Posted by Jukka Kotovirta:
I will be sued for treason but I say it anyway. The biggest current-day business innovation is IKEA. Here are the reasons why:
Their share of a customer’s wallet must be 10 times higher than that of an average Finnish furniture vendor. IKEA’s customership is a lifetime affair. At every turning point in your life (moving out from your parent’s house, moving in with somebody, moving on your own again, meeting somebody else, getting married…) you’re supposed to refurbish your entire apartment or house. Often you will, too.
As we all know, the first thing that IKEA plans about a new product is the price tag – the price tag that fits into a certain change of civil status of an average customer’s lifeline. With matching side products that lure the customer to actually renew the entire furniture in one go, with tempting showrooms in the stores to help materialize it.
In the US, going shopping at IKEA with someone equals going steady with that person. That is why I claim our former prime minister lied when he said he met this lady at IKEA. No – you don’t go there as a bachelor unless there is a turning point in your life that has already taken place. Yes – you go there together to dream about your new home together.
You think you have lots of choice at an IKEA store, but do you really? Actually you have been carefully segmented before even entering the store. What is the stage of your lifeline you’re in? Good. So you supposedly have this much of a budget. Good. Let’s top that budget by 30% and you’ll find everything you need at the store. Why not do it all at once, we have readily combined it all for you.
Articles look cheap but actually they’re not that cheap. At the kitchenware department you can spot the ridiculously cheap wok pan, and, while waiting in the queue to pay, there are oodles of cheap, mostly useless items. Their sole purpose is to be eye catchers to alter your perception of price. Much like after a stint on the motorway our perception of speed is greatly altered.
The cheapness is further punctuated through their mythical founder and forefigure. Grownups are not supposed to believe in Santa Claus, but somehow we all buy the story of Ingvar F. Kamprad fighting for us customers’ benefit in everything. Really?
Ecological they definitely aren’t. Helsinki city dumps must be flooded with not so old IKEA furniture that cannot be recycled. Our 3-year-old meeting room table is there as well, as no recycling company accepted it any more. But somehow they are getting away with it. At least I haven’t heard of Greenpeace attacking any IKEA store or subcontractor. Their members must shop at IKEA, too.
So if you add up high volumes achieved through customer lifecycle management, tough segmenting, showroom packaging and the overall concept of disposable furniture, but with high customer satisfaction through pseudo-choice, cheap-at-first-glance and whitewasted corporate ethics you’ll end up making wonderful margins.
To use the Geoffrey A. Moore’s terminology, in Main Street, which means the day-to-day highly competitive environment where most businesses are, most of the innovations are actually marketing innovations. This is where IKEA is King.
I’m not critical to IKEA. Instead I’ll take my hat off and take a bow. These are the things you as an entrepreneur should be thinking as a next step to leapfrog your business, outside the current box.
It’s never too late to innovate.