Executive Summary
• We analyzed IKEA’s stakes and objectives finding out that IKEA needs to focus on the improvement of its brand image, enhance its customer
experience and ensure differentiation from its competitors.
• The process mapping of IKEA’s value chain highlights its primary and supporting value chain activities. With regard to the internal functions as
well as the operations, inbound and outbound sales logistic IKEA has already achieved a lean and effective value chain systems using digital tools
and processes. As we discover potential for improvement in relation to marketing and sales and the service, we decided to focus on the client
Current side for our business recommendations.
Situation • To enhance the knowledge about IKEA’s current and potential customers, a customer segmentation was conducted. Three current segments
and one potential segment was discovered and described by demographics and their purchasing behavior.
• Finally, the comprehensive As-Is-analysis of IKEA’s market position revealed three major risks for its current business model, namely the risk of
standardization, the reputation as low-quality furniture retailer, and the long product life cycles in the furniture industry.
In conclusion, uniformly designed products available at low-prices can turn from being IKEA’s competitive advantage to their biggest threat due
to the digital age and changing consumer habits.
• As our business mission for IKEA we set four dimensions IKEA should be associated with by its customers and prospects within the next five
years. IKEA needs to design and sell must-have products, provide superior customer service, be known as the digital innovator, and offer a
seamless omnichannel experience. For each dimensions, important KPIs have been developed to ensure and monitor IKEA’s progress on this
goal.
• Our seven concrete recommendations for IKEA’s business model will tackle all three identified risks and will help IKEA to follow the three set
stakes simultaneously. Thereby, the recommendations can be divided into four main categories – product recommendations, crowdsourcing,
Main virtual reality, and offline stores.
Recommen- 1. The product recommendations include designer collaborations, more Smart Home products, and add transformable products to their portfolio
to make sure that IKEA differentiates from its competitors, surprises its customers, and re-establish its brand to a new segment.
dations for 2. Developing an IKEA community that helps each other designing their homes will strengthen its relationships with all possible customers and use
IKEA digital skills and knowledge to enhance its customer experience.
3. Using virtual reality, also for popup stores in big cities, and augmented reality in its original IKEA offline stores will deliver a complete new level
of customer experience and increase sales. When IKEA gains the digital skills required for these recommendations, it will be prepared for the
future and establish a new benchmark in its market.
When using a feasibility-impact-matrix to assess the recommendations, it becomes obvious that we propose IKEA to focus at first on
establishing an IKEA community, using VR, implementing AR for their offline stores, and developing designer collaborations.
IKEA - Digital Business Transformation 3
Summary
5 As-Is-Analysis 10 GANTT
IKEA - Digital Business Transformation 4
• Interogo Holding AG was established in Switzerland in 2016: holding company of the investment business
Different
with a
• The IKEA Concept is the core asset of Inter IKEA Group and its franchising operation meaning
Core • IKEA Range & Supply is a core business: IKEA Range & Supply consists of two core
Business units: IKEA of Sweden AB and IKEA Supply AG.
Markets &
• Ready-to-assemble furniture, homeware Annual Sales Figures in Billion €
• Wide range of home furnishings with good design, function, low prices and sustainability
Compe- • IKEA's furniture is designed to be assembled by the customer: reduce costs and use of packaging
titors • IKEA is the market leader. It is largest retailer for furniture.
Objective 1: Understanding the ever- Objective 1 : Involving consumers and Objective 1: To bring more exclusivity
changing customer needs & community to the design and to the brand image, following the
expectations in terms of price, quality, development process of the products in innovations in product designs and
design and technology (considering labs. manufacturing processes.
designer collaborations, engage social
media influencer, crowdsourcing) Objective 2 : Focus on the virtual reality Objective 2: Focus on consumer
in terms of designing and redesigning experience, differentiation in
Objective 2: Optimal marketing homes. comparison with competitors while
communication for demonstrating the taking into account research &
quality of the products following with Objective 3: Supporting online development of the field.
their other advantages to reposition purchasing, and analysis of the store
the brand image for loyal consumers design and empower after-sales
and new consumers as well. service.
IKEA - Digital Business Transformation 6
Process Mapping and Value Chain = Amount of value added by this step currently
Primary Activities
Inbound Sales Logistic: Operations Outbound Sales Logistic: Marketing & Sales Service
● Buying raw materials from ● Manufactured mostly ● Distributing products and ● Various channels used ● Before, while and after
suppliers in bulk, through subcontracted services to customers outside the store to explain purchasing to customers
worldwide (cost reduction) parties ● Manufacturers are the full offer such as repairs and
● Receiving, storing, ● 10,000 item product line responsible on shipping the ● Co-workers: art directors, maintenance function
distribution of materials at manufactured by over 1,000 components to large copywriters, interior
warehouse suppliers distribution centers designers, project leaders
● Control of product ● IKEA designs all of its ● Self-serve warehouse (cost ● Targeted at families with
movement furniture on its own reduction) lower income, students and
● 6 distribution centers ● Using mostly renewable and singles
recyclable materials ● Family-friendly store
environment
Customer Segmentation
Europe
• Age: 22-40
• Income category: lower, medium Looking for a nice, modern design of a
Singles • Background: Living in the cities, mostly in better quality for reasonable price.
shared apartments or bachelor flats.
As-Is-Analysis
Positioning of Products
Problem Risk of standardization Reputation as low-quality furniture retailer Long product life cycles
• Consumer strive for self-expression and self- • IKEA offers low-cost furniture and design • Consumers show high involvement about
realization, they are not satisfied by products which have to be assembled by the decorating their home as they spend much time
standardized solutions and products consumers themselves in it and their homes should also represent
• IKEA offers easy-to-assemble furniture with • Consumers associate low prices with low their personalities and status
simple shapes that can be sold globally quality and do not turn to cheap brands when • If consumers spend a lot of their resources, e.g.,
Description
• The design of their products is supposed to they are looking for permanent and satisfying time and money, on decorating their home
appeal to the mass and to fit in as many as solutions for their homes once, they are not willing to re-design it again
possible different home designs and functions • Hence, the low prices of IKEA can lead to within a short time frame
• Therefore, this design approach can lead to consumers assuming that their furniture is of • This consumer habit confronts IKEA with the
consumers turning away from IKEA to find more low quality which is particularly dangerous in issue of long product lifecycles and consumers
personalized, individual, and more edgy the area of home design with high customer unwilling to invest in furniture repeatedly
furniture (globally online) as IKEA does not offer involvement and the rising popularity of • Hence, IKEA’s low-cost approach is in danger as
exclusive, status-enhancing products premium products this require high sales volumes
Uniformly designed products available at low-prices can turn from being IKEA’s competitive advantage to their
biggest threat due to the digital age and changing consumer habits.
IKEA - Digital Business Transformation 9
Low influence
Problems Stakes
Reputation as
Enhance
Risk of low-quality Long product Improvement of
customer Differentiation
standardization furniture lifecycles brand image
experience
retailer
Product
innovations
1.1-1.3
Crowdsourcing
2.
Virtual Reality
3.1-3.2
Offline stores
4.
The seven recommendations for IKEA’s business model will tackle all three identified risks and will help IKEA to follow
the three set stakes simultaneously.
IKEA - Digital Business Transformation 11
Product Innovations
Required level of
1.1 Designer Collaborations digital skills
Product Innovations
Required level of
1.2 Smart Home products digital skills
• As Smart Home products will be standard solution for consumers within a few years from now, it is absolutely Singles
Young
academics
necessary for IKEA to extend its business in this area to stay relevant and in the market for many more years.
• Technology-savvy consumers have a higher willingness-to-pay for innovative Smart Home products that are also KPIs (+1 year)
well designed and hence, IKEA can benefit from higher margins and finance the investments for research and • Share of Smart Home products + 20%
development. • Connectable to min. 80% smartphones
IKEA - Digital Business Transformation 13
Product Innovations
Required level of
1.3 Transformable Products digital skills
will feel a gap in the market with such a product category. Singles
Young
academics
• IKEA will be considered as a very innovative company that instantly follows need of its' customers, because it is
highly technically oriented project with a lot of design work to be done behind so that homes are spacious, KPIs (+1 year)
practical but still wrapped in a modern design.
• Increasing sales + 20 % in a first
year
IKEA - Digital Business Transformation 14
Crowdsourcing
Required level of
2. The IKEA Community Designs Your Home digital skills
• Since the products will be designed for client basically by himself, IKEA might expect increase in client's Targeted segments
purchases. Students
Young
families
• Extending the group of loyal customers and also attracting new, potential customers thank so the community
representants. Singles
Young
academics
• High focus on customers' experience, trough involving him into company's processes and giving him some
power, experience in the labs. KPIs (+1 year)
• Possible cost reductions thanks to crossing out some processes, customers as a part of communities as a chief
• Increase in new IKEA family
creator of the product lines. members +45 % in the first year
IKEA - Digital Business Transformation 15
Virtual Reality
Required level of
3.1 The VR Experience digital skills
Virtual Reality
Required level of
3.2 VR in Pop-Up Stores digital skills
• Enables IKEA to get closer to the customer without buying expensive square meters from the center but still Targeted segments
letting customers see the whole catalog of furniture. Students
Young
families
• Increased online sales through customers being able to see the product digitally but as real as possible
• IKEA can test the reactions of customers to different furniture designs without starting actual production. Singles
Young
academics
• Harness people to make interior designs for free.
• Introduces customers on VR and paves the way for VR shopping at home. KPIs (+1 year)
• 15% of customers joining IKEA Family
• 40% of customers associating IKEA
with digital innovations
IKEA - Digital Business Transformation 17
Offline Stores
Required level of
4. AR for IKEA Stores digital skills
Prioritization of Recommendations
High
1.1
3.2 Pop- Designer 4. AR 2. IKEA
Up collabo- Commu-
Stores rations nity
3.1 VR
1.2 Experi-
Smart ence
Feasibility
Home
1.3
Trans-
formable
furniture
Low
This transformation plan is based on highly feasible and impactful actions incorporating different levels of
digitalization so that all three main stakes will be fully achieved and IKEA can maintain its market leadership.
IKEA - Digital Business Transformation 19
GANTT
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