Innovation Strategy Report: Analyzing IKEA's Business Model

This report offers a comprehensive analysis of IKEA's innovation strategy, examining its response to innovation trends, including the adoption of lean startup principles and the application of the business model canvas. It explores the different concepts of innovation, such as organizational environment, innovation capabilities, and value creation and capture, and their interrelationships within the context of IKEA's operations. The report highlights the importance of innovation strategy in achieving strategic alignment and discusses the impact of the lean startup methodology on IKEA's business practices. Furthermore, it delves into the role of IKEA's innovation strategy in shaping its approach to innovation and outlines various methods for organizing innovation activities. The report also explores additional innovation capabilities and strategies for ensuring that IKEA generates and captures value from its innovations, ultimately contributing to the company's strategic alignment and long-term success. The report concludes by summarizing the key findings and their implications for IKEA's future.

Running head: INNOVATION
Innovation

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Table of Contents
Introduction...........................................................................................................................................3
Introduction of company and its innovation trend.................................................................................3
Different concept of innovation and relationship between them............................................................3
Importance of innovation strategy in strategic alignment......................................................................5
Impact of the lean start-up on IKEA......................................................................................................5
Business model canvas..........................................................................................................................6
Role of organization’s innovation strategy in innovation trend.............................................................7
Ways to organising innovation activities...........................................................................................8
Additional innovation capabilities.....................................................................................................9
Ways to ensure organisation creates and captures value from the innovation....................................9
Organization ensures strategic alignment..............................................................................................9
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11

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Introduction
This report provides a description of the Ikea and innovation trend. It also describes the
different aspects and their relationship with them. It also demonstrates the business canvas
model and strategy used for implementing innovation.
Introduction of company and its innovation trend
IKEA is a private and world’s largest furniture retailers and global home product company
that sells and designs the ready to assemble furniture like home accessories and appliances.
This company was established in the year of 1943. The key mission of IKEA is to provide the
wider category of home furnishing products with affordable price, good design, and
functions, and durability that the bulk of individual can afford for purchasing them (Blank,
2013).
The Lean Startup social technology is an innovative trend that manages and creates the
startups and provides the desired products to the hand of the customer promptly. It is a
methodology that is used to create the businesses and selling the products in shortening
product development cycles. It also promptly identify when the proposed business model is
viable. It can be addressed through adopting the integration of iterative product releases,
hypothesis-driven experimentation as well as validate the learning (Cooper, &Vlaskovits,
2013).
Different concept of innovation and relationship between them
The organizational environment
An organizational environment is the integration of factors that is surrounding a company and
it may influence the operation, resources, and performance. It involves all the aspects that are
presented in the external environment of company’s boundaries and can have the potential for
influencing the portion of the company (Osterwalder, &Pigneur, 2010).
Innovation trend

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Innovation is defined as the creative thoughts, new ideas as well as, new imaginations in the
form of device. Along with this, innovation is demonstrated as the use of feasible solutions
that attain the new needs, existing market requirements together with, accomplish the
unarticulated requirements. A trend is a potential growth in upcoming times that would be for
longer-term, creates a lasting impact, and changes something (Gobble, 2017).
Innovation strategy
An innovation strategy is illustrated as the plan for increasing market profits and share by
making innovation in product and service development. While, company addresses the
solution then, innovation strategy demonstrates the product enhancement and disruptive
innovation approach is effective (Ojasalo, &Ojasalo, 2018).
Innovation capability
Innovation capability is the competency of the company for transforming the ideas into
something new that carries the economic value. Along with this, innovation capability has a
favorable impact on products and service innovation, process innovation, marketing
innovation and, organizational innovation (Steiber, &Alänge, 2016).
Innovation value creation and capture
Under the innovation system, value creation is defined as the collaborative procedure as well
as, activities for generating the value for consumers and other stakeholders. Along with this,
value capture is defined as an individual firm level that actualizes the profit taking and the
ways that the company can use to get competitive benefits and to reap associated profits
(Stampfl, 2016).
The integrating strategy is used in IKEAto keep the positioning in relation to gaining the
sustainable competitive benefits. It also makes the choices regarding which products and
services will deliver in industry, and distributing the resources for attaining the competitive

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position. The goal of this strategy is to attain sustainable, long-term, as well as, superior
performance (Alänge, &Steiber, 2018).
The key emphasis of this strategy is to generate the value by satisfying the needs and wants
of customers as compared to other strategy. The implementation of the strategy is led by
generating the set of opinion related to investment decision regarding the company’s
resources, brand and business development, and products and services expansion (Gunter,
2018).
Importance of innovation strategy in strategic alignment
There are different benefits of innovation strategy in making strategic alignment within
IKEA. In company, innovation strategy is used to enhance productivity and decline costs.
Company has high-pressure for reducing the unit costs. It can be attained by enhancing the
production capacity and offering the flexibility of the business. It also enables Ikea for
exploiting the economies of scale (Kornel, 2018).
Innovation strategy is also beneficial for offering the better quality products with services,
and that ultimately attain the needs and wants of consumers. It should be highly marketed that
aids to attain the higher profits as well as sales. A company with an inadequate product range
and single products will certainly advantageous through innovation. Along with this, broader
product range facilitates the chances for increasing the sales and profits as well as, declines
the uncertainty related to shareholders (Robertson, 2017).
In addition to this, innovation strategy is beneficial for increasing the more benefit. It helps to
develop the unique selling proposition for the product and something that the customer is
prepared for paying more and that supports the business for differentiating itself from rivalry
(Hoogveld, 2017).
Impact of the lean start-up on IKEA
Blue ocean strategy

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Eliminate industry
Salespeople
After sales services
Raise above the industry standard
Offers tens of thousands of home furnishing
items
Reducethe industry below the standard
Warranties
Create industry has never offered
A new way to shop for furniture
Blue ocean strategy can be used to make innovation in the company and helps to gain the
competitive advantageous and creates new demand. There are four grids that are considered
into this strategy such as eliminate, reduce, raise, and create. In the eliminate area, IKEA can
decline the sales people and after sales services because of lean start-ups social technology. It
would also provide the bulk of home furnishing products as this factor is above the industry
standard. Ikea can reduce the warranties and it is below the standard (Birkinshaw, & Mark,
2017). In addition, Ikea can create a new way of shopping the furniture, as this factor has
never offered in the industry.
Business model canvas
Key Partners
Merchandise
source, Asia,
Europe, and North
America
Key Activities
A requirement of more
expansion in other
markets
Value
Proposition
The key value is
provided to
customers are
high in quality
however low in
rates.
Customer
Relationshi
p
They keep
healthy
customer
liaisons
Customer
Segments
Mainly
families as
well as
particularly
women
Key Resources Channels

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The key resources are
their workforces.
Retail
outlets are
their key
channels
Cost Structure
Sources merchandise through cost-effective sources.
Revenue Streams
Furniture, and augmented
reality applications.
Role of organization’s innovation strategy in innovation trend
Ikea uses disruptive innovation strategy to respond towards the innovative trend. In Sweden,
there are different circumstances due to post-war requirements and baby boomers that had
compelled Ikea for continuing to meet their needs as targeted. Consequently, it was
considered for creating the advantage and accomplishing favourableoutcome from all
counterbalances that was recognized in disruptive innovation during post-war Sweden
(Gassmann, Frankenberger, & Csik, 2016).
Ikea significantly passed the starting phase of the lifecycle and considered furniture-retailing
business due to several causes. Initially, Ikea was succeeding to recognize the market share
associated with low medium economy level as well as, young consumers whose needs were
not faced within the segment of furniture. The company can differentiate itself by selling
highly designed furniture with superiority quality at minimum expenses (Pinto, Dell’Era,
Verganti, & Bellini, 2017).
Ikea can also apply and outlined the expenses and quality control that made prospect for the
consumer to sell and manufacture the better product at an affordable rate that a customer can

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pay. The company is also adopted the aggressive marketing approaches and persistence to
communicate with the consumers (Gonzalez, Val, Justel, &Iriarte, 2016). Ikea has a key
threat from established furniture corporation as a key threat to their marketplace and
attempted for preventing the Ikea to deliver the products to the company. Ikea focuses on
creative strategy in order to reach at the bulk of customers. It also applies the innovative
strategy in management, marketing, and services and through that, it can significantly
articulate the value offering features that a customer is accepted (Birkinshaw, & Mark, 2017).
Ways to organising innovation activities
Create a Culture of Innovation
Ikea organizes its innovation activities such as augmented reality App by creating the culture
of innovation. The company would likely find that it has a requirement for creating the
hundreds of ideas in terms of addressing the ten good ones that would generate the value for
an organization. It is part of a creative brainstorming procedure as well as, it should be
motivated. It should be accountabilities of each individual in a company to start the new
ideas, not just the key staffs(Pinto, Dell’Era, Verganti, & Bellini, 2017).There are some
strategies that can motivate the flow of opinions:
Enable Employee Innovation
Ikea has an innovative culture at the workplace but it has a requirement for recognizing the
employees with certain hallmarks to continuing innovation. For instance, Ikea can educate
their workforces at the regular training session on the topic like teamwork, entrepreneurship,
as well as creativity. Each session can conclude the task of an exercise to be performed over
the next few working weeks that would consolidate the learned lessons. The main objective
of this innovation is to give workforces a test of innovation so they can embrace the
procedures(Hoogveld, 2017).

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Additional innovation capabilities
Ikea can develop different innovation capabilities for developing an organization such as
augmented reality furniture through Lean startup method and promotion through online
channels. The key challenge for the furniture chain is to sell more furniture and it could be
short-term or long-term. Hence, Ikea can use an AR app, as it would aid to gain the sales on
short term and for the longer term. This technology can be used for early adopters and could
be created as mainstream for consumers(Gunter, 2018).
Ways to ensure organisation creates and captures value from the innovation
Ikea can make sure that it creates as well as, captured through lean startup social technology.
This innovation trend can decline the inventory during the assembly line. This technology can
be used as Kanban cards for signal only while the required material to production is required
and in so performing, reduce assembly waste as well as, increases productivity(Pinto,
Dell’Era, Verganti, & Bellini, 2017).Moreover, Ikeacan address the mistakes and
imperfections at the time of assembly as early as possible at the instant quality control
checkpoint for making sure that the minimum amount of time can be expended for creating
the faulty products. In addition, lean manufacturing was later implemented to software as
lean software development(Gunter, 2018).
Organization ensures strategic alignment
There is a different strategy for executing the innovation trends in order to best make sure the
strategic alignment. Ikea should encourage the creativity as it supports to keep staff happy.
When employees perceive that they are essential resources for generating the financial
payoffs in corporation, then they demonstrates their contribution in sharing their opinion.
Hence, Ikea should encourage the participation where, teamwork improves the strength of
people as well as avoids the weaknesses of an individual. Effective teamwork also

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encourages the awareness that it is inthe best interest of everyone in order to maintain the
business growing as well asenhancing(Hoogveld, 2017).
Conclusion
From the above interpretation, it can be concluded that Ikea can use the lean Startup social
technology for business growth. There are different concepts involved in innovation such as
the organizational environment, innovation trend, innovation strategy, innovation capabilities,
innovation value creation, and capture. It can be summarised that blue ocean strategy and
business canvas model is used for developing the innovation within an organization.

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References
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corporations. Triple Helix, 5(1), 1-25.
Birkinshaw, J., & Mark, K. (2017). 25 Need-to-know MBA Models.UK: Pearson.
Blank, S. (2013). Why the lean start-up changes everything. Harvard business review, 91(5),
63-72.
Cooper, B., &Vlaskovits, P. (2013). The lean entrepreneur: How visionaries create products,
innovate with new ventures and disrupt markets. UK: John Wiley & Sons.
Gassmann, O., Frankenberger, K., &Csik, M. (2016).Innovation Strategy: From new
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Modell (pp. 81-104).UK: Springer Gabler, Wiesbaden.
Gobble, M. M. (2017). Innovation at the Bottom of the Pyramid. Research-Technology
Management, 60(3), 62-67.
Gonzalez, I., Val, E., Justel, D., &Iriarte, I. (2016).Closing the Brand Gap through innovation
and design. Procedia CIRP, 50, 112-116.
Gunter, F. (2018). Brains versus Capital: Entrepreneurship for Everyone: Lean, Smart,
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Kornel, A. (2018). Mastering the Art of Tinkering.In Spinning into Control (pp. 17-36).UK:
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Ojasalo, J., &Ojasalo, K. (2018). Lean service innovation. Service Science, 10(1), 25-39.
Osterwalder, A., &Pigneur, Y. (2010). Business model generation: a handbook for
visionaries, game changers, and challenges.USA:John Wiley & Sons.

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Pinto, G. L., Dell’Era, C., Verganti, R., & Bellini, E. (2017). Innovation strategies in retail
services: solutions, experiences and meanings. European Journal of Innovation
Management, 20(2), 190-209.
Robertson, D. (2017). The Power of Little Ideas: A Low-Risk, High-Reward Approach to
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