What happens when the disrupter is disrupted?
Ikea revolutionised retailing from the 1950s, persuading shoppers to travel to its out-of-town stores, navigate their mazelike formats to collect their furniture, transport it home, and assemble it themselves. But as Jesper Brodin took over as chief executive in 2017, it quickly became clear its customers had had enough.
Brodin, who runs Ingka Group, which operates the Ikea stores, travelled to Spain, the UK, Sweden, the US, Canada, Japan, China and Russia talking to customers. All gave him the same message: we like Ikea, but it’s not working for us. Their main complaint? A lack of convenient places to shop.
“On a Tuesday night, when I come home from work and we’ve fed the kids, they’ve done their homework, I need to buy two folding chairs, I’m not going to the Ikea store. And if you can’t offer me an opportunity on my conditions, I will deselect you,” Brodin says of the customer feedback.
The soft-spoken Swede, who once worked as an assistant for Ikea’s legendary founder, Ingvar Kamprad, says he presented a “travel report” of what customers thought, only to realise they had come up with the new strategy Ikea needed.
“We were the disrupters of furniture in the 1900s. Suddenly, we were being disrupted by the technology revolution and new retailing. So it was obvious for me that it was not our decision any longer. It was our customers’ decision.”
Brodin led changes on several fronts: Ikea invested heavily in its online business, trying to catch up with rivals such as Amazon and Alibaba that were attracting many of its customers; it tested out smaller store concepts including in the centre of big cities and shopping malls, which the company had long resisted; and it offered shoppers new services, from home delivery to paying somebody to assemble furniture (through one of its biggest ever acquisitions, the odd jobs service TaskRabbit).
We are meeting in one of the fruits of the transformation: a smaller store in the centre of Paris, close to the 19th-century church of La Madeleine. For a company whose shops used to be huge warehouses next to the “potato fields”, as the chief executive likes to say, it is a big change.
Brodin says he found it easier to make tough decisions because it was clear Ikea’s old business model was not working.
“I probably wouldn’t have had the courage to embark on this journey unless there were signals we were not improving. You can say the effectiveness of our investments in the old model paid off less and less. We were losing share, in particular to online.”
He also knew the changes had to be swift: “The choice of an evolutionary approach, I couldn’t simply believe in it myself. I thought this is going to take too long, and we will be too much clinging on to some of the old truths. Of course, at that moment, you feel a little bit lonely. And you wonder: how will this be good for all of us?”
Brodin’s task was made harder by the presence of Kamprad, who founded Ikea as a 17-year-old in 1943 and gave it its unique culture, creating a complex corporate structure more impenetrable than the company’s furniture building instructions to not only minimise tax but prevent it from ever listing or being taken over.
Kamprad in particular was unconvinced by ecommerce. “There was a moment in 2005 or 2008 when the fears were weighing heavier from him than the opportunities. The fear of cost and the disruption of what was optimal in our value chain made him take a very clear stance that we’re not going to go down that route,” Brodin says.
When Brodin took over, Kamprad was frail — he died just a few months later — but also back living in Sweden after decades of tax exile in Switzerland. His return increased the pressure on Brodin, but the chief executive saw no other option than to break with the past and embrace ecommerce.
“There was basically a realisation that we were not the leader of the decision. Something had changed in society,” he adds.
Dressed in the Ikea corporate uniform of casual shirt and jumper, Brodin admits it took time to build up momentum inside the company for change. “As a leader, you need to be both the inspirer at the front end and engage yourself in the details, and you have to deal with the impossible problems,” he says.
He cites two main difficulties in leading the transformation: “We have to accept that we will at least partly change our business model. And then, I would say, the scariness of the unknown. I had some scary moments. But it was also the idea that not doing anything didn’t seem very appealing.”
The plan seems to be working, with online sales up from about 6 per cent of the total to a quarter. A new smaller store in a central Stockholm shopping mall has increased annual footfall in the Swedish capital — where Ikea just had two out-of-town stores — from 6mn to 9mn.
While Kamprad did not share the digital vision, much of the founder’s ethos lives on at Ikea, including the acceptance of mistakes. Kamprad — who distilled his homespun wisdom in a small tome in 1976 called “Testament of a Furniture Dealer” — used to stop planning meetings and ask managers to list their mistakes. Brodin has built on that, giving top staff a “license to go bananas” card to try to overcome the fear of making mistakes — it means, in theory, that if they take a risk and it doesn’t come off, Brodin has pre-excused them. His staff are compiling a book of the best mistakes. The aim is to encourage more entrepreneurship, a challenge in a company that has become so big (Ingka made €42bn of revenue in its last financial year).
Brodin does not spare himself, saying he made three mistakes at the Madeleine store in Paris. Initially Ikea decided to abandon its labyrinthine layout in the shop for a more free-flowing design, but customers complained. “I want to know I’m not missing anything,” was their feedback. The maze was reinstated but with short-cuts signposted. Logistics in the city centre were also an issue, and something Ikea had to learn through trial and error. Finally, Ikea rented the store space as Brodin did not want to bet too heavily on its success, but he says the company is now moving from owning 20 per cent of such stores to close to 80 per cent.
Another misjudgement he made was to focus too much on the new smaller stores over the large stores that made up the bulk of the business. “We have corrected that,” he adds. It helps that part of the solution to the digital problem came from Ikea’s existing stores — instead of building new warehouses to fulfil online orders, Ikea uses its out-of-town shops, making them more efficient.
If Brodin has a mantra, it is “love the past, create the future”. His plan for Ikea has come in what he calls two “three-year sprints” so people do not over-intellectualise problems. The current sprint is about a year away from ending and Brodin thinks the next one might focus on sustainability and Ikea’s supply chain. It hopes to be climate positive by 2030 — reducing more emissions than its supply chain emits — but Brodin says it wants to do more to protect nature as well as climate.
He is evangelical about how sustainability must be for all price ranges, not just luxury products. He calls it a “dangerous myth” that “if things are affordable, it means it’s bad quality and bad for nature”.
As the interview ends, Brodin takes me into Ikea’s latest innovation: an “immersive” room where you can see kitchens or bedrooms and instantly change their colour or design to test out how they would look at home. For Brodin, it is a sign of how Ikea’s transformation is ever ongoing. “We are never done. Next autumn we will start again, renew ourselves, ask what is the next big thing around the corner, and we can sense that the rate of transformation will continue,” he adds.
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