in practically every major city on Earth, with 277 in Europe, 77 in Asia, and 70 in North America. In 2022, the company’s sales reached almost $48.3 billion, growing at a rate of 13% in 2021 since the year prior. As IKEA continues to adapt to a changing market and ever-shifting consumer preferences, its supply chain is evolving as well.

How Does the IKEA Supply Chain Work?

IKEA’s supply chain strategy is efficient and effective. In order to keep it this way, IKEA focuses on a few key areas.

Sustainability Initiatives

Businesses with complex supply chains often have trouble keeping track of every supplier’s sustainability efforts. To address this, IKEA introduced  IWAY  (the IKEA supplier code of conduct) in 2000, as well as an annual  sustainability report . This standard specifies the requirements the company places on suppliers and manufacturers and outlines what they can expect in return. It also lays out guidelines designed to reduce waste and help ensure products are sourced sustainably.

“The world is changing, and the IKEA business is changing with it,” reported Torbjörn Lööf, the CEO of Inter IKEA Group. To further enhance supply chain sustainability, the company developed a proprietary tool called the “e-wheel,” which helps assess the environmental impact of its products at five stages of the supply chain, each forming a key part of its strategy:

• Raw materials
• Manufacturing
• Distribution
• Consumer use
• End of life

More specifically, the furniture giant has been working toward a  circular supply chain  since 2018: Every item is designed and manufactured with  next use  in mind. Depending on the product, this could mean using only recycled materials in production or providing a spare parts warranty.

As another example of the company’s sustainability efforts, IKEA launched the ÅBÄCKEN water mist nozzle in late 2022 designed to help cut down home water usage by up to 95%, as well as raise awareness that every drop counts.

Inventory Management

To avoid waste and cost inefficiencies caused by the bulk stock ordering of items that don’t sell as expected (meaning more costs and less room in warehouses for better selling stock), IKEA employs “minimum settings”, the lowest number of products that have to be available before a new order can be placed, and “maximum settings”, the highest number of products that can be ordered at once.

Further increasing  inventory management  efficiency, IKEA’s “do-it-yourself” model has also helped set their supply chain apart. By packaging their products compactly, customers can easily take their purchases directly from the warehouse to their homes to assemble themselves. This allows IKEA to maintain a larger inventory, in turn reducing the company’s shipping costs.

Finally, by automating restocking processes for “high-flow” items — which make up 80% of a store’s sales volume — the business is able to minimize the need for shipping and manual restocking.

In-Store Logistics in IKEA Stores

To streamline the flow of goods in and out of its stores, IKEA operates with a unique and rare feature: in-store logistics managers and personnel. An IKEA logistics manager and other personnel members monitor deliveries, record all inventory coming into stores, sort goods, and ensure they’re placed in the appropriate areas.

By handling logistics in-store, every IKEA location can closely monitor and control all processes, helping to ensure high store-level inventory accuracy — a rarity for many retailers that rely on forecasting and inventory replenishment logic handled at distribution centers.

Not only does this help IKEA reduce costs, but it also helps improve customer loyalty, creating an easy-to-navigate shopping experience that allows consumers to buy the furniture and housewares they need, where and when they need it.

Lessons to Learn from IKEA’s Supply Chain Strategy

As the modern supply chain continues to shift in response to changes in the market, consumer preferences, and the economic landscape, businesses need to remain nimble if they want to succeed. Although emulating IKEA’s strategies may be challenging for smaller companies, the retailer can provide inspiration for several aspects of the supply chain — particularly for forward-thinking businesses looking to increase sustainability and optimize efficiency.

For instance, some companies may want to consider implementing or increasing automation to centrally manage complex supply chain processes. Not only can this enhance productivity, but it can also cut costs. Aspects of IKEA’s  inventory optimization  strategies, as well, can be adopted by businesses looking to be at the forefront of their industries.

With a range of inventory management systems available, businesses have many options to choose from for their specific needs. For instance, some systems are designed specifically for small- to medium-sized companies, some are geared toward certain industries, and some may offer special features for particular business needs.

IKEA Supply Chain—COVID-19 Impact

In light of the  COVID-19  crisis, businesses around the world have been rethinking and reworking their supply chain operations — IKEA included. The retailer had been forced to temporarily close some stores, but demand for office furniture remained steady as people working remotely wanted to create comfortable, practical setups.

Henrik Elm, the global supply manager at brand owner Inter IKEA Group, which heads supply, said that  supply chain disruptions  increased as the virus spread across the United States and Europe, with closed borders and suppressed movement creating hold-ups. Spreading inventories across warehouses in different locations has helped, he said.

The main challenge the company faced was finding space to store items stuck in transit to areas where most IKEA stores were closed. Elm correctly foresaw constraints in harboring these goods, and warehouses being a bottleneck. “Things that were on their way we are either re-steering or storing,” he told  Reuters at the time. To aid in relief efforts, IKEA also shifted its focus to making face masks, hand sanitizers, visors, and single-use aprons for healthcare workers.

Since then, the company announced that while retail sales benefited after re-opening post-pandemic, inflation and supply chain issues impacted 2022 sales, leading to rising costs and higher product prices. Although sales grew financially, quantities had not. In light of this, IKEA decided to redesign some of its bestselling products, such as the famous Billy bookcase , in a bid to keep manufacturing costs low while still being profitable.

IKEA Supply Chain—Moving Forward

Going by the company’s sales data history, and despite sales dipping for the first time due to COVID-19, a steady increase in revenue is anticipated in the next couple years; demand for IKEA products never seems to dwindle. In 2022, IKEA registered a total sales increase of 6.5% with 4.3 billion visits by customers to IKEA’s website accounting for 22% of its overall sales (the rest, by its 822 million in-store visitors).

The company continues to have a competitive advantage, offering many home items at a similar quality and much lower cost than other furniture retail giants. IKEA is set on prompt order fulfillment, and the use of fewer materials (and therefore, fewer costs for customers) for continued customer satisfaction and loyalty.

While the continuing impact of COVID-19 and potential future spikes are not exactly certain, IKEA has laid solid groundwork for itself by building an efficient, sustainable supply chain — one that includes long-term business relationships and long-term contracts with suppliers and manufacturers — that will help carry the business through the current crisis, as well as any disruptions that may occur in years to come.

• https://about.ikea.com/en/about-us/year-in-review
• https://www.statista.com/statistics/264433/annual-sales-of-ikea-worldwide/
• https://www.retail-insight-network.com/news/ikea-fy22-results/#:~:text=IKEA%20registers%20total%20sales%20increase%20of%206.5%25%20for%20fiscal%202022

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Exploring digitalisation at IKEA

International Journal of Retail & Distribution Management

ISSN : 0959-0552

Article publication date: 15 March 2022

Issue publication date: 19 December 2022

The paper aims to clarify how an incumbent retail organisation explores digitalisation for its existing business.

Design/methodology/approach

The paper draws from an in-depth case study of home-furnishing retail giant, IKEA conducted with semi-structured interviews, participant observations and document analyses.

In the exploration phase of digitalisation, three major activities – interpreting, interrelating and integrating – illuminate how the exploration process can be organised in practice.

Originality/value

Although digitalisation ranks amongst the most significant ongoing transformations in retail businesses, research on how incumbent retail organisations have engaged in exploring digitalisation in practice has remained scarce. The paper contributes insights into digitalisation processes in retail businesses that may also apply to other trends affecting the retail industry.

• Digitalisation
• Exploration

Hagberg, J. and Jonsson, A. (2022), "Exploring digitalisation at IKEA", International Journal of Retail & Distribution Management , Vol. 50 No. 13, pp. 59-76. https://doi.org/10.1108/IJRDM-12-2020-0510

Emerald Publishing Limited

Copyright © 2022, Johan Hagberg and Anna Jonsson

Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

1. Introduction

Digitalisation , defined as the “integration of digital technologies into everyday life by the digitization of everything that can be digitized” ( Hagberg et al. , 2016 , p. 696), ranks amongst the most significant ongoing transformations in business, one that has introduced new ways of doing business whilst challenging established ones ( Leeflang et al. , 2014 ). As such, digitalisation has been characterised as a disruptive change that tests industries, their accepted logics and even individual businesses (e.g. Verhoef et al. , 2015 ; Hänninen et al. , 2018 ).

In literature addressing retail, digitalisation has received increased attention from both consumers' and retailers' perspectives ( Frasquet et al. , 2021 ), including in terms of omni-channel strategies ( Verhoef et al. , 2015 ), business models ( Jocevski et al. , 2019 ), multi-sided platforms ( Hänninen et al. , 2019 ) and the reconfiguration of retail stores ( Hagberg et al. , 2017 ). Most recently, according to Hänninen et al. (2021) , such research has integrated far more discussion and theorising about digitalisation across the value chain. However, the organisational processes that catalyse the incorporation of digital technologies in retail businesses – in March's (1991) and Winter and Szulanski's (2001) terms, the exploration phase – have received less attention. Therefore, this paper focusses on that very phase – the early stage of digitalisation – to contribute insights into digitalisation in retail ( Hänninen et al. , 2021 ) whilst answering the call for research on “how firms adapt their business models in response to external threats and opportunities” ( Saebi et al. , 2017 , p. 567).

The paper aims to clarify how an incumbent retail organisation explores digitalisation for its existing business, even as potential disruptions, their meanings and their consequences remain uncertain. To that purpose, the paper builds upon an in-depth case study on IKEA, an established firm in today's dynamic retail sector, an environment in which digitalisation especially urges business actors to rethink their ways of doing business and attracting customers ( Hänninen et al. , 2018 ; Blom, 2019 ; Jocevski et al. , 2019 ). It draws upon first-hand experiences with, and insights into, how IKEA has explored digitalisation, even when the concept was relatively elusive and how it would affect IKEA's business. In describing IKEA's exploration phase and what digitalisation has meant for its business, the paper delineates three major activities of that exploratory process: (1) interpreting what digitalisation means, (2) interrelating digitalisation and the existing business and (3) integrating new ideas and solutions in light of digitalisation.

In what follows, we review literature on digitalisation in retail and research focussing on that process's exploration phase and development in businesses. Next, we describe the methodological considerations made for our case study on IKEA. After that, we present our findings in terms of three major activities that guide the exploration phase. We conclude the paper by discussing our findings in relation to the literature and addressing our research's limitations.

2. Literature review: exploring digitalisation in retail

Having significantly impacted retail in recent years, digitalisation has become an important topic in research on the industry ( Hänninen et al. , 2021 ), especially regarding specific applications of digital technology – for example, the use of smartphones in physical retail settings ( Fuentes et al. , 2017 ; Grewal et al. , 2018 ), augmented reality ( Scholz and Duffy, 2018 ; Caboni and Hagberg, 2019 ) and digital signage ( Dennis et al. , 2012 ; Jäger and Weber, 2020 ). Studies on specific technologies have been accompanied by broader frameworks for integrating various digital technologies into retail, not only by turns based upon their usage and retailers' objectives ( Wolpert and Roth, 2020 ), their social presence and consumers' convenience ( Grewal et al. , 2020 ) and their use in relation to shopping behaviour at various stages of the customer's journey ( Rosengren et al. , 2018 ; Blom, 2019 ; Roggeveen and Sethuraman, 2020 ), but also by general frameworks of what digitalisation implies for retail business overall ( Hagberg et al. , 2016 ). In such studies, digitalisation in retail has received sustained attention regarding several aspects of consumer behaviour ( Hure et al. , 2017 ; Pantano and Gandini, 2018 ), the retailer–consumer interface ( Hagberg et al. , 2016 ; Roggeveen and Sethuraman, 2020 ) and retailers' ways of doing business ( Verhoef et al. , 2015 ; Hänninen et al. , 2018 ). The processes in which incumbent retailers develop their businesses in light of digitalisation, however, have received far less attention.

Because digitalisation, understood as the integration of digital technologies, is arguably not a binary shift from one stage to another but an ongoing process without a clear beginning or end ( Hagberg et al. , 2016 ), its exploration in retail warrants a more processual perspective, particularly regarding its influence on how retail organisations alter their businesses (cf. Langley, 1999 ). Along with frameworks addressing how retail businesses can integrate digitalisation in various ways, the actual processes that may result in digital integration need to be explored and modelled. That need directs our attention to the exploratory processes through which retail businesses may approach digitalisation and, more specifically, to how digitalisation consequently influences established business models. Especially for the latter reason, we gave priority to incumbent retailers, whose business models and established ways of conducting business often confront such considerations.

Despite extensive research on what constitutes a business model, understandings differ about how to define, explore and leverage one. In fact, Teece (2018 , p. 41) has estimated that there are probably as many definitions of business model as there are models themselves. According to Ritter and Lettl (2018) , a business model, simply put, is a company's “way of doing business”. In this paper, considering how business models have been discussed in retail settings ( Sorescu et al. , 2011 , p. 4), we broadly understand a company's business model as representing “the firm's distinctive logic for value creation and appropriation”.

Although various external events may necessitate changes to ways of developing and operating businesses, digitalisation itself is not an event but an emergent, comprehensive and uncertain phenomenon. Indeed, digitalisation can span several external and internal aspects of businesses, as well as pose myriad implications for individual business models. To date, though scholars interested in digitalisation have examined different approaches to innovating business models, from making gradual, evolutionary adjustments to radically altering them ( Berends et al. , 2016 ; Inigo et al. , 2017 ; Snihur and Wiklund, 2019 ), how the exploration phase of digitalisation is understood and organised merits further investigation.

Following March's (1991 , p. 71) definition, exploration refers to searching for, innovating and experimenting with something novel. The concept as used by March (1991) is often considered in relation to exploitation, which refers to refinement, efficiency and implementation of “old” routines or certainties in an organisation. As noted by He and Wong (2004 , p. 481), researchers in strategic management, organisation theory and managerial economics have applied the two concepts in order to understand how innovations occur and how an organisation learn and develop dynamic capabilities to meet change. Previous studies either focus on the trade-off between exploration and exploitation or the balancing act between the two as discussed within literature focussing on ambidexterity and means for developing dynamic capabilities (e.g. Benner and Tushman, 2003 ; He and Wong, 2004 ; Vahlne and Jonsson, 2017 ). The two concepts have also been applied in processual research describing the evolution and development of an organisation. Winter and Szulanski (2001) use the two concepts when outlining their theory of replication as strategy and suggest a two-phase model where the organisation first enters the exploration phase “in which the business model is created or refined” (p. 731) and then move on to the exploitation phase. The argument that exploration and exploitation can be understood in terms of different phases of a process has been adopted also by researchers focussing on, for instance, retailers' internationalisation process ( Jonsson and Foss, 2011 ), the transition into retail omni-channel strategies ( Picot-Coupey et al. , 2016 ) and reverse knowledge flows within franchise organisations ( Friesl and Larty, 2018 ). Still, how the exploration phase is organised and how it can be understood remains to be further investigated. To the best of our knowledge, there is a dearth of research focussing specifically on the exploration phase and how it develops in practice. Whilst existing studies do explore the exploration phase, it is also discussed in relation to the exploitation phase with focus on the outcomes rather than the processual aspects of the phase as such. For this paper, we zoom in on and examine the exploration phase and how it can be understood in the context of retail digitalisation. In particular, when emergent trends such as digitalisation, a change process, challenge established business models, more comprehensively re-engaging the exploration phase can become essential.

3. Methodology

Investigating a complex phenomenon such as digitalisation, and given our aim, calls for a qualitative in-depth case study ( Eisenhardt, 1989 ). According to Dyer and Wilkins (1991 , pp. 615–617), case studies aim to “provide a rich description of the social scene”, “describe the context in which events occur” and thus offer opportunities for other researchers to see “phenomena in their own experience and research”. In that sense, rich, explorative case studies provide avenues for future research or, as more broadly conceived by Doz (2011 , p. 588), “offer the opportunity to help move the field forward and assist in providing its own theoretical grounding”.

Our in-depth case study focussed on IKEA, a global home-furnishing retail company, and its work with developing an understanding of digitalisation. IKEA is a particularly interesting case that has attracted practitioners seeking a benchmark in a hitherto successful business model (e.g. Jonsson and Elg, 2006 ; Edvardsson and Enquist, 2011 ; Burt et al. , 2016 ). IKEA has frequently been used as an empirical example in the business models literature (e.g. Hedman and Kalling, 2003 ; Sorescu et al. , 2011 ) and subject to in-depth case studies of the development of specific aspects related to the IKEA business model over time (see e.g. Salzer, 1994 ; Jonsson, 2007 ; Tarnovskaya et al. , 2008 ; Edvardsson and Enquist, 2011 ; Hellström and Nilsson, 2011 ; Burt et al. , 2016 , 2021 ). In addition, there are several studies of various aspects related to digitalisation, including store format development ( Hultman et al. , 2017 ) and comparison of IKEA's digital catalogue and website ( Garnier and Poncin, 2019 ). IKEA has also served as an in-depth case for studies of exploration in relation to exploitation and replication ( Jonsson and Foss, 2011 ; Vahlne and Jonsson, 2017 ). The present study adds to this literature through an in-depth case study of IKEA's digitalisation process in an early explorative phase.

In the ten months from September 2014 to June 2015, we observed IKEA's work on exploring digitalisation and the trend's potential impacts on various parts of the organisation's business model and participated in a project undertaken in support of such exploration. In that form of action research ( Patton, 1980 ), engaging in IKEA's internal exploratory work as researchers allowed us to understand digitalisation's implications by discussing them with representatives at IKEA, which, at the time, considered knowledge of those implications to be important because they, along with digitalisation itself, remained unknown. Using such methods enabled us to contrast findings from interviews with findings from observations and synthesise the results in light of theory ( Ghauri and Grönhaug, 2002 ). In particular, our case study revolved around two ongoing projects and the processes of working within them: IKEA's “E-Commerce Programme”, later named the “Multichannel Transformation Programme”, and a project designed as a pre-study addressing the future role of IKEA's physical stores and the challenges and opportunities that they face amid digitalisation.

We collected data with three overlapping methods: in-depth semi-structured interviews, participant observations and document analyses (for an overview, see Table 1 ). As for the first, we conducted 21 interviews with senior executives with different functions in different departments at IKEA as detailed in Table 1 . Using purposeful sampling, we interviewed IKEA managers and employees working with and/or preparing for the organisation's digitalisation about their experiences with and thoughts on the concept of digitalisation and its implications. The interviews combined retrospective questions about IKEA's business model with questions about current situations experienced by the interviewees and prospective enquiries about IKEA's future in relation to digitalisation. All interviews began with open-ended questions about digitalisation in general and digitalisation at IKEA in particular. As the interviews progressed, questions became more structured and delved into the future role of IKEA stores, the specific challenges that IKEA faces, whether they will affect the IKEA concept and if so, then how. All interviews were recorded and transcribed verbatim and translated into English in those cases the interviews were made in Swedish.

Meanwhile, participant observations involved three meetings – before, during and after data collection, respectively – with the project manager of the pre-study to discuss the overall project. Those meetings lasted 11 h and 36 min in all. We also engaged in both in-store observations and meetings, lasting 10 h in total, whilst visiting an IKEA store in the Altona borough of Hamburg, Germany that operates as a test store for new concepts (e.g. urban proximity, technical solutions and delivery solutions). The local managers who accompanied us during our in-store observations also met with us twice: once with five other store managers and once with five employees from different departments. We conducted both meetings as group interviews guided by the same questionnaire used in the individual interviews. During all observations, we took field notes for data about the employees' perspectives and what digitalisation meant in practice. That information was valuable when conducting interviews with IKEA managers responsible for strategic decision-making and for translating digitalisation into IKEA's business model. Last, we also collected documents and visual communication, both public and internal, for analysis. The internal documents contained information about the pre-study, the “E-Commerce Programme”, the “Multichannel Transformation Programme” and the movie “ Shop with Laura ” (see Table 1 ) and public documents included information about the IKEA history, vision and business idea statements. Documents were collected on the basis of their mentioning during the interviews or participant observation sessions. These constituted sources of detailed information preserved from the time in which they were written and less dependent on the informants' memories. Throughout data collection, we facilitated informants' validation of the data on several occasions (cf. Silverman, 2006 ), which afforded us the opportunity to discuss our observations and findings with the participants. Apart from our participant observations, we also hosted two internal workshops with the project manager of the pre-study to discuss our findings.

To analyse the data, we used systematic combining ( Dubois and Gadde, 2002 ) – i.e. alternated focus between our empirical material and theory – whilst developing our case study and the emerging framework. For integrity's sake, we triangulated the three major sources of data – participant observations, interviews and document analysis ( Silverman, 2006 ) – during all four steps of data analysis. First, we coded the transcripts with reference to keywords and phrases related to digitalisation and its consequences for the retail industry in general and IKEA in particular. In that step, we adopted an emic perspective that prioritised the perceptions and understandings of the informants ( McCracken, 1988 ). Second, following Langley's (1999) suggestion, we took a narrative approach to comprehending the process-related data, namely by drafting a general description of the process with illustrative quotations from material collected in the field ( Berends et al. , 2016 ). Third, whilst working abductively between the empirical material and our emerging analytical framework, we used theoretical coding ( Charmaz, 2014 ) to sort, integrate and organise the material to represent a three-phase process. In so doing, we gradually shifted to an etic perspective – i.e. from the informants' perspective to our own perspectives as observers of the empirical material. Fourth and finally, we reorganised the material and wrote a case narrative structured according to the three abovementioned activities as presented next.

4. Exploring digitalising: the IKEA way

In the past 70 years, IKEA has grown from a small, family owned company in Sweden into the world's largest retailer of home furnishings. Arguably, IKEA's rapid international expansion resulted from the three-phase development of a formula that has been replicated in all markets where IKEA has entered an expanded, where the first phase commenced by exploring IKEA's business idea and opening test stores in markets outside Sweden ( Jonsson and Foss, 2011 ).

IKEA's business idea builds upon two concepts – the idea concept and the concept in practice – that together define what, in theoretical terms, could be understood as IKEA's business model. Whereas the idea concept refers to IKEA's vision “to create a better everyday life for the many people”, its philosophy of co-creation (i.e. “We do our part, and you do yours”) and the central role of IKEA stores, the concept in practice refers to IKEA's practices of examining specific sets of variables whilst adjusting to local markets ( Jonsson and Foss, 2011 , p. 1,090). The two concepts are mutually dependent; if the concept in practice does not change, then the practices of the idea concept will eventually become irrelevant and not reach “the many people”.

In 2014, drawing from insights during its internationalisation, IKEA realised that digitalisation could be both a challenge and an opportunity amid its recently declining expansion. For decades, IKEA had experienced outstanding success in replicating its business model: an average yearly increase in sales of approximately 8–10%, the constant meeting of new sales targets and a steady rate of expansion, with 12–14 store openings per year. In 2013, however, IKEA's steady growth declined in some markets, as the rapid worldwide growth of e-commerce in retailing continued to challenge physical stores and change the competition. In response, the company decided to decelerate its international expansion in favour of exploring what digitalisation could mean for their established business model. At IKEA, it was, therefore, considered increasingly important to return to a state of exploration in which key variables describing the idea concept and the established concept in practice would be re-evaluated. Moreover, as increasingly more young employees at IKEA sought new, 21st-century ways of reaching “the many people” – i.e. current and potential customers – both IKEA's employees and customers began looking for digital solutions and new ways of working.

In the following sections, we recount how IKEA engaged in exploring digitalisation in the IKEA way and how it (re)imagined reaching “the many people” in the shifting retail landscape. The story begins when the intersection of digitalisation and IKEA's business model was becoming increasingly apparent but not yet regarded as a phenomenon that would require radical changes, and it ends six months later, when the exploration phase resulted in an understanding and approach that we term the re(in)innovation of IKEA's business idea. In particular, we discuss how IKEA interpreted, interrelated and integrated digitalisation with its established ways of doing business. Although we have structured our discussion in three subsections, each addressing one of those three activities, the activities should not be considered as occurring along a linear path but instead as three aspects of the exploration phase.

For an overview of the activities and related steps, please see Table 2 .

4.1 Interpreting digitalisation

In 2014, aware that IKEA retailers in the USA were witnessing a cannibalising effect on their physical stores because of e-commerce, IKEA took its first steps towards exploring digitalisation. IKEA realised that its E-Commerce Programme launched only a year prior, could not simply be rolled out as initially planned but needed to be informed by a discussion about what e-commerce and digitalisation would mean for sales in IKEA's physical stores. Although digitalisation was becoming a widely discussed concept in retail at the time, it had remained undefined, and it was unclear how, or even whether, it was distinct from e-commerce. Recognising that possibility, IKEA's global expansion manager initiated several internal projects to explore what digitalisation meant and how it might relate to IKEA's business idea.

E-commerce is how we do business electronically, so it's about selling: selling online. But digitalisation is much bigger than that […] It's about the whole company, because it involves, for example, online learning. I think that e-commerce is not just about selling; it's about fulfilment, the buying process. (Development Manager, E-Commerce Programme)

Digitalisation is broader than e-commerce. It's also more about how we approach customers: how we communicate and how we ensure that all of our customers have the same knowledge, whether they're buying things in the store or online. Digitalisation is something that happens in the store. It's how we provide all of the information to our customers: where the products come from, what they do and how you can use them. (Supply Manager, IKEA Supply AG, Logistics)

As that quotation suggests, despite references to what digitalisation might mean and what it truly is, its signification remained vague. Even so, it appears that digitalisation might have generally been understood as offering digital information to customers. Making sense of digitalisation thus involved distinguishing digitalisation from e-commerce to not only explain how the concepts differed but also make digitalisation manageable for and relevant to customers.

So, all of a sudden, the amount of information that we have about people and how they live, move, interact etc. is phenomenal. And it's in combination. It's not urbanisation only; it's urbanisation plus digitalisation that gives us the opportunities. It's an example of how combined trends can become very powerful. (Digital Business Manager, Inter IKEA Systems B.V.)

It is exponential because every new invention in the digital space is built on previous ones. So, it's a combined effect that creates exponential speed. So, ignoring it, as Kodak or Nokia did, will be very dangerous. On the contrary, it can be very powerful, like for Apple, Google, Facebook, etc.

For me, digitalisation is a moving target. Its content is changing all of the time. To some extent, we use a lot of digital technology already—it's just that it’s outdated, right—so we're changing how we digitalise instead of digitalising something that is not digital. (Global Retail Logistics Manager, Retail Logistics IKEA of Sweden)

Gradually, it became clear that digitalisation not only needed to be understood in the sense of selling goods online but would have broader implications for the company. As a case in point, when observing customers who had already developed new shopping behaviours – using mobile phones to search for products from both outside and inside stores, for example – IKEA realised that new mobile solutions had to be integrated with traditional retail logic. As a result, IKEA unveiled the “Future Role of the IKEA Store in a Multichannel Environment” project to emphasise the need to understand and combine related trends. The project was initiated to jumpstart a shift towards what IKEA called a “seamless customer journey”. Consisting of five sub-projects, the project prompted the redefinition of the E-Commerce Programme and later evolved into the Multichannel Transformation Programme.

Digitalisation means nothing, I would say. Because what we want is to secure a solution for when you, the customer, move between the store and the web. It might be a digital solution, but it can also be a physical solution, or something else. The only thing that's important is to solve some sort of need and to learn more about those needs. (Group Retail Manager, Global Retail Services IKEA Group)

The expansion manager also emphasised that instead of simply focussing on defining digitalisation, routines and skills need to be developed for facilitating “disruptive developments” and finding new solutions and ways of testing new ideas. Understanding how various activities were organised and integrated was also considered to be pivotal. The idea addressed in many interviews – namely, that digitalisation both enables and requires the integration of knowledge – was explained as enhancing the focus on customers and their experiences. That perspective marked a shift into the phase in which IKEA began actively exploring what digitalisation meant to its ways of doing business by revisiting the idea concept and the concept in practice.

Altogether, the first activity of the exploration phase, interpreting, refers to ways of understanding and making sense of digitalisation and the changes that it was considered to imply. The process can be described as encompassing three steps: differentiating (i.e. distinguishing and delimiting digitalisation from other concepts), combining (i.e. making connections between digitalisation and other trends and concepts) and concretising (i.e. defining digitalisation and making it actionable). Building upon lessons from that work, IKEA transitioned into the second activity of exploration where it began relating digitalisation more explicitly to IKEA way of doing business.

4.2 Interrelating digitalisation with established business ideas

Whilst interpreting digitalisation, informants increasingly reflected on what it would mean for IKEA's established business ideas. After all, the replication formula was being challenged by not only digitalisation but also urbanisation. Mounting criticism about globalisation and calls for de-growth were also seen as challenging the existing understanding of doing business – i.e. by selling furniture “to the many people” – and concerns for sustainability were identified as needing to be incorporated into understandings of digitalisation.

To ensure that all IKEA employees shared the same interpretation of digitalisation and how it relates to IKEA's established business model, it was considered to be necessary to visualise the future. To convince internal sceptics, it was considered to be especially important to also visualise how digitalisation could generate opportunities for sales and attract a broader customer base and thereby more fully reach “the many people”. It additionally required ideas about urbanisation, sustainability and ways of offering not only furniture but also services, both in terms of continuity and making it easier to shop. Some proposals even conceived collaborating with second-hand retailers or establishing an organisation that would create opportunities to sell recycled and/or used furniture.

We wanted to have a completely different kind of interaction with our customers: a completely different type of conversation, a completely different type of engagement. So, I made a video that I think is very entertaining. […] She [Laura, the protagonist] wants to decorate her children's room, and the videos show her journey until she's satisfied. (Web and Digital Manager, Web and Digital Retail Services)

To develop a “seamless” experience for customers, it was considered to be crucial to introduce multiple perspectives, which seemed to require visualising the journey of customers in order to ensure focus on their experiences. To that end, it was expressed that all perspectives in IKEA's value chain had to be considered, and a consensus was emerging that different perspectives needed to be integrated in order to realise digitalisation. It was also clear that integrating knowledge from various functions in order to avoid a silo mentality would require more effort.

Our model has been built on direct deliveries to our stores, where you [the customer] do your part, we do our part, and then we save money. We need to think about a completely different kind of integration in how we develop and how we lead the overall development. To make that happen, we're now investing billions in new infrastructure—large investments in IT—but that's not what will take us into the future . (Group Retail Manager, Global Retail Services IKEA Group)

It was necessary to look inwards and to involve different views and perspectives, both across different parts of the company and from the outside. The same informant underscored the importance of accessing different perspectives to also “integrate the outside perspective into our structure, so that we do not get too isolated and, in that way, also cultivate our own skills”. The involvement of different functions and external partners prompted discussions about what digitalisation meant in relation to the established retail logic of “You do your part, we do our part (and together we save money)”. As it became clear that digitalisation would inevitably affect IKEA's business model, the question of how that process would unfold increasingly became the topic of discussion.

In sum, the second activity of the exploration phase, interrelating, refers to assessing digitalisation in relation to established ways of doing business in three steps: visualising (i.e. what the future might look like), mapping (i.e. what functions, areas and parts of the business model will be involved) and evaluating (i.e. how digitalisation will affect the business model and current ways of doing business). Based upon insights from that work, IKEA advanced to putting lessons learnt into practice and began the third activity: integrating new knowledge with existing knowledge.

4.3 Integrating digitalisation into a business model

From the internal projects related to efforts of interpreting digitalisation and interrelating it to other trends, IKEA's managers concluded that its established business model needed an update and that the antidote, digitalisation, also offered an opportunity to fully realise the business idea of offering products and services to “the many people”. To that end, testing new ideas, learning from them and making any necessary adjustments were considered to be important tasks. Thus, to be able to integrate digitalisation with the business model, it was necessary to experiment with numerous ideas and solutions as was done at numerous IKEA locations. For example, at IKEA in Altona, new ideas and concepts were tested to see whether they could satisfy a more digital, urban segment of customers. The Altona store was not only constructed differently from the standard global store format, in terms of size and layout, but also to accommodate for trends in urbanisation. It had also been adapted to test new concepts in practice, including new logistics and distribution solutions, and the normal pathway through the IKEA store had been partly removed to attract customers passing by outside. In the United Kingdom, by comparison, as a result of exploring digitalisation and testing new digital solutions, IKEA had launched its first app.

Experiences from testing new ideas and solutions were transferred back to the IKEA Group and Inter IKEA Systems. Thus, an important step was reviewing and learning from those experiences followed by transferring them internally within the organisation. In relation to the Altona store, both IKEA's management team in Germany and the IKEA Group's management team followed the experiences closely. Beyond that, many employees from IKEA worldwide visited the UK and/or Altona stores simply out of curiosity.

That's the essence of IKEA. If you remove everything, then the core is what's left, and that's IKEA… [We] need to develop our concept, take it further and say, “This is how I see IKEA today”. We have to be on track and dare to test and create other formats… So, IKEA has to change; otherwise, it's the beginning of the end. (Group Retail Manager, Global Retail Services IKEA Group)

The concept manager also reflected on how those changes would affect the idea concept and the concept in practice, as well as the latter should not come at the former's expense: “I mean the concept, if we go back to it, and the vision… part of the recipe for success has been just doing things together, engaging people” (IKEA Concept Manager, Inter IKEA Systems B.V.). Thus, integrating digitalisation into IKEA's business also implied reconnecting with IKEA's roots and reflecting on the idea concept as “the core of the core”. After all, although IKEA was changing at the time and continues to change, it remains the same IKEA. In that sense, revising the business model appeared to be quite natural, for though it had always changed in one sense, in another sense it had also always remained intact. The conclusion was that to be able to sustain the idea concept, “the core of the core”, the concept in practice needed to change, which would imply searching for new formats and new solutions to further leverage IKEA's business. IKEA's managers realised that although the basic needs were the same, people had changed and were continuing to change, and the experiences of customers demanded far more focus. For those reasons, a new position, global customer experience manager, was created. The shift implied a return to the core of IKEA's concept and vision – “to provide products and services that are both cost-efficient and innovative” – and that digitalisation had forced IKEA to rethink its processes of achieving those ends. As another informant argued, the entire process of re-evaluating the way of doing business – i.e. the IKEA way – had alerted managers and employees not only to IKEA's strong vision and business model, but also its need to seize the opportunity to fully realise that vision and reach “the many people” both online and offline.

All of the work to prepare IKEA for the digital shift had prompted a return to the company's roots and the questioning of proven solutions, which is indeed one of IKEA's ten values, perhaps best be described as shifting from interpreting digitalisation and interrelating with IKEA's business model into integrating and turning it into practice. That integrative phase also precipitated how IKEA re(in)novated its business model. IKEA's approach of digitalisation could thus be understood as returning to the company's original idea; the understanding of the idea concept will never change, but the concept in practice has to be rethought and new ideas and practices tested and evaluated in order to continue to reach “the many people”. To that end, practising and testing new solutions were crucial strategies for IKEA, not to mention integral to the IKEA concept and its organisational culture.

In all, the third activity of the exploration phase, integrating, refers to the actual digitalisation of the business idea by steps of practising (i.e. developing and trying different solutions to test and learn from them), reviewing (i.e. sharing knowledge within the organisation to learn from practice) and revising (i.e. connecting and evaluating changes to the established business model in order to provide continuity).

5. Conclusion

This paper has sought to illuminate how an incumbent retail organisation approached digitalisation for its existing business at an early, exploratory phase when possible disruptions, their meanings and their consequences remained uncertain. To that aim, we have provided an account based upon our in-depth case study of IKEA and how the company explored digitalisation at an early stage. We have delineated the exploration phase as consisting of three chief activities – interpreting, interrelating and integrating – each of which we have detailed by identifying certain steps therein. Together, and with reference to IKEA's case, those aspects allow an understanding of the exploration phase.

Compared with previous studies on exploration and exploitation (e.g. March 1991 ; Winter and Szulanski, 2001 ) and specifically in the context of retailing ( Jonsson and Foss, 2011 ; Picot-Coupey et al. , 2016 ; Friesl and Larty, 2018 ), our paper contributes with insights on how the exploration phase is understood and organised in practice. The study further contributes to previous literature of IKEA's business model ( Hedman and Kalling, 2003 ; Sorescu et al. , 2011 ) and specific aspects of the IKEA business model (see e.g. Edvardsson and Enquist, 2011 ; Burt et al. , 2016 , 2021 ) by outlining the exploration phase in further detail. Although the activities of the exploration phase – interpreting, interrelating and integrating – stem from a specific case, we believe, following the potential of qualitative in-depth case studies ( Dyer and Wilkins, 1991 ; Doz, 2011 ), that they may provide value for analysing what digitalisation or any other current or future trend means to retail businesses apart from IKEA.

Because our study was performed at a relatively early phase of adapting the business model at IKEA, some of the outcomes of that process were beyond our study's time frame. However, conducting the study during the process afforded the advantage of revealing ambiguities, scepticism and reservations amongst employees and managers, all of which are important for understanding how retail businesses can be transformed in practice due to digitalisation. In hindsight, some of those uncertainties may be expected to fade or fall into oblivion once changes appear as a continuation of their antecedents and become institutionalised in the ordinary course of business, whether such a development occurs and, if so, then how it remains to be investigated. In any case, a key contribution of our study is the understanding of how an organisation such as IKEA, a global retail giant, organises its efforts to explore digitalisation in relation to its existing business. Still, as this study was conducted in a relatively early phase of the digital transformation, we believe that the findings may differ from later implementations when digitalisation has increasingly become a norm rather than an exception and retailers having increased abilities to learn from their and other's previous experiences. An important opportunity for further research would be to study more recent cases of exploration phases in relation to digitalisation as well as comparing incumbents and entrants as well as larger and smaller organisations.

Using a case study to develop an understanding of digitalisation in retail has advantages and disadvantages. On the one hand, it affords a more profound understanding of how retail businesses are transformed due to digitalisation in practice, as well as detailed insights into the practical work within the company (cf. Saebi et al. , 2017 ). On the other, however, it can be difficult to apply the results of case studies in forming a basis for scientific generalisation ( Yin, 2003 ). Although an analysis based upon a particular case can indeed provide an understanding of the practical process, that process is liable to differ between companies and between industries. In IKEA's case, as an organisation that many companies use as a benchmark due to its long-term success, no precedent construct existed for understanding how digitalisation in retail would look – for example, by relying on normative models – but instead surfaced as an emerging process. A better understanding of how a specific retailer has approached digitalisation complements current understandings of retail's digitalisation in general ( Hagberg et al. , 2016 ; Hänninen et al. , 2021 ). By extension, we believe that the suggested conceptual framework for understanding and organising the exploration phase could be a useful tool for retail managers to explore not only digitalisation, but also any other transformation and the consequences for their businesses.

Types of data sources

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Acknowledgements

The authors contributed equally to this work. The paper is part of a research project with financial support from The Swedish Retail and Wholesale Development Council. The authors would like to thank Niklas Egels-Zandén for comments on an earlier draft of this paper, and also colleagues Catrin Lammgård and Malin Sundström who were also part of the research project. In addition, the authors would like to thank the people at IKEA who have contributed with their time and reflections, and in particular, the authors would like to appreciate Martin Hansson and Carole Bates for showing interest in this research and for inviting the authors to participate in the internal work of trying to interpret what retail digitalization means to IKEA.

Corresponding author

About the authors.

Johan Hagberg is professor of business administration specialising in marketing at the School of Business, Economics and Law, University of Gothenburg. His research revolves around the digitalization of retailing, consumption and markets.

Anna Jonsson is associate professor at Lund University, School of Economics and Management. Her research interests include learning and knowledge sharing in organizations and society. She has conducted research about various industries and organizations, including the retail industry.

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The business concept of IKEA involves selling high volume of mostly furniture products in low prices. Moreover, “with an aim of lowering prices across its entire offering by an average of 2% to 3% each year, its signature feature is the flat packed product that customers assemble at home, thus reducing transportation costs” (Profile:IKEA, 2011, online)

The vision of the company reflects this strategy in an effective manner. “The IKEA vision is to create a better everyday life for many people. We make this possible by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them” (Inter Ikea Systems B.V, 2011, online).

As one of the leading retailers in a global scale IKEA is engaged in systematic environmental monitoring and analysis which serves to be an effective source of information for decision-making. Internal benchmarking is one of the main methods of environmental monitoring and analysis engaged in by IKEA. Benchmarking is “method of improving business performance by learning from other companies how to do things better in order to be the ‘best in the class’”(Janakiraman & Gopal, 2007, p.181).

The Internal benchmarking practice engaged in by IKEA involves comparing different divisions and subsidiaries of the company and thus establishing the best practice and aspiring to it for the remaining divisions and subsidiaries of the company.

Moreover, IKEA is engaged in extensive market research both in global and local levels that is conducted by marketers employed by the company, as well as, independent market research companies.

IKEA Financial Analysis

During the financial year of 2009 15 new IKEA stores have been opened and the total revenue of the group has grown to 21.8 billion EURO (1.4% growth). During the same time operating income has increased by 4.4% to reach 2.8 billion EURO (Welcome Inside, 2010, online). Although it is a modest growth for IKEA considering its size and resources, it has to be noted that during the same period of time high number of business of various sizes along a wide range of industries have experienced losses caused by the global financial crisis of 2007-2010 that reached its peak during the same financial year.

There was a fluctuation of net income between 10% and 13% of revenue during the past ten years and fixed assets have increased by 527 million EURO to reach 16.8 billion EURO in total caused by net investments in property and investment (Welcome Inside, 2011, online).

Moreover, “IKEA generates 79% of its sales in 2010 in Europe. 15% of sales IKEA generated in North America and only 6% came from Asia/Australia. The main three financial principles of IKEA are financial stability, independence and flexibility” (Berger, 2011, p.2)

Complexity of the Market Environment and the Key Business Challenges for IKEA

IKEA has an effective business strategy that has been effectively implemented and this has ensured global leadership position for the company. This strategy consists of finding an effective combination of quality and prices for the products and thus appealing to a wide range of customers who mainly represent middle class in society.

However, the current position of IKEA should not be taken for granted and there are specific set of challenges that need to be addressed by the company in an effective manner in order to remain competitive in the future and achieve long-term growth.

The key business challenges faced by IKEA can be summarised into the following four points:

• Keeping costs down . One of the major challenges faced by IKEA relates to the necessity of keeping costs down on the face of increasing prices of raw materials. Raw materials used by IKEA contractors for the majority products of the company involve wood and metal. The prices for both of these materials are increasing in global level and this fact causes difficulties for the company in terms of achieving its objective of lowering the prices by 2 to 3% annually.
• Addressing cross-cultural differences in international markets . IKEA operates in more than 38 countries on the basis of both; company operated stores, as well as, franchising. The population in each of these counties have their unique culture and cultural differences find their reflection on various aspects of life including perceptions of value propositions offered by companies, the level reception and interpretation of various marketing materials and consumer preferences (Pride and Ferrell, 2008). This situation presents challenges for IKEA in terms of adapting various aspects of the business to local markets taking into account the cultural differences associated with each individual market.
• Dealing with competition from China and India . Producers from new emerging superpowers, China and India present substantial threat to leading multinational businesses from US and Europe due to their significant competitive advantages in the forms of cheaper access to resources (Mullins, 2005). Therefore, there is a risk for IKEA to lose the attractiveness of its value promise due to cheaper discounted furniture being offered to the marketplace by Chinese and Indian companies.
• Achieving flexibility for the business . IKEA has been growing in size for several decades as a result of aggressive international market expansion strategy. While the massive size of the company offers a number of substantial advantages such as economies of scale it has serious limitations as well. Namely, IKEAs massive size may negatively affect the level of flexibility of the company which is essential in current constantly changing marketplace. In other words, IKEA is faced with a challenge of remaining flexile and adaptable to rapidly changing marketplace, amid its massive size that slows down the speed of implementation of the proposed changes.

Recommendations for  IKEA

The current leadership and management practices in IKEA are promoted by the corporate culture that has been laid by its founder Ingvar Kamprad. Rothacher (2004) informs Ingvar Kamprad’s leadership style to be a combination of charismatic and autocratic leadership styles and also states that the founder of IKEA was notorious for micro-management.

Moreover, according to Martins (2010, online) the quote “if there is such a thing as good leadership, it is to give a good example. I have to do so for all the IKEA employees” belongs to Ingvar Rothacher, thus it can be stated that IKEA founder has practiced exemplary leadership as well.

There have been some modifications in corporate culture and management style since Ingvar Kamprad retired from the leadership position in 1986, nevertheless the impacts of his autocratic leadership style have lasted until present days and effects current leadership and management practices in IKEA. This statement can be justified by the fact that Ingvar Kamprad still serves as a senior adviser to IKEA and wields great influence to the company managers in various levels (Berger, 2011).

While autocratic management style can still be highly effective in present days, for instance, in the case of Steve Jobs of Apple Corporation, generally, this style of management is widely criticised by business researchers and practitioners for a number of serious shortcomings. Specifically, the increased level of criticism associated with autocratic management style relates to low employee motivation and morale, high level of dependence on the competency of one or few people, and the lack of innovation.

IKEA has a great potential in present day to increase its effectiveness and obtain competitive advantages in various levels thorough changing the management style practiced in the company from autocratic to democratic.

“As the name implies, a democratic management style gives employees a much greater say in decision making. Rather than making unilateral decisions and expecting employees to carry them out, the democratic entrepreneur encourages employees to get involved in the process” (Kishel and Kishel, 2005, p.158).

Embracing the democratic management style will offer IKEA numerous advantages such as highly motivated workforce, valuable insights to existing issues and innovative ideas for improving various business processes.

A Rationalised Improvement Plan for IKEA

As it has been shown above, the rationalised improvement plan for IKEA directly relates to the change of leadership and management style from autocratic to democratic. Such a dramatic and fundamental change within IKEA needs to be implemented in an effective manner in order to eliminate the chances of negative implications of the change on various business processes.

Burke-Litwin model of organisational change can be employed in order to ensure successful implementation of proposed changes in IKEA. “According to the Burke-Litwin model of change, planned change flows from top (external environment) to bottom (performance). The arrows that point downwards are given more casual weight. Thus, with respect to organisational change, external environment has the greatest impact. Inside the organisation, the transformational factors have the greatest impact” (Sharma, 2006, p.65)

 Source: De Smet (1998, online)

Ingols et al (2011) divide the variables within Burke-Litwin model of change into two categories: transformational factors and transactional factors. Accordingly, environment, leadership, mission and strategy and culture are considered to be transformational factors, whereas, all the remaining variables are transactional factors. “Transformational factors “entail significantly new behaviour by organisational members and major alterations to other variables in the model. However, when fundamental reorientation and re-creation are a necessity, they may represent the only viable approach to organisational rejuvenation and long-term success” (Ingols et al, 2011, p.93).

According to the model the proposed changes in IKEA should be promoted from the top to the bottom. Specifically, strategic level management in general and IKEA Group President and CEO Mr. Mikael Ohlsson in particular should promote the new democratic style of management to be integrated into the corporate culture. This can be achieved through appointing a change agent, ideally Mr. Ohlsson to lead by example and to demonstrate the advantages of democratic management style in a practical manner.

Moreover, in order to increase the level of effectiveness of change management the proposed democratic style management should be integrated into mission statement and strategic plans of IKEA, the company’s organisational structure, as well as, its systems and policies.

In this way the work climate within IKEA can be improved in a desired manner and individual needs and values can be altered to appreciate and embrace the principles of democratic management system.

Current Situation within IKEA Affecting the Implementation of Rationalised Improvement Plan

The plan proposed above that mainly involves changing autocratic management style to democratic management offers the potential of dramatically improving IKEA’s prospects. However, an in-depth analysis of the current situation within IKEA reveals several areas of weaknesses associated with the proposed plan.

Firstly, Mr. Ingvar Kamprad still has a major influence on company employees in his capacity of the founder of IKEA in his position of senior advisor to the CEO . This fact might defer the proposed changes from taking place because Ingvar Kamprad might see these changes unnecessary and even violating the basic principles of leadership that has ensured the achievement of the current status for IKEA.

Secondly, the current team of senior level management of IKEA – Mr. Mikael Ohlsson President and CEO; Mr. Soren Hansen, Vice President and Chief Financial Officer; Mr. Goran Grosskopf, Chairman of the INGKA are performing well in their current positions according to the financial performances of IKEA . As such, the proposed plan of changing the management style in IKEA might be perceived as unnecessary by them as well. In other words, the current team of senior level management in IKEA may fail to appreciate the advantages of democratic management style, being deceived by their current high level of performance and taking current leadership position of the company for granted.

Alternative Options for IKEA

Alternative approaches need to be developed for IKEA that would address the above mentioned weaknesses of the proposed plan. The most appropriate alternative approaches available for IKEA can be summarised into the following points:

• Promoting and implementing inspirational management style . Because it has been revealed that the implantation of democratic management style in IKEA might prove to be highly challenging due to above specified reasons, the most suitable ‘second best’ alternative would be the promotion and implementation of inspirational management style. The advantages of inspirational management style include high level of performance from the workforce through motivating them with an effective combination of tangible and intangible motivational tools. The implementation of inspirational management style is going to face less opposition within various management ranks in IKEA compared to the implementation of democratic management style because the latter style is associated with less changes and disadvantages compared to the former.
• Devising a plan for implementing democratic management style over a longer period of time . IKEA founder Ingvar Kamprad and the strategic level management team might be more receptive to the idea of implementing democratic management style over longer period of time through devising relevant programs and initiatives because implementing the proposed changes in such a manner would not involve dramatic changes in a short period of time, and thus may not contradict to established principles and norms within the company.

Recommendations for IKEA to Address Major Challenges

The findings of this report can be used in order to formulate recommendations for IKEA in order to achieve its main objective of profit maximisation in a more effective manner. These recommendations can be summarised into the following points:

Firstly, focusing on using recycled materials . The awareness of population who are the current and potential customers of IKEA about various environmental issues is increasing due to the activities of various non-government organisations and wide coverage of these issues by the media. One of the most discussed environmental issues in a global scale relates to deforestation in various regions and its negative impacts for the future of the nature and humanity.

As a result, the demand for the various types of products such as paper and plastic bags made of recycled materials has dramatically increased. This change in consumer preferences presents good opportunity to IKEA to promote research and development initiatives among its suppliers with the aims of introducing furniture and other types of products in the marketplace that are made of recycled wood and other recycled materials.

Having followed this advantage IKEA would possess the first mover advantages in the market of recycled furniture and in this was the company would be able to further strengthen its position in the marketplace.

Secondly, engaging in product differentiation . There is an opportunity for IKEA to dramatically increase its revenues through engaging in product differentiation. IKEA is recommended to follow the strategies of Argos and Tesco where the offerings of products and services range from international calling cards to various types of insurances and loans and accordingly they have greater potential for increased amount of revenues.

IKEA already has a firmly established effective strategy and infrastructure and these can be used in order to increase the product ranges of the company in an effective manner.

Thirdly, engaging in market expansion in an international level . IKEA is also recommended to increase its revenues through engagement in market expansion strategy in an international level. Specifically, the company is recommended to enhance the level of its presence in Eastern European and Central Asian region. Markets in countries where IKEA is currently operating has become saturated, and from this perspective international market expansion would make a good business sense for IKEA.

Factors that Might Influence Implementation of Recommendations

Specific factors may effect the implementation of recommendations formulated above. Some of the most important factors of this nature are described below.

• Possible global financial crisis . In the case of another global financial crisis some of the above formulated recommendations that relate to product differentiation and international market expansion would have to be deferred for the later period of time. This is because financial crises are usually associated with decline in sales for most types of products and services and uncertainty in the marketplace and IKEA management would consider it inappropriate to invest in product differentiation and market expansion in such an environment.
• Regulations in Eastern European and Central Asian countries. Rules and regulations might be introduced by the some governments of Eastern European or Central Asian countries that can make it highly challenging or even impossible for IKEA to launch operations in within those countries. Such activities by the governments can be initiated for the reasons of protecting local businesses.

IKEA Group Report contains the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain Analysis and McKinsey 7S Model on IKEA. Moreover, the report contains analyses of IKEA’s business strategy, leadership and organizational structure and its marketing strategy. The report also discusses the issues of corporate social responsibility.

 References

• Berger, A, 2011, Operations Management: IKEA, Grin Verla
• Inter IKEA Systems B.V., 2011, Available at: http://franchisor.ikea.com,
• Janakiraman, B & Gopal, RK, 2007, Total Quality Management: Texts and Cases, John Wiley & Sons
• Kishel, GF & Kishel, PG, 2005, How to Start, Run, and Stay in Business: The Nuts-and-Bolts Guide to Turning Your Business Dream Into a Reality, 4 th  edition, John Wiley & Sons
• Martins, T, 2010, Ingvar Kamprad Quotes: Business Leadership Advice from IKEA’s Founder, Available at:  http://www.strategicbusinessteam.com/famous-small-business-quotes/famous-business-and-leadership-quotes-from-ingvar-kamprad-founder-of-ikea/
• Mullins, LJ, 2005, Management and Organisational Behaviour, Prentice Hall
• Pride, WM & Ferrell, OC, 2008, Foundations of Marketing, Cengage Learning
• Profile: IKEA, 2011, Innovation Leaders, Available at:  http://fp05-527.web.dircon.net/ikea_company_profile.htmL
• Rothacher, A, 2004, Corporate Cultures and Global Brands, World Scientific
• Welcome Inside, 2010, IKEA Group, Available at: http://www.ikea.com/ms/en_CN/about_ikea/press/press_releases/Welcome_inside_2010.pdf

Unpacking the digital transformation at IKEA

by Didier Bonnet , Michael R. Wade Published 15 February 2022 in Innovation • 8 min read

In an IbyIMD interview, Barbara Martin Coppola, Chief Digital Officer of IKEA Retail (Ingka Group), explains how she is helping to take the company, famous for its out-of-town stores and physical products, in a bold new direction.  

For nearly 80 years, IKEA has provided the world with its distinct style of ready-to-assemble home furniture, appliances, and accessories. IKEA is now one of the most recognized brands in the world, and its fame was built on quality physical products and analog distribution and business model. So, how does such a successful incumbent company stay relevant faced with the fast-changing realities of the digital economy?   

Four years ago, to accelerate its digital transition, IKEA hired Barbara Martin Coppola, a seasoned digital executive with global experience from Google to Samsung, with a remit to accelerate the digital transformation of IKEA.  

IMD Professors Didier Bonnet and Michael Wade asked Barbara how she faced the challenges of digitally transforming such an iconic global brand.   

What were the priorities of IKEA when you joined the company?  

When I joined IKEA, I was the first Chief Digital Officer in almost 80 years, the company was going through a deep self-reflection about its future directions. There were headwinds in the retail industry, consumers were changing their habits, the way they live their lives and their consumption patterns. Yet, when you think about IKEA, you think about those big flagship stores outside main cities, which is the model that, over the years, had served us well to grow the company. Now, with digital technology providing the opportunity to operate companies more efficiently and find new sources of growth with digital business models, IKEA had to embrace this digital wave quite urgently.   

In discussion with our CEO, we progressively realized that a digital transformation would mean changing deeply the way IKEA operated. But with one strong guiding principle. Every digital change was to be true to the values and the mission of IKEA. So, the remit was not to design a digital transformation “on the side” of the core business but to truly follow the firm core principles.  

“Now, with digital technology providing the opportunity to operate companies more efficiently and find new sources of growth with digital business models, IKEA had to embrace this digital wave quite urgently. ”

So, it was not about a digital strategy, but a strategy enabled by digital transformation?  

Absolutely. IKEA was very clear on its driving objectives, and the idea was that we needed digital to underpin and accelerate the execution of these objectives. On the surface, the driving objectives were not technology-driven, but fundamentally linked to our changing customers and our competitive position. The vision and mission were built around three core elements:  

• How do we become more accessible ? Given our traditional out-of-town locations.  
• How do we continue to be affordable ? Serving our wide base of customers from India to China, to Germany.  
• How do we become planet-positive ? Contributing to the sustainability of the world we operate in.  

I like to refer to these as the “Three Icebergs”, because the bulk of the digital work was to take place below the surface. Let me give you a tangible example. How do we become more accessible? When you start peeling the onion, it means that our customers have to be a click away from the brand, they have to be able to access a multitude of touchpoints even when they live within large cities. The consequences of doing that are profound as it means our inventory flows need to be different, it means the speed and agility which we operate the business have to be different, it means merchandising needs to be different and even the skills of the people delivering to customers need to change. This is exactly where digital needs to come to the fore.  

The change you describe implies you managed to execute your digital transformation across the natural silos in the organization?   

First, it needs a realization that the silos, particularly in terms of functions, needed to change themselves. To execute effectively, we also needed to build cross-functional teams bringing different expertise to tackle digital solutions end-to-end. It required a lot of human interactions, a lot of communication and a lot of stakeholder management. Second, it was about how we empowered those cross functional teams and give them the freedom to execute fast. We gave them decision rights to execute the change and produce the results. One thing I think we got right during the pandemic, is that we did not implement a heavy governance mechanism upfront with committees and layers of decision-making and approvals. We empowered the teams first and then formalized the governance later. And it was a business governance around three functions: Digital, Commercial and Operations. We had to remain pretty nimble, particularly during COVID, as the stores were closed, so empowering the front line and leading from behind was key to speedy execution.  

Discover IMD Program: Developing Digital Transformation Strategies

Digital and sustainability are the two major transformations facing businesses today, how do you reconcile the two  .

I see huge complementarity between the two transformations. It would be wrong to treat them separately. Digital is absolutely central to achieving our “Planet Positive” objective. Let me give you an example of how the two reinforce each other. One of the key sustainability goals of IKEA is to have a circular business model. One of the main implications is that we can follow the goods, trace the provenance of materials, monitor their usage and be able to get goods back for recycling. This is entirely based on digital product information, supply chain visibility and the data flows that underpin all these digital processes. You also need to digitally equip consumers through apps so they can see that information and be able to return an item to IKEA.   

We started a program last year where customers can sell products back to us for recycling. On Black Friday alone last year, we had 100,000 items sold back to us. And this is just the beginning, we plan to triple that number this year. We need to understand each component of the item to be able to recycle them effectively either by reusing materials or by reselling used items in the stores at a cheaper price – benefiting our affordability goal. Everyone benefits we save on goods and raw materials, we save on carbon impact, and we prolong the life of the products we make. I believe a lot of people will be happy with this. And it’s only possible because of our ongoing digital transformation.   

Our research shows that externally appointed CDOs often find it hard to navigate the complexity of large organizations, you seem to be a counter example?   

It’s a great question, you’re right, I’m only the second executive coming from outside IKEA in 78 years. And I’m not Swedish, I’m digital and I’m a woman. I think, first reporting directly to the CEO was an essential signal of the intent. Second, the CEO deserves a lot of credit for supporting me and putting in place the right conditions for the digital transformation to happen. I would also say that other executive team members were also extremely supportive, and that is a great help. 

I believe that what made a difference is that the whole executive team was aligned on the need to change. But, more importantly it was also about fitting into the values and the beliefs of the IKEA organization. To be honest, I was closely observed at the beginning, and I had to pass the “can we trust her” phase, way before any questions on my digital expertise. Once the confidence was established then we moved into the transformation execution. During this phase, we needed to bring proof points and early successes, so people went “oh, my god, this is working”. And started to believe in the power of digital to augment IKEA.    

If there’s one thing I have learned is that the human dynamics are essential to digital transformation success. How do we embed a digital mindset as a core component of the company’s leadership, and how do we bring the entire organization on the journey with us?  

Back to your question, I think it’s a lot about respecting what is and envisioning what could be. There is a sentence at IKEA that I really like and that capture that mindset: “Love the past and create the future.”  

This article is part of a series of “ Digital Leaders” interviews that IMD is conducting, to learn from real experiences from practitioners leading the digital transformation of large, global organizations.

Didier Bonnet

Professor of Strategy and Digital Transformation

Didier Bonnet is Professor of Strategy and Digital Transformation at IMD and program co-director for Digital Transformation in Practice (DTIP) and Leading Customer Centric Strategies (LCCS). He also teaches strategy and digital transformation in several open programs such as Leading Digital Business Transformation (LDBT), Digital Execution (DE) and Digital Transformation for Boards (DTB). He has more than 30 years’ experience in strategy development and business transformation for a range of global clients.

Michael R. Wade

TONOMUS Professor of Strategy and Digital

Michael R Wade is TONOMUS Professor of Strategy and Digital at IMD and Director of the TONOMUS Global Center for Digital and AI Transformation . He directs a number of open programs such as Leading Digital and AI Transformation , Digital Transformation for Boards , Leading Digital Execution , and the Digital Transformation Sprint . He has written 10 books, hundreds of articles, and hosted popular management podcasts including Mike & Amit Talk Tech . In 2021, he was inducted into the Swiss Digital Shapers Hall of Fame.

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Award winner: IKEA in Saudi Arabia (A)

Author perspective

Instructor viewpoint, who – the protagonist.

IKEA is the world’s leading furniture retailer, manufacturer, and franchisor. In 2012, they had 5% of the global market share and were the only furniture retailer with a global footprint.

On 1 October 2012, a Swedish newspaper revealed IKEA had erased all images of women from its catalogues for Saudi Arabia. This sparked immediate media attention and criticism of the brand from those who believed this was in conflict with their values and commitment to human rights and gender equality.

Saudi Arabia had strict laws based on a conservative moral code whereby women were banned from driving, travelling alone or mixing with men in public spaces. IKEA’s catalogue ran the risk of being censored or withdrawn, as well as incurring financial penalties unless it was adapted for Saudi Arabian culture. Many global customers, however, have questioned whether the move was consistent with its value statement “to create a better everyday life for the many people” or if it was simply happy to discriminate to sell more products.

The case examines the reaction to a Swedish newspaper article about IKEA’s erasing of women from its Saudi Arabian catalogue. The reactions in both Sweden and Saudi Arabia are explored alongside a wider global context.

The case is set in October 2012.

In the US and Northern Europe there were calls to boycott IKEA products and, as the coverage grew, the management needed to respond to the situation quickly. The B and C cases follow the response by IKEA and the changing situation in Saudi Arabia.

AUTHOR PERSPECTIVE 

This is the third award for Karthik following his case competition wins in 2017 and 2019 . It is the first award for his co-authors Jérôme and Marc.

Across three continents

Karthik said: “We are absolutely thrilled to win this award! This case was written across three continents (myself in Boston, Jérôme in Paris, and Marc in Dubai) in record time to meet a teaching deadline. It was a sensitive case, both for IKEA and for Saudi Arabia, so it involved a lot of thoughtful writing, which was driven by Jérôme and Marc and their teams across Europe and the Middle East.” 

Marc added: “I was motivated by a desire to share the region’s many success stories and its failures with fellow business students across the world. This award gives me hope that the world has become increasingly interested in individual tales from the Middle East, and that stories from our region are indeed worth sharing.”

Controversial

Marc continued: “This case was controversial on several fronts. Having a Swedish, ultra-liberal firm trying to navigate and thrive in the ultra-conservative (at the time) Kingdom of Saudi Arabia ecosystem, surfaced several important questions that leaders of the future should be asking themselves. What norms and values should a firm be unwilling to compromise on, for the sake of business? Where to draw the line between cultural sensitivity and unacceptable norms? These are questions that individuals, companies and governments will have to increasingly deal with.”

Exciting tension

Jérôme explained: “A great feature of working on this sort of case is to collect and compare key information from different sources in Europe and the Middle East, to create an exciting tension in the case.”

Marc adds: “Writing this case was particularly challenging to me given my personal upbringing and heritage. I found myself fighting an internal struggle between defending the Kingdom of Saudi Arabia and the region to which I belong, while portraying the contrast between norms in the Kingdom and the West in an objective and realistic way.

“A good case is one that is capable of spurring strong feelings and emotions within oneself and even amongst the authors.”

Karthik commented: “Good cases have no single right answer; they present opportunities for multiple creative solutions, and it is through a discussion of these solutions that managers build better judgment.”

INSTRUCTOR VIEWPOINT 

Discover how this case works in the classroom.

"This case is a rare find as it addresses the political risks international corporations confront in their overseas investments from both the governmental and cultural perspective. It provides fascinating insights into the challenges corporations face in their efforts to replicate successful business models in new territories.

"Whilst considering the Saudi context, the case study demonstrates how IKEA’s attempts to adhere to the cultural sensibilities of the Kingdom, generated a social media backlash in western markets amongst consumers who considered the corporation to be compromising its own values in the pursuit of profit.

"The power of social media and reputational damage this medium can inflict is aptly demonstrated and an important learning point for new entrants to the business world."

The authors

Karthik was a professor at  Harvard Business School when he wrote the case.

Jérôme was a Research Associate at Harvard Business School’s Europe Research Center when he wrote the case.

Marc is an MBA graduate of the Harvard Business School class of 2015 and was leading Harvard Business School’s  Dubai research office  covering the Middle East when he wrote the case.

In conversation with Karthik, Jérôme and Marc

Due to the Coronavirus pandemic we were sadly unable to visit Karthik, Jérôme and Marc to present their awards in person.

However, they joined our Director, Richard McCracken, from Oxford, Strasbourg and Beirut, to discuss their winning case.

Watch the full conversation here:

You can also watch shorter sections of the discussion:

• what the case covers
• which classes the case is used in
• the case writing process .

Educators can login to view a free educator preview copy of this case and its teaching note.

View all the 2021 winners

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More From Forbes

Unlocking skills and growth: how ikea is empowering its workers.

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Ulrika Biesèrt, the chief human resources officer and global people and culture manager at Ingka ... [+] Group, the parent to Swedish furniture company IKEA

Employee engagement in the United States is dropping. A recent survey by McKinsey & Company reveals that worker engagement fell to 32% , down 3% from the prior year. While these individuals fulfill the basic job requirements, they do just the bare minimum. Factors that lead to disengagement include feeling undervalued, poor work-life balance and a toxic workplace culture.

In a conversation with Ulrika Biesèrt, the chief human resources officer and global people and culture manager at Ingka Group, the largest IKEA retailer, the executive shared how she looks after her 170,000 workers in more than 31 countries.

Biesèrt is committed to strengthening workers’ employability at Ingka through lifelong learning, development and reskilling. The CHRO emphasizes employee values, kindness, collaboration and prioritizing mental health and emotional wellbeing.

Values Are As Important As Performance

Employees, specifically in the tech sector, dread being subjected to a performance improvement plan, fearing they’ll be pushed out the door. In stark contrast, at IKEA, performance evaluation is equally weighted, with a 50% focus on the business KPIs, deliverables and performance goals and 50% on values and leadership.

Leadership expectations at the company cover the following topics:

• “I communicate with impact.”
• “I communicate in an inclusive and straightforward way.”
• “I act with honesty and transparency and show my vulnerability in dialogue with others.”
• “I lead by example.”
• “I live our IKEA values while performing in our business as what we do and how we do it is equally important.”

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“We ground our work in our vision and values, striving to take responsibility and take care of people,” Biesèrt said.

IKEA has several initiatives to support its workers' mental health and emotional wellbeing. The international retailer offers flexible wellness days to its employees and has a “co-worker experience manager” tasked with fostering a great workplace for employees to facilitate a great customer experience. This entails focusing on areas such as health and wellbeing, employment practices and reward structures.

Looking After Workers

The company champions the concept that everyone is a learner, has talent and can lead, referring to this movement as “leadership by all,” in which the organization empowers individuals to help lead the business together.

Employees are encouraged to share their career goals and take ownership of their development. For example, an IKEA employee can meet with their manager and openly state, “I want to become a team leader. What do I need to do to achieve that?” Nearly 90% of the company’s managers were hired from within , according to Alejandra Piñol, who is responsible for talent at Ingka Group.

Piñol said about the company’s inclusive leadership initiatives, “We want to encourage each of us to lead, to feel trusted and take decisions, so that, in turn, we better serve our customers.” She added, “Giving everyone the opportunity to lead allows for real entrepreneurship, which is in the DNA of IKEA.”

The company has a program in which staff at all levels try new assignments to gain new skills and a sense of appreciation for the jobs being carried out by colleagues. If you pop into an IKEA store one day, you may see Biesèrt or Piñol onsite doing manual tasks.

Deploying AI to Help Managers And Increase Retention

In an evolving business landscape, the company must contend with trends like digitization, automation, e-commerce, diversifying workforce models and changes in traditional retailing.

“These changes mean that life-long learning and innovation are prerequisites, and our future needs are about unlocking skills and driving growth,” said Biesèrt. To meet the demands of the future, IKEA is leveraging artificial intelligence to improve its operations and enhance the customer experience.

Biesèrt is focused on upskilling and reskilling workers for resilience in the age of AI. For instance, the company uses AI to transform call center employees into interior design advisors.

Other Use Cases For AI

• Support managers with automated retention analysis customized for their team
• Help pinpoint the employees in most need of attention and suggest topics to address
• Keep track of agreed actions
• Enables follow-up that managers take their responsibility to act on employee turnover

The deployment of AI to help increase retention has been rolled out to 122 stores in six countries, with more coming. The results from the first three countries showed an improvement of voluntary turnover by 2.7%.

Managers will conduct a probability analysis using data, such as time in their position, salary, schedules and more, to determine who is at high risk for voluntary turnover. Armed with this valuable insight, supervisors can initiate a dialogue with the employees regarding their work life.

For example, if the data shows that hours worked is the most significant contributing factor to an employee potentially voluntarily separating from the company, the manager can touch base with the employee and inquire if everything is okay and whether they feel they are working too much and any adjustments are needed. This practice also holds managers accountable for making the necessary improvements to ensure employee retention, engagement and happiness.

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Apparel & Accessories: New UX Benchmark with 5,500+ Performance Scores and 4,700+ Best Practice Examples self.__wrap_n!=1&&self.__wrap_b(":R95lb396:",1)

At Baymard we’ve just released a new UX benchmark of 10 apparel and accessories sites.

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Note that this benchmark includes an initial subset of apparel-specific guidelines. As our Apparel & Accessories research study is ongoing, more apparel-specific guidelines are currently being added to our catalog, and subsequently, our Apparel & Accessories UX benchmark will be updated with this new data by late fall 2024.

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Authored by Anders Nielsen on August 13, 2024

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