- Business and Employment
Challenges faced by Ingvar Kamprad, great lesson from IKEA
The IKEA Legend
One of the earliest challenges faced by Ingvar Kamprad occurred in a situation which is best highlighted in a story that later turned into the IKEA Legend.
Kamprad originally had founded a furniture retail store based on an order-by-mail sales model. In such a situation, transport and logistics become an important business factor. It should also be considered that in 1950 furniture was a different product than in 2010. Most furniture items were produced in factories or by craftsmen as single-piece items. The factory worker or the craftsman would assemble the entire wardrobe, bed or table in such a way that the end product would be one solid furniture item. There was no way to dissemble the end product easily.
This turned out to be a challenge. Each item had to be transported to the end customer as bulky freight. This special status increased cost for transport and storage. Besides, as each item had to be pre-assembled, the costs of production were higher as well.
One day, it is reported that Ingvar Kamprad overheard one his draughtsman (a kind of designer or engineer) named Gillis Lundgren. The man had difficulties fitting a table into a transport. After many unsuccessful trials he shouted out loud: “Oh God! Let’s pull off the legs and put them underneath!” Ingvar Kamprad understood that his employee was correct in his assessment of the situation. Moreover Kamprad understood the potential of this remark.
Soon afterwards IKEA introduced new product lines of furniture which were designed to be sold unassembled. In this way the cost for manufacturing (no more assembly) and logistics (standard transport costs due to optimized measures) could be reduced significantly.
This was at first a challenge to the company as the design of furniture became a core function of IKEA. Then it was a significant change to the way the customer received and perceived the final product. It required efforts to make the customer understand the benefits of having to assemble his furniture himself. These benefits were the lower price. Ingvar Kamprad consequently channeled all cost savings he gained from lower manufacturing and logistics costs directly to the customer in form of low prices. In this way he also established IKEA as a cost leader in furniture retail.
The case emphasizes Ingvar Kamprad’s strength in understanding his own employees and being open minded to their ideas. It also highlights his ability to see beyond the immediate need and using the full potential of an idea by changing the corporate strategy and even the entire company while becoming a cost leader.
Ingvar Kamprad is known to suffer from dyslexia to some extent. This led to a situation when he had difficulties remembering the order numbers of his own products. This is actually not a business challenge but a personal disadvantage. However, Kamprad’s solution to his problem provides interesting insights into his personality as a leader. Instead of ignoring or delegating this issue he came up with a creative idea.
Normally products would be identified by some kind of code. The code would give indications about the nature and origin of the item but only to the educated user. However as Ingvar Kamprad had dyslexia, he would have difficulties with any sort of code. He decided to use names instead of code. Beds, wardrobes and hall furniture would be named after Norwegian places. Chairs and desks would get men’s names. Materials and curtains received women’s names and garden furniture would be identified by the names of Swedish islands.
As all these names were known to Ingvar Kamprad he could visualize and memorize his products without any further difficulties. Today the names of IKEA furniture are iconic. Many people understand that a BILLY bookcase is an IKEA product. Not only Kamprad, but also the IKEA customers seem to like the idea of more “human” products. So in the effect Kamprad turned a personal weakness, a personal challenge, into a high value marketing tool for his own company.
The case is a good illustration of the ability of Kamprad to take challenges head-on rather than avoid them but with creative rather than standard solutions.
The Nazi Past
In 1994, IKEA received some negative press. A customer in one of the IKEA restaurants sat on one of the IKEA chairs when the chair suddenly broke down and the customer got injured. In order to benefit from the heightened interest in negative IKEA stories, some journalists then decided to research more into IKEA’s and Ingvar Kamprad’s history. Eventually the Swedish newspaper, “Expressen”, revealed that Ingvar Kamprad had close friendship with Per Engdahl in the 1950s. Per Engdahl was the leader of a right wing political movement and known for his sympathies with the German Nazis.
In this case it should be pointed out that many Swedish people hold the opinion that the country did not adequately deal with its own history during the Nazi era. Though occupied by German troops, many Swedish men served voluntarily in the SS organization. Moreover a small but significant portion of the population was assumed to have some sympathy for the Nazi ideology especially as the German Nazis officially considered the Swedes as being part of the so called Arian Master Race. Therefore the revelation spurred a very controversial discussion among the Swedish people.
Ingvar Kamprad reacted without much delay. He wrote an open letter to his employees and then gave an interview to an important Swedish newspaper. In both cases, he fully acknowledged his involvement and called it the “Greatest mistake of his life”. Moreover, he said that this friendship was a result of the “sickness of his youth”, but that he would like to ask first his employees and then the Swedish public for forgiveness.
This episode is a very important event as it shows a very important leadership quality in Ingvar Kamprad. He is willing to admit mistakes. While his earlier successes have proven that he has many strengths and business acumen, this revelation of a weakness let people fully accept him as a leader. By showing human weaknesses rather than only strengths, his employees and the general public could understand that he is one of them. This makes it possible for them to relate to him and learn from his behavior. The episode also closes the circle by showing once more that Ingvar Kamprad is not aloft but very much down to earth and therefore a leader who really impacts the people around him in an inspirational and positive way.