IKEA's Innovation and Sustainable Business Development: A Case Study

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INNOVATION AND SUSTAINABLE BUSINESS
DEVELOPMENT
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Executive summary
The innovation trend that IKEA uses is the ‘Lean Start-up’. Lean start-ups is an approach based
on the belief that the entrepreneur must iterate, test, experiment, and investigate when the
product is developed to start or build new business. The lean start-ups were developed in the
2000s and then it has been evolved into a methodology in the next 5 to 10 years. IKEA is popular
for providing modernist designs of furniture and appliances of many different types and it is also
popular for eco-friendly interior designs of the houses. The process of lean start-ups is built in a
way that minimizes the time consumption and also the money invested in the ideas of product
and its development because the entrepreneurs have to first test the potential values of the and
then prove it.
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Contents
Executive summary.........................................................................................................................2
Introduction..................................................................................................................................4
Discussion....................................................................................................................................5
Organization and its innovation trend..........................................................................................5
The organizational environment..................................................................................................5
Innovation trend...........................................................................................................................5
Innovation strategy......................................................................................................................6
Innovation capability...................................................................................................................6
Innovation value creation and capture.........................................................................................6
Creation of innovation strategy to make sure the organizations configurations and their
significance..................................................................................................................................7
Impact of design thinking on IKEA Company............................................................................8
SWOT Analysis...........................................................................................................................9
Business Model Canvas.............................................................................................................10
How the strategies which organization ensures the alignments to the trend of the innovation.12
Conclusion.....................................................................................................................................13
Recommendations..........................................................................................................................13
References......................................................................................................................................14
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Introduction
The organizational environment is the very important constituent of an organization. An
organization must work within a framework which consists of various elements of the society
and surrounding. The external environment consists of all the elements which lie outside the
organization and all the other elements which are not included in the external environment are
included in the internal environment. It is important for an organization to effectively understand
the various components of the environment for the effective management of the organization.
Organizational environment consists of two main components namely macro and
microenvironment. This innovation trend was founded and developed by the entrepreneurs of
Silicon Valley Eric Rise and Steve Blank and then many other companies started to adopt this
and promoted it more and more. A lean start-ups principle focuses to ensure that the products
that are needed to develop by the entrepreneurs should be the products that are in demand or
customers actually want, rather than attempting untested ideas of making products to build new
business (Jarmila & Kateřina, 2013).
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Discussion
Organization and its innovation trend
IKEA is a multinational group famous for providing furniture which is ready-to-assemble, home
accessories, home services, appliances for the kitchen, and many other useful goods and services.
Ingvar Kamprad was the founder of the company who was a carpenter and was only 17 years old
when the company was founded. IKEA was founded in 1943 in Sweden and since 2008 it is the
largest retailer of furniture in the world. The operational details cost control and development of
products continuously of IKEA allowed them to lower its prices during the global expansion
period by an average of approximately two to three per cent. IKEA is operating in 52 countries
with 424 stores of IKEA (Yoo & Young, 2018).
The organizational environment
Factors like investors, stakeholders, suppliers, customers, competitors, etc. are included in the
external environment of the organization and the factors like cultural environment within the
workforce, technological environment, economic environment, etc. are included in the internal
environment of an organization. Effective organizational environment is very important for an
organization’s development and growth and to stay ahead in the competition (Hoveskog, et. al.,
2018).
Innovation trend
The trend in innovation is in boost as it is becoming a key strategic driver for different
organizations. But many organizations are facing difficulty in understanding what innovation
really means and stopping them for being more innovative and how they can improve their
innovation to stay in the competition. Organizations that are facing these difficulties should
develop some strategies which will help in creating new innovative ideas and improve the
company’s growth. The innovation trend that IKEA is using is lean start-ups which are an
approach for new businesses development. Innovation is just new ideas, thoughts which are
creative, imaginations which are of different forms from the usual (Lee & Seo, 2018).
Innovation strategy
Innovation strategy is a type of plan or process which helps to grow market profit or shares
through different innovative products or services. An effective innovation strategy must correctly
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and properly inform which segment the company should target, what the job will, and who will
execute the job to achieve and gain most growth. Though the innovation success rate is very low
of the breakthrough or disruptive approach it is the best approach if implemented efficiently.
Most of the organizations plan their innovation strategy in a way that will encourage
advancement in the service or technology of the organization by investing their money in the
activities of the research and development.
Innovation capability
There are many different definitions of different organizations. The innovation capability of an
organization refers to the innovativeness of the organization or how innovative the organization
is. Innovation capability is basically the ability of any organization to make the changes or
transform any idea into something new which will create economic values for that organization.
Value helps in the creation of wealth and the economic values that will be created through the
innovation capabilities will help the company to increase the profit and the performance of the
organization will improve consequently (Chen, 2014).
Innovation value creation and capture
A process known as Value innovation is a process which allows a company to upgrade the
existing products or services or to introduce new technologies in the organization that are
designed in a way which will help the organization to achieve both low costs and product
differentiation. The changes which are made through the value innovation help in the
improvement of new elements of the service or products and can also reduce the costs by
eliminating unnecessary elements or aspects during the lifecycle of the product (Hoveskog, et.
al., 2018).
The value creation must be the primary aim of any organization because creating values help the
organization to sell the products and services. The creation of values for the shareholders by
increasing the stock prices will ensure the organization’s future availability of the funds or
investment capital for the implementation of other operations of the organization. The innovation
values are created by some of the organizations from a financial perspective when the return on
capital exceeds the cost of the capital or simply when a business earns revenue that exceeds the
organization’s expenses (Jakšić, et. al., 2018).
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Value capture is a process of retaining values that are provided through every transaction made
by the company in some percentage. The more a company captures value, the less attractive the
company’s product becomes. There are mainly two major approaches of value capture namely
maximization and minimization. The maximization approach of value capture of an organization
tries to capture the maximum possible values and the minimization approach of value capture of
an organization tries to capture the values as little as possible, little but sufficient.
The innovation trends, innovation strategy, innovation capabilities, innovation value creation and
innovation value capture helps an organization to develop different strategies that may help the
organization to stay ahead in the competition in the market. IKEA is using all these concepts
from years and they are very efficient in the market, in fact, IKEA is one of the best companies
of the world for providing furniture of different designs (Hart, et. al., 2016).
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Creation of innovation strategy to make sure the organizations configurations and their
significance
The process of linking the innovation strategy with the organization's goals, strategies,
objectives, and vision are called strategic alignment. The strategic alignment helps and enables
an organization to perform higher as it optimizes the contribution of the process of organization,
people of the organization, and the inputs to identify the measurable objectives of the company
and also minimizes the wastes of time and also the misdirection of resources and efforts. In this
modern era, the environment of global business, the strategic alignment should be viewed
broadly as it not only encompasses the human and other resources in a particular organization
but with the complementary objectives it encompasses across every possible organization. The
strategic alignment can also refer to the state in which a business company and its strategies for
the development of the products are aligned with the marketplace, users, and customers of the
company which overall leads to the economic success of the company or organization.
Impact of design thinking on IKEA Company
The time and cost which are required in creating a new service or product are so very large that
the lack of a perfectly executed and aligned strategy of innovation can be very wasteful. The
strategic alignment helps an organization to create a directional beacon that defines which
domains are needed to be avoided and which domains are needed to be explored (Bouglet, et. al.,
2012).
Executives in innovation are not investing simply for the fun of it, but recent trends have
uncovered that enterprises’ leaders are still struggling to find strong parallels between a large
portion and corporate innovation strategy of these companies are still making “blind bets” with
their innovation investments. So many leaders know that innovation is needed.
They invest millions into these projects with the hopes of disrupting the norm, transforming their
company culture, and catering to the markets of the future, but they have not actually figured out
a fool-proof strategy for generating this innovation, let alone how they are going to align these
innovation plans with their ultimate business goals. However, a lack of alignment between
corporate strategy and innovation goals can only result in unsatisfactory outcomes. Based on a
study, 54% of executives say they struggle to align innovation strategy with business strategy,
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and 72% say they are not out-innovating their competition. But the scariest statistic from this
report is that 65% of the company that invest over 15% of their revenue in innovation believe
that aligning business strategy with innovation was their top management challenge
(Swiatkiewicz, 2017). Fortunately, there are ways for senior executives to recognize their role in
identifying areas of concern, communicating strategy, setting expectations and goals for
innovation.
SWOT Analysis
Strength
 Defined some concepts and policies to
preserve and contrivance existing
services and new structures.
 To attain more effective working culture
organization provides training and
development.
 It helps to provides suitability and
sustainability to the organizational
structure.
Weaknesses
 The organizational structure is not
serious to understand the real
market.
 The approaches are sometimes little
costly which makes the negative
impact on financial status of
organization.
Opportunities
 It accomplishes the ways to understand
the needs and requirements of the
customers to provide benefits and
opportunities.
 This helps to make the customer
satisfied and also gives approaches to
immense the business.
Threat
 Increasing demand of new and
attractive innovations sometimes
make the imbalance to working
culture.
 The current era is full of compaction
and it needs to be followed.
Business Model Canvas
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Key partners
o Investm
ent
associat
es
o Tangible
land
agents
Other partners
o Speciali
zed
technolo
gy
provider
s
o Technic
al team
o Analytic
s
o Insuranc
e
o Many
others
Key activities
o Provides
attractive
interior
foe
household
s.
o Improve
value
scheme
o Analyse
and
determine
requireme
nt of
customer
Value
preposition
For employees
o Future
growth
o Attracti
ve
workin
g place
o Sustain
and
stable
For customers
o Innovat
ive
designs
of
furnitur
e
o Good
services
o Operati
ve
method
ologies
Customer
relationship
o Good
services
o Customer
satisfactio
n
o Innovatio
n
strategies
customer
segments
Employees
o Socio
economic
o Micro
graphic
o Behaviou
ral
o Situationa
l
Customers
o Develop
ment
skills
o Virtuous
prospects
o Beneficia
ry
o Tactics
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Key resources
o Accomplis
hed
employ
o Data
analyst
o Worthy
administra
tion
o Speculatio
n principal
o Brand
value
Channels
o Public
medial
channel
o Vocal
marketing
o Broadcast
ing
o Profitable
channel
Cost structure
Impact to ecological sustainability.
Involvement and authorization of
revolution developments.
Revenue stream
Online booking
Credit card
Debit card
Cash on delivery
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How the strategies which organization ensures the alignments to the trend of the
innovation
The organization IKEA is a fast-growing company and had faced immense growth the most
necessary this to establish and determine the growth is to have some attractive and innovative
activities which help to make the employees enthusiastic towards their work Jarmila & Kateřina,
(2013).
Engage in Forced Connections: This is an interesting innovation activity as it helps the
employees to think out of the box. Basically, this activity includes some different ideas of
different people and provides some significant opportunities to build some new and creative
things with the help of those chosen ideas. The innovation can be referred to as the backbone of
an organizational structure as it provides the creativity and attraction not to the organizational
structure only but also to the employees working with it. To attain stability and sustainability this
is necessary for the organization to achieve some additional innovation capabilities and these can
be (Hoveskog, et. al., 2018).
 Empower employees to make decisions and take action
 Make preventing burnout a high priority.
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