Put customer centric thinking at the heart of your business model

One of the great entrepreneurs of the C20th, Ingvar Kamprad, the founder of IKEA, died last month. He created a business, founded when he was just seventeen, that today has commercial reach and a cultural impact that very few consumer products could hope to attain.

Kamprad was an entrepreneurial schoolboy. He bought pencils and matches in bulk which he resold to classmates for profit, moving onto fish then Christmas cards trading. When he was seventeen, he borrowed money from his father – who was convinced that he was giving money for Ingvar’s’ studies – and opened IKEA, hatching the plan at his Uncle Ernst’s kitchen table.

Initially it was a mail-order furniture business, but facing a price war against his business, he flummoxed rivals by opening a showroom – the first IKEA furniture showroom opened in 1953 in Älmhult, Sweden, so customers could see and touch IKEA home furnishings before purchasing them.

To attract prospective customers, he also promised a free cup of coffee and a bun to everyone. Imagine his surprise when this modest event attracted more than a thousand people! Nevertheless, everyone got a cup of coffee and a bun. The idea of opening a fast food restaurant in each store was born.

Kamprad focus was customer centric, but specifically on a do-it-yourself ethic for customers – the company’s name was a do-it-yourself job, too, it stands for Ingvar Kamprad, from Elmtaryd (his family’s farm) in Agunnary, a village in the Smaland region of southern Sweden. His own motto, based on a strong work ethic, was that most things remain to be done, and he built this into the ethos of his customer offering too.

Kamprad’s impact on everyday living has rivalled that of Henry Ford and his mass-produced motor car. Furniture used to be costly, clunky and heavy, and you kept it for many years. For the cash-strapped and newly nesting, fitting out a home could cost many months’ salary. IKEA made domesticity not just affordable and functional, but fun.

Out went the hand-me-downs and junk-shop make-dos, in came the cool, tasteful, egalitarian look and feel of modern Sweden. Airy, sparse, uncluttered – a little bland maybe, but hard to dislike. The Billy bookcase is perhaps the archetypal IKEA product, dreamed up in 1978 by designer Gillis Lundgren. Now there are 60-odd million in the world, nearly one for every 100 people – not bad for a humble bookcase.

Light and bright, basic but cheerful, like the furniture, IKEA’s 400-plus outlets also run on the same central principle: customers do as much of the work as possible, in the belief they are enjoying the experience and saving money. You drive to a distant out-of-town warehouse. Inside, you enter a structured journey through a busy maze – the route is controlled, no shortcuts allowed – where every twist reveals new furniture, artfully arranged with cheerfully coloured accessories to exude a contemporary relaxed lifestyle.

The low prices make you buy, so you load up your trolley with impulse purchases that you don’t really need – a clock, a bin, plants, lampshades and more tea lights than you will ever use. You lug heavy cardboard boxes holding flat packed furniture into your car and reward yourself for your thrift and good taste with meatballs slathered with lingonberry jam. Then you drive home and assemble your prizes. You rejoice in the bargains and the variety of purchases.

There is no doubt that Kamprad reinvented the shopping experience with the product and the store, but Kamprad’s biggest innovation, and the cornerstone of his value proposition, was that consumer inconvenience was a problem worth solving. However, he approached it the opposite to most brands that build their reputations around a set of distinguishing positives and unique differences they provide for their customers.

By 1952, Ingvar already had a 100-page furniture catalogue, but had not yet hit on the idea of flat-packing. That came as he and his company’s fourth employee – designer of the Billy bookcase, Gillis Lundgren – were packing a car with furniture for a catalogue photo shoot. This table takes up too much darn space, Gillis said. We should unscrew the legs.

Kamprad realised that furniture could be flat-packed to significantly reduce the cost of delivery, which were among the product’s largest cost drivers, to make the customer self-service journey complete. Table legs are unwieldy, so why not just take them off?

Except, now every customer buying furniture has to assemble it – and there are many moving parts to some of IKEA’s complicated furniture items. From personal experience, there can easily be fifty or more steps involved in the construction of the piece, with an instruction guide that remains as confusing as ever. I’ve assembled many cupboards with nothing but an Allen key, metal bolts, baffling instructions and sweat. And swear words.

But Kamprad and his team knew that with the right price, product mix and user-centered focus, consumers would see IKEA as a destination shopping experience. Given the locations, they had to bring their cars anyway, and having self-selected their pieces, taking their purchases home made an attractive and complete transaction cycle.

They also understood that unlike a grocery store, furniture shopping is not a daily or weekly occurrence, and so people were comfortable investing significant time at the store when they finally did make the trip. That’s one of the reasons that IKEA has restaurants serving meatballs as simply, the more time consumers had in the store, the more they spent.

It seems trying to cram flat-pack furniture into your car, missing screws, and the ensuing marital tensions, haven’t been enough to put people off. IKEA has a 12% market share in the UK, outstripping rivals such as Argos, John Lewis and sofa retailer DFS.

So, Kamprad’s IKEA experiment focused on a simple, core value proposition – well designed, reasonable quality furniture at reasonable prices, supporting his vision ‘to create a better everyday life for many people’. He consistently developed and scaled, but the fundamental premise was to make customer experience the brand differentiator. Having grounded his business model around the customer, what are the other aspects of Kamprad’s entrepreneurial flair that we can learn from?

1.     Give your customers context

IKEA offered a completely new concept. It wasn’t just what they were selling that was different, but how it was selling it: You come here, you walk through this maze this way round, then you pick it up in the warehouse, and then you take it home, and you build it. It is a really prescriptive way of doing stuff where the customer has to invest time, contrarian ever more so with the advent of online shopping, but dictating a customer’s journey in this way had never been done before.

It’s this very journey of course that frustrates many of its customers, with the baffling warren of mocked-up rooms, floor arrows, and no glimpse of the outside world to help you orient yourself – is far from accidental. But the key to IKEA’s strategy is suggesting to the customer that they are in charge – they give you your own pencil, paper and trolley, there’s only a smattering of staff, and there’s no hard-sell from sales assistants.

Every IKEA store is a showroom, where not only sofas and cupboards are exhibited, but any little things of everyday life too – tablecloths, curtains, towels and candle holders. The visitor can see ten children’s rooms, and then twenty-five dining rooms or living rooms and so on.

Having imagined what a particular furniture set-up would look like in their own home, a customer can then go for it to the self-serve warehouse. The customer then transports the furniture in comfortable packages to his home and then assembles it by reading clear and sensible instructions.

As e-commerce scales, shoppers need incentive to come into stores. With its elaborate showroom and cafeteria, IKEA has become a unique destination for shoppers. While many retailers enter shopping centres hoping for traffic, IKEA is a standalone store that shoppers seek out with a specific goal in mind, as the context is made clear for them.

2. Understand the experience your customers want

Kamprad said that his vision for IKEA was a company that would make life easier for its customers. He built a furniture company, which acted like supermarket.

Most of us have gone to one of IKEA’s unmistakable giant blue and yellow stores, wandered through its carefully-designed if somewhat labyrinthine paths, tasted its Swedish meatballs and bought and assembled its modernist furniture. They attract us in the thousands. How? They understand the customers and the experience brilliantly.

IKEA designers are among the foremost anthropologists of home life. Designers create rooms for eight types of people, from four stages of childhood, through to ‘living single/starting out’, ‘living single/established’, ‘living together/starting out’ and ‘living together/established’. IKEA does endless research on each category.

IKEA also has ethnographers who conduct field research into the domestic life of different regions through home visits, interviews, and panels. While the researchers’ ‘Life at Home’ consumer insights research goes to the development of new products.

This makes the IKEA brand different. When you’re authentic about your distinctiveness, your passion will attract those who love your products and going to be a lot easier to build up your audience.

3.     Focus on getting good, not making it big

Kamprad focused on getting good at business before he tried to get big at business.  Many people want growth as their objective. The new web design agency wants to work for major companies, not work in relative obscurity while mastering his craft.

But if you only focus on short-term wins and results, then it can be very easy to get distracted from doing the work required to build the skills you need to grow and scale, and it’s the ability to scale that matters. The process is more important than the outcome at early stage startups. Focus on getting good before you worry about getting big.

Research of over seventy famous composers and revealed that not a single one of these musical geniuses produced a famous musical piece before year ten of their career. This period of little recognition and hard work – referred to as the ‘ten years of silence’ is very similar to the period that Kamprad spent selling matches before launching his IKEA vision.

4.     Don’t let your business model become stale

IKEA is beginning to respond to some of their most recognised customer frustrations. For example, you can now order some bulkier items online for home delivery, and they recently bought US start-up Task Rabbit, which helps you hire people to do flat-pack furniture assembly.

Responding to the growth in online shopping, it has also started experimenting with selling through other online retailers, and running directly counter to its original out-of-town model, also testing a smaller, city centre store format as well as order and pick-up points in town centres, as part of a wider push to become more accessible to shoppers.

Travelling to the out-of-town store, plus the long queues are, ironically, part of IKEA’s winning strategy. The experience is so time consuming that we tend to buy more to avoid having to return in the near future. However, giving the customer online options with the convenience, simplicity and control offers a different shopping experience, backed by the same product sentiment.

5.      Innovation can be about efficiency

The Billy is a bare-bones, functional bookshelf if that is all you want from it, or it is a blank canvas for creativity. It demonstrates that innovation in the modern economy is not just about snazzy new technologies, but also boringly efficient systems.

The Billy bookcase isn’t innovative in the way that the iPhone is innovative. The Billy innovations are about working within the limits of production and logistics, finding tiny ways to shave more off the cost, all while producing something that looks inoffensive and does the job.

Thrift is the core of IKEA’s corporate culture, you can trace it back to the company’s origins in Smaland, a poor region in southern Sweden whose inhabitants, like Kamprad, are “stubborn, cost-conscious and ingenious at making a living with very little”.

Innovation in IKEA is about efficiency, economy and effectiveness – recently designer Tom Dixon has joined forces with IKEA to offer a 28-piece modular furniture collection, perfect for adapting compact city homes to your needs – and all about the customer.

Kamprad’s forward-thinking customer focused strategy made IKEA the top furniture seller in the world, maintaining the customer-centric concept from its original foundations in every part of the company and its business model. It is the entrepreneurial eye for this business model innovation, and scaling the execution, that are Kamprad’s legacy for other entrepreneurs to admire.

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