Home > Random Thoughts, Uncategorized > IKEA’s success may have more to do with accident than design

IKEA’s success may have more to do with accident than design

April 5th, 2018

As much as I love talking about strategy and execution and all that cool stuff I have always felt that a “magic potion” simply does not exist and great strategy is usually only recognized in hindsight and has way more to do with how people in a leadership role respond to opportunities that pop up from time to time and challenges that pop up all the time.

This thought process is what gave rise to what I call my “Oh I SEA” model which is a play on the idea that in retrospect we can say to ourselves oh I see why that worked (or didn’t.) The model looks like this:

Results = O x O x I x S x E x A

Where:

Opportunities very often arise from challenges. Bearing in mind challenges in industries typically impact all firms so the one(s) that find a solution to the challenge gets a competitive advantage at least for a while.

Observation of those opportunities. If you don’t see the opportunity it may as well not exist. This means you should be constantly alert to what’s going on and the pains, gains and jobs that your customers and prospects want or need to get done.

Ideas that flow from that observation which ideally should be innovative, inspirational, and implementable.

Strategy reflects how those ideas will be implemented. It’s critically important to understand what your strategy is if you’re going to able to communicate it to your team and the world.

Execution is clearly a key to getting results.

Accountability for results is what keeps people focused. More often than not this is when good ideas get lost because they get crowded out by other “pressing” urgent matters.

Now let’s take this a little further.

Suppose we add some theoretical indices to each of the independent variables that reflect the degree to which they are “in place” … this is the best way I can describe it. For example, we could assign a value between 0 and 1 to each of the variables that would reflect their relative contribution to the outcome. On a scale of 0 to 1 where 0 is nothing and 1 is the Full Monty.  Because it is a product equation, if any of the variables scores 0 the outcome is zero i.e. no results.

For example, if there are no opportunities or you don’t see them then clearly there’ll be no new ideas, no strategy, nothing to execute, and no need for any accountability. The result is more of the same. This tends to be the normal state of most businesses, not because there are no opportunities, but because they’re not observed.

The model also reminds us that you might have great ideas together with a related strategy and implementation plan that could dramatically improve results but if it is poorly executed or there is very little accountability then your results will be modest at best.

The purpose of the model is to simply highlight what I believe are the building blocks for achieving an improvement in business outcomes and most importantly to be vigilant when it comes to looking for opportunities.

And that brings me to IKEA. I use the IKEA business model a lot when I’m talking about strategy so whenever I see it referenced in the literature I take notice. Recently the founder of IKEA, Ingvar Kamprad, passed away which has resulted in lots of press and comments about the company’s staggering success.

In particular, I noticed a recent Harvard Business Review article, titled IKEA’s Success Can’t Be Attributed to One Charismatic Leader, which very accurately reflects the way strategy tends to evolve in the “real” world. Here is an introduction to the article:

“Ingvar Kamprad, the late IKEA founder, leaves behind him an impressive legacy. But often business success stories are attributed to a single, charismatic leader, when the truth is much more complicated. Sometimes, strategic leadership is about coming up with a great plan and then executing it seamlessly. But often, it’s about reacting intelligently – to an unanticipated challenge, or to a serendipitous comment. In successful firms like IKEA, focusing heavily on the legacy of a founder can obscure these truths, and result in a story that looks a little too tidy with the benefit of hindsight.”

The article goes on the explain how the idea for flat packaging came from a random employee comment which in turn led to the need for customer self-assembly, and how a huge check-out challenge lead to the self-service checkout process, and how the idea for displaying furniture in “show rooms” became an essential part of the IKEA business model.

The point I’m making is that the business model did NOT come from some consultant-led strategic planning session but rather was an evolutionary process that starts with observation to idea, to testing, to implementation, to outcome and continual refinement.

Having said that, I want to emphasis that this does not mean we should forget about strategic thinking. Nor should we forget about strategic planning sessions. On the contrary, an understanding of strategy is essential if a business is going to leap ahead of the pack.  Our job as consultants is to show our clients how and why strategies like IKEA’s actually work and to get them thinking about designing their business around their own customers’ journey from awareness to the consumption their product or service use.

The essence of the IKEA breakthrough was to be customer-centric meaning to understand what customers need or want and are willing to pay for by testing ideas. In IKEA’s case that understanding has emerged to become fresh design, low relative cost, an enjoyable shopping experience (some people would disagree, and IKEA are very OK with that – they are their non-customers), instant availability of (most) products, see/experience before you buy which also offers some interior design ideas (and things to add to your shopping bag), affordable in-house dining, children’s play center, etc. etc.

All these things are reflected in IKEA’s value chain (a strategic thinking concept.) They reflect low-cost coupled with a differentiation strategy, a combination that some strategists argue will not work (I’m not one of them BTW), that together have resulted in an incredibly strong brand. Most importantly, they reflect the importance of what Michael Porter calls FIT; that is, all the critical activities or facilities consistently support and in some case, optimize the impact of each one.

In preparation for your next planning session you might want to share the HBR article with your clients and discuss the idea of the Oh I SEA model as it could apply to them.

  1. No comments yet.
  1. No trackbacks yet.

Prove that you\'re human by solving this equation: * Time limit is exhausted. Please reload CAPTCHA.