During my conversations with CEOs, it always comes to a point where they say: “I want to leave a legacy.” Any CEO would be satisfied with the business legacy left by Ingvar Kamprad, the IKEA founder who died last weekend. The store he founded, with its iconic blue and yellow logo and functional, minimalist furniture, is the largest furniture retailer in the world. Latest figures show it has 190,000 employees, 411 stores in 49 countries, and a revenue of 36 billion euros. Famous for its Allen wrench-assembled flat-pack furniture, Swedish meatballs, and the maze-like shopping routes through its showrooms, it hit upon a winning formula. It provided a differentiated offering that disrupted the industry at the time: affordable, build-it-yourself home furnishings sold in massive stores built on cheap, out-of-town real estate. But how did it hit on this winning strategy?
There is no doubt that Kamprad’s personal tenacity, business savvy, and leadership skills account for IKEA’s success. Obituaries across the world give credit to this part of the man (even as they acknowledge that as a teenager, he joined a pro-Nazi group, something he very much came to regret). However, there is another side of the IKEA story that gains less attention. These elements go beyond the charisma and complexity of the founder. When we focus on the puzzle of the man, we overlook important, hidden elements of the company: the paradox of its history, its processes and routines, and its shared, embedded culture of innovation. 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.
IKEA’s success did not result from the kind of planful strategy development that is still taught in some business schools. Quite the contrary. It has been mixture of emergence, haphazardness, and invention through necessity. For example, when the first IKEA catalogue came out in 1951, many retailers had similar, mail-order business models. To crush the upstart, IKEA’s competitors started a price war, almost forcing the fledging IKEA into bankruptcy. As a last-ditch response, Kamprad opened a small show room in the small town of Almhut, in Sweden in 1953. The hope was customers would see, touch, and compare the furniture and the company would be able to claw its way back. “I have never been so scared in my whole life”, he recalled in his memoir. On the day of the opening, about 1,000 people queued outside the shop. Literally overnight, a new business model emerged that sold through a showroom rather than by mail. It became a hallmark of the IKEA way.
Similarly, one day the team was packing away the furniture and a casual remark about how much space a pair of table legs took up led to another revolutionary idea: what would happen if we were to flat-pack our products? The rest is history, but it was a unique offering at the time.
Another part of the company’s unexpected history came in the 1960s, with the opening of a new store of 31,000 square feet that was launched to considerable fanfare. 18,000 people waited eagerly for the store to open. But the popularity was so great that it turned into a disaster: there were too few check-outs, check-out queues got longer, and people got frustrated and started to leave (some taking goods without paying for them). It was this experience that ignited the IKEA self-service model — as shoppers leave the showroom, they pick up their flat-packed goods from the warehouse, put the boxes on trolleys, and bring them to the checkout themselves.
Despite the serendipitous emergence of these key elements of IKEA’s business model, Kamprad did institute strong discipline when it came to financial matters, and this combination of improvisation and rigor is a key part of the company’s success. For example, the complex and opaque company structure of trusts and not-for-profit entities has been a source of criticism, with accusations of tax evasion and the company’s financial dealing remaining, until recently, a mystery. However, this complex set of company arrangements would protect IKEA from corporate raiders and undue external influence, and provide long-term protection and continuity.
The company also has a unique manufacturing strategy and business model. While IKEA’s products are designed in Sweden, they are largely manufactured in developing countries to keep costs down. For most of its products, the final assembly is performed by the consumer which saves space and simplifies the manufacturing process as well as reducing the costs. Over its history, IKEA has rigorously avoided deviating too far from this model.
Kamprad also deserves credit for keeping the company focused on a common purpose: “To create a better everyday life for the many people.” He developed a team of trusted ambassadors to maintain and develop the company’s special culture set out in the IKEA Bible: The Testament of a Furniture Dealer, published in 1976. It goes on, “We shall offer a wider range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.” The company values were enacted in its thriftiness, attention to detail, quality, and cost consciousness.
But perhaps least appreciated is the strength of IKEA’s organizational culture that has sustained the world-leading organization over the last 70 years. It has been often said that “culture eats strategy for breakfast”, and IKEA’s management team has focused on building an organizational culture that has inspired tens of thousands of women and men worldwide, irrespective of diverse national cultures: an egalitarian culture where all employees are called colleagues; where everyone is encouraged to think every day how they can improve the company and perform continuous innovation in customer service and products.
Leaders, of course, are necessary. But the success of any endeavor is not down to them alone — it requires a vibrant, empowering culture that can outlast them. Otherwise, companies would fail once they are gone. In the case of IKEA, there has been a range of complex, unpredictable, and contradictory factors that have led to its success. Some were planned, but many were unplanned. Findings about the clear link between CEOs and organizational outcomes are unclear or mixed (Cannella, Park & Lee, 2008; Hambrick, Humphrey & Gupta, 2015; Pitcher & Smith, 2001). Much can be explained by environmental factors, the role of the team around them, or the structure and organizational culture.
Although the idealization of business leaders can often be misleading, it remains very popular. But we’ll learn the wrong lessons if we simply follow the crowd. And this is something that IKEA rarely seems to do.
from HBR.org http://ift.tt/2DW4Rz4
