Monday, April 11, 2011

Ikea. Imagine the business plan.

Reading Duncan J Watt’s book ‘Everything is Obvious. Once you know they answer” has got me thinking again about my occasional game of ‘Imagine the business plan'.

It involves looking at a business who success is so great as to seem inevitable and imagining how bizarre the business plan might have sounded when pitched before its inception.

I’ve written about this before using my favourite London restaurant, St John as an example but now I am thinking about a much larger and far-reaching brand.

The global ubiquity of IKEA is so great that it is hard to imagine life without it. Rarely do we go into a home that doesn’t contain items bought there and I, for one, have been a customer at an IKEA store on at least three continents.

But imagine how it would have sounded: “So, let me get this straight, you want to open a store selling furniture that people have to make themselves? How is that even furniture? It’s like hardware with promise.”

But of course this was not Ingvar Kamprad’s strategy. His early vision for IKEA was about affordability. He was locked in a price war with a local competitor and needed to see how cheap he could get things without compromising quality. He just took out all the extraneous things he could in order to reach the best design for the cheapest price possible. His killer innovation was to take out something that no one else would have thought feasible.

The fact that customers were willing to take the stuff home in a box and assemble it themselves with nothing but an allen key and much swearing was (and still is) a testament to just how good and how cheap the stuff was. Fifty years later no one has really bettered the formula.

I’ve had IKEA furniture since I was a child in the 70’s and whole process of buying it, getting it home and putting it together has never gotten any easier or more pleasant. It doesn’t need to. It seems we understand the exact nature of the compromise we are agreeing to and as long as they keep improving the quality/price ratio, we will put up with everything else.

In post rationalisation it may seem obvious but no one could have predicted that removing the ‘making’ from furniture-making would have been so successful.