It helps that we don’t change strategic direction very often. We tend to build on what we have, and that helps a lot with alignment. We don’t have to constantly explain, “Yes, last year we said we would do something else, but now we’ve changed our mind.”
S+B: How do these capabilities fit with your other distinctive strengths, such as customer insight and engineering design?
WORLING: You can’t be successful in retail without understanding what your customers think of you. Hundreds of millions of people visit Ikea stores every year, and even more visit our website, and we listen to them. Ingvar Kamprad, our founder, still walks around the stores and talks to customers there. “What didn’t you like here today?” We are always trying to do better.
As for engineering capability, we continue to design most products ourselves. Our product designers don’t just sit in an office with a computer. They work in our factories, and in the factories of our suppliers, designing products with the engineers there, to help make them more efficient to produce.
They also work on the packaging side to shave down the amount of packaging. Even a few millimeters can make a big difference in fitting more pieces into a container. We hate transporting air. We have a flat-pack business, which was originally developed to help customers take products home. It also reduces our own shipping costs.
Designers sometimes start with a pallet outline, and it’s like a jigsaw puzzle. How will the pieces fit together in the package and how many boxes can they get on that pallet?
S+B: How has this initiative changed the way you conduct business?
WORLING: Like any other company, we have far more potential priorities than we can fulfill. So at some point we have to say, even though everything on our list is valid, some items won’t create as much growth for us as the ones at the top. And we invest accordingly.
In the long run, this has given us much more control over our destiny. We can continue to build the stores we want to build; we don’t have to make compromises on quality. We don’t see low costs and high quality as incompatible; we find ways to increase resources where it is the right thing to do.
- Deniz Caglar is a principal with Booz & Company in Chicago. He focuses on organizational design and cost fitness in the consumer packaged goods and retail industries.
- Marco Kesteloo is a partner with Booz & Company based in Amsterdam. He focuses on strategy, operations, and organizational management for companies in the logistics industry, as well as their customers.
- Art Kleiner is editor-in-chief of strategy+business.
- Also contributing were Booz & Company principals Bas Kemme and Tara A. Owen.