Ikea dismantles tradition to seek inspiration from car industry

People queue at an Ikea store. Photo / 123RF

Sometimes the complexity of their own companies can surprise top managers. Torbjorn Loof, chief executive of the owner of the Ikea brand, looks wide-eyed as he describes how the furniture retailer has nearly 100 different cabinets, sometimes with only 4-5 millimetres difference between models.

In storage solutions it has Pax wardrobes, Godmorgon bathroom cabinets, Metod in the kitchen and Besta in the living room — similar products but with subtly different heights or widths, making things difficult not just for the customer but also for Ikea itself.

So the world's largest furniture retailer has looked to the car industry for inspiration. Platforms have dramatically changed the process of making cars — different models with vastly different pricing can be built on the same basic chassis. Changes are made between models on the things customers see — like the dashboard and entertainment systems — but much of the back-end that is invisible to drivers can be common.

Now Ikea is looking to bring platforms into home furnishing. "This is a revolution in home furnishing," says Mr Loof, head of Inter Ikea, the central company in the retailer's sprawling empire.

The change in how it builds its furniture is symptomatic of the radical transformation the entire retailer is undergoing. For decades, its business model has been simple — attract customers to giant out-of-town warehouses where prices are kept low by shoppers having to pick their own furniture from shelves, take it home and assemble it.

Now, all of that model is under question. Ikea is experimenting with city-centre and smaller shops as well as services such as home delivery and assembly. It is looking into renting out furniture instead of selling it, and smart home technology that brings it up against Silicon Valley.

Its platform initiative is one of its most important, albeit largely invisible to customers. Much still remains to be worked out such as just how much is common between different products — a dilemma recognisable from the car industry where Volkswagen faced complaints that there was little difference between VW and Skoda models except for the price.

The prize for Ikea is clear: standardisation should lead to lower prices for both it and customers. The furniture retailer, founded in Sweden but now headquartered in the Netherlands, also sees it as an important stepping stone for its ambitions in sustainability by enabling products to be recycled easily.

It is starting with a few platforms — storage, comfort such as mattresses, tables and chairs; textiles and its new smart home business area. Mattias Jansson, a product development platform manager at Ikea in Sweden, says that traditionally the company took about a year to develop an item but with the new strategy up to "90 per cent of the complexity" can be removed. He points to a new wall-hanging system that took just six to seven weeks.

"How can we scale up in an efficient way? It's difficult if we make each product uniquely. With platforms, it's easier to adjust to new markets," Mr Jansson adds.

The new approach is not without risks though. Developing new platforms can be a costly business and in the car industry has often led to just as much complexity as before, particularly in companies like VW that are known for overengineering their vehicles, or confusion among consumers as to how big a difference there is between supposedly rival products.

Mr Loof is aware of the problem. "We need to define what makes sense to have on the platform and what not," he says. "If you go too far you can arguably say you have decreased your range offer." He adds that Ikea needs to think through how it names its products too. There are also challenges in the sheer amount of things Ikea is trying to change at the same time, placing big demands on management.

But for the furniture group, facing the same rapid changes in the retail landscape that have caused dozens of brands to fail, there is a feeling that it needs to do as much as it can even if it is likely to have failures on the way.

As Ikea's legendary founder Ingvar Kamprad, who died last year at the age of 91, once said: "Only while sleeping one makes no mistakes."

Written by: Richard Milne

© Financial Times