The tightly packaged furniture you buy at IKEA -- a company whose business was founded on the idea that it is possible to offer a wide range of well-designed, functional home furnishing products at prices so low that they are affordable to as many people as possible -- is the platform to a highly sustainable and successful business.
The Swedish company 's secret to success, even in a market downturn, are its lean operations, tight controls, and shrewd tax planning, as reported in an article by The Economist.
In fact, in the fiscal year 2010, IKEA’s sales grew by 7.7% to €23.1 billion and net profit increased by 6.1% to €2.7 billion. The company celebrated more than sixty years of "providing light, airy, functional Scandinavian style."
Anyone in the retail business will be able to tell you, it's a tough world out there -- costs can be high, margins are low, range, service and product availability need to be maintained at the highest level for the company to make it. Like many other businesses, IKEA survives on satisfied customers.
In June 2004, at one of Fast Company network's conversations in Philadelphia, we had the fortune of discussing the human side of the company's business with Pernille Lopez, then* President and CEO of IKEA North America. We met in Plymouth Meeting, PA, the location of their flagship and first store in the US, and one of my favorite hunts for years.
The company was created by Ingvar Kamprad from Elmtaryd in the rural parish of Agunnaryd; looks familiar? That's where the name IKEA came from. Ivgar registered it in 1943, at the age of 17 and soon after published the first catalog, which sold the new sensation of the day: the ball point pen. As the story goes, mail-order became milk-order -- it was the milkman who delivered the products along his route. Some history on the company's growth:
People said it couldn't be done, the farmers living in this area, Smalanders, did it and built the walls as they cleared the land. This is the spirit that inspires the company to do things that other people feel can't be done.
Ingvar Kamprad built the business based upon 9 guiding principles, which the company today calls The Nine Points. This is the platform on which the business stands to this day [source: IKEA booklet titled "A Better Everyday Life"]:
- The Product Range -- Our identity: a wide range of home furnishings at prices so low that the many people can afford to buy them.
- The IKEA spirit -- a strong and living reality: the true IKEA spirit is founded on our enthusiasm, our cost-consciousness, willingness to assume responsibility and to help; on our humbleness and simplicity in our behavior. We must take care of and inspire each other.
- Profit gives us resources: a better everyday life for the many people! To reach our goal we need resources. This forces us to develop products economically, to purchase better, and cut costs.
- To reach good results with small means: expensive solutions to all kinds of problems are often signs of mediocrity. Waste of resources is a "mortal sin" at IKEA. An idea without a price tag is not acceptable.
- Simplicity is a virtue: complicated rules can paralyze. Planning is necessary, but it can become red tape. Exaggerated planning can be fatal. Let simplicity and common sense guide you.
- The different way: by daring to be different, we find new ways. "Why" is a keyword. A hunger to experiment leads our way.
- Concentrating our energy -- key to our success: we cannot do everything everywhere at the same time. We can't satisfy all tastes nor conquer all markets at once. Concentrate your energy. You'll get results.
- To assume responsibility -- a privilege: only when sleeping one makes no mistakes. Mistakes are the privilege of the active person who can start over and put things straight. Fear of mistakes is the root of bureaucracy and the enemy of evolution.
Most things remain to be done. A glorious future! A feeling of accomplishment can be a sleeping pill. You can do a lot in 10 minutes. Split your life into 10 minute segments and waste as few as possible.
Platt, as in platform: Democratic Design
People have curves; materials matter; fashion's fun; comfort is key; color is personal; everyone is not rich. Have you ever been at an IKEA store? The designs are truly comfortable and beautiful. Form may be a matter of lines and curves, materials and color, but it's also about you.
Maybe you have seen one of the few IKEA TV commercials: a couple is having a discussion in a well lit and colorful living room, the expressions fly, the people are quite animated and you have no idea of what this is about, until the camera's angle widens and you see that you're in an IKEA showroom. In fact, what IKEA sells is who they are, which brings me to the substance of our conversation with Pernille Lopez on the human side of business decisions.
Platt, as in platform: The Human Side
Originally from Denmark and a journalist by training, Lopez learned about the retail business by copying IKEA and while doing that, learned her first big lesson: when you copy, you don't know what's behind. She subsequently joined the Scandinavia furniture company in California and quickly rose to Human Resources (HR) Manager for North America with a seat on the global project team responsible for creating an HR strategy.
In 2001, she became President of IKEA North America and had thus the opportunity to learn her second big lesson: living the reality of one's own strategies is tough. Lopez was now grappling with her own decisions from a different position within the company. Some of them concerning her most valuable asset: part time employees. And since IKEA is a company where leaders lead by example, all eyes were on her.
She was rescued by a company vision that has guided it through the years allowing it to give down-to-earth, straightforward people the possibility to grow, both as individuals and in their professional roles. The realization was that it takes a dream to make a successful business idea and it takes people to make dreams a reality.
Lopez believes that the role of business is changing. To provide jobs, create profits and pay taxes is no longer enough. Our customers and co-workers expect more from us. They expect us also to take an active role in influencing both social and environmental issues were we are present. IKEA has developed a strong policy with respects to social environmental responsibility so that it can be a good business and do good as they feel responsible to do both.
IKEA's global workforce counts nearly 80,000 people who need health insurance and opportunities to grow. The recruitment process begins with a matching of values along with the competence assessment. There's a movement around unleashing everyone's potential and looking at what's holding people back. The 7 areas of development for IKEA coworkers are:
- Open environment (transparency)
- Mobility (support)
- Life balance
- Learning and development (how to get there)
- Leadership and culture (what makes you feel alive)
Platt, as in platform: to be Flat out Honest
"Why am I so infrequently the person I truly am?" Asked Lopez in the framework of personal leadership. What does it take to answer the questions on what you're about? During our conversation, we discovered that it takes:
Courage - There are no clear answers. It is about being the front and trying to find the way; taking steps that no one else is taking. Taking feedback truly and asking of oneself: what are the things we're not dealing with? The leader is responsible to create an environment where it's OK to ask that. It's about dealing with the ugly, which won't go away. Courage is addressing emotional issues such as diversity. It can be admitting that it can be confusing as hell. It's about the excitement of fast change. It's about taking risks and overcoming fears.
Some examples during recent events: the store in Elizabeth, NJ saw the twin towers crash to the ground; IKEA was involved in the blackout with their store in Canada and feared for its employees and customers at the store in Washington, D.C. during the sniper attacks.
Passion - Pernille loves to sit and talk with people. Coaching and mentoring takes 90% of her time. She loves connecting with what IKEA does. If you express what you want, you may get it. Her great sense of urgency demonstrates her love of retail. Diversity is a personal commitment - in many situations she's been the only woman at the table. In many jobs people need help to achieve greater opportunities. Passion creates energy around you.
Commitment - It must come from everything you have. It's not giving up, ever. Towards friends, family, Copenhagen and the little town near it where she's from. It means going all the way when people are struggling. It's true when you're going through tough times. It's committing to having life balance for yourself and everyone else. Through mentoring where someone else drives the process and you learn to let them find a way.
Trust - This is everything. Trust is something she considers a given, you don't have to earn it. You then take the responsibility when it's taken away. This creates a great dynamic and level of empowerment. It stems from knowing that she performed the best when she was trusted. 99% of the people really want to do a good job. Trust sets people free to do that. What it means to be a leader, personally and as an organization, is being present, authentic, open, and creating an environment where other people can be themselves.
What does IKEA say to other companies? They say: take our ideas, please.
Platt, as in Platform: Social Media
I realize I could almost write a book, except for they have written the book themselves; by being who they are, and doing what they are. Is it any wonder that they have a passionate following? Would it surprise you to find out there is at least one IKEA hacker and thousands of IKEA fans? IKEA was also one of the first nominated lovemarks.
In 2007, IKEA launched a user-generated bed making video campaign, hosted and managed by new entrant Shycast.
On the sustainability side, in 2008 the company made the commitment of cutting its plastic bags from 70 to 35 million. It achieved a current 92 percent reduction before moving to using no plastic bags at all.
In 2009, decided to utilize the existing function of tagging photos in Facebook to run a branding and buzz exercise around the Malmö store manager, Gordon Gustavsson and the new store opening in the area. By doing that, they also created a halo effect for the brand, and associated it with people's own profiles.
The company's Twitter presences are a bit all over the place, with IKEAITALIA in first search place -- I do know the store is loved back home -- and no clear naming conventions, although its fans appear to match. This must be a first that Italy is ahead of the US in social media, at least on Twitter.
With 231,115 fans on Facebook, the US stores gain the advantage and conversation on the wall. Check out the photeos, too. There are some that are priceless, even at IKEA's rates.
Its furniture may be flat, yet the company's growth is everything but. We could have so much fun in social with this brand.
* While Ms. Pernille-Lopez is no longer the President of IKEA North America, I felt that revisiting the company's philosophy would be useful in understanding the context that has made its social media efforts fun and engaging. [this is a repost with changes from 2007]