1. Innovation Strategy

1.1 Design Thinking and IKEA

According to Edvardsson and Enquist (2011) IKEA’s definining feature is cost effectiveness and high level of customization where it engages in customer co-creation in order to fully empathise with user requirements. IKEA’s core business objective is to help provide the masses of ordinary citizens with modern furniture at affordable pricing. The strategic focus of IKEA is embedded system that can deliver exceptional value for its home based user delivering .

Design thinking has transforms IKEA enormously over the past few decades and has become a large multinational corporation which has its presence across the globe, and employing upwards of 208,000 individuals in its various divisions and operations, therefore fully qualifies as a globally integrated enterprise. The company adopts design thinking concept of customer first ideation and rapid experimentation to achieve the desired integration with the strategic objectives. According to Agnihotri (2015) having low cost processes integrated within company’s operations IKEA can bring about innovation at competitive rate and according to the needs of consumer which appeal them to a greater extent.

IKEA is a brand that offers services via employing design thinking at its core. The organization constantly work to deliver ‘solutions to real life problems’, and emphasis is placed upon enriching the quality of life for its customers (Hinterhuber & Liozu, 2014).

1.2 Manifestation of Innovation within IKEA

Organizational Environment. According to Smith and Rees (2017) Organizational environment refers to all the forces that tend to influence the way an enterprise is organized with its structure and divisions. The way the organization of IKEA is structured is that the core basis to be implemented is the sharing knowledge in the most efficient and effective manner so as to create the maximum possible value for the company is a whole. IKEA, following a matrix structure in its organizational hierarchy ensures knowledge is passed on in a line wise manner across each business unit, and each region it chooses to operate within. The organizational culture empowers employees to think beyond ordinary and take initiative. Organization applies design thinking here to organize resources in a more dynamic manner they encourage analyzing daily operational problems and findings effective solutions (Alänge, Clancy, & Marmgren, 2016).

Innovation trend. According to Prause and Thurner (2014)innovation trend refers to the general direction the company’s innovation strategies are headed when benchmarked against industrial standards and practices. It also incorporates various aspects of the corporate culture of the firm towards the concept of innovation. IKEA relies heavily upon innovation to improve furniture product designs, to be environmentally sustainable, and to improve the overall shopping experience for its customers. Hence, the most dominant trend in terms of innovation is that IKEA involves customer to create on the organization’s behalf harnessing the power of customer co-creation (Joshi, Saxena, & Tarkas, 2015).

IKEA Innovation strategy. Innovation strategy refers to the overarching set of policies and standards the executive management of IKEA has formulated and established to be followed by the company in the long term periods to follow for the foreseeable future. It also dictates how significant the role of innovation would be to the business of the company, and the association with positive performance and profits. Following flow chart illustrates the strategy.

Innovation value creation and capture. According to, Ritala, Agouridas, Assimakopoulos, and Gies (2013) the concept of value creation and capture refers to how the company specifically plans on employing innovative techniques and practices in its offerings and procedures in a way that are in line with creating value for the customer, and hence improving the financial viability of the firm. IKEA focuses on its employee development and connection with consumer to organizat around it and enhance value for the consumers.

2. Strategic Alignment of IKEA

It is crucial for any company with a similar scale and nature to that of IKEA to employ a decisive and well planned out innovation strategy, which would ensure all innovations proposed are streamlined to follow one set of core objectives. The key here is IKEA has to align its strategic outlook with initiatives undertaken by the organization. To maintain a strong strategic outlook IKEA according to Vahlne and Jonsson (2017) excels in three core elements one is maintaining a dynamic communication with all its stakeholders, IKEA never pushes anyone to a corner rather is always looking to involve stakeholders within the system to actually gather information and ideas to process their own.

Secondly, IKEA has brilliantly demonstrated the implementation of such a system. The organizational culture is focused on accepting new ideas. They always spend a lot in creating an enabling environment where new ideas are properly evaluated unless proven to be not usefull. Third, IKEA fully integrates the innovation management system (Ye, Jha, & Desouza, 2015). They conduct operations in a manner whereby each innovative process and practice is not disconnected, yet interdependent and integrated in a systematic way to achieve organizational objectives by solving the needs of its customers through its creative furniture designs. Following the design thinking process IKEA, empathise, define problem, ideate, prototype, test and eventually commercialize there designs to have sustainable development.

IKEA has not imitated the fundamentals of any other organization’s innovation system, rather it has built up its own system since its inception and consistently developed and perfected the processes accordingly with the changing needs of the customer and the external environment. A well defined strategy of innovation is a crucial prerequisite in designing the various systems of innovation in any company, which can produce creative solutions as per the business needs of the organization. According to Ye et al. (2015) every idea is evaluated for a viable business case, the key strategic consideration is initiated when IKEA evaluates ideas for strategic fitness ensuring if has viable cost benefit analysis would render prot It also strongly ensures that each division and department of the organization is working towards the overall company strategy, as opposed to conflicting projects which cause a clash in priorities of the firm, despite a unitary business strategy.

3. Impact of Innovation Trend on IKEA

Impact of the selected innovation trend on IKEA has been positive as philosophically IKEA has aligned it self to accept diverse ideas. Similarly, IKEA believes every consumer faces a unique problem when endeavouring in perfecting their living speace . hence IKEA cannot ideate every time on the bhalf of the customer hence IKEA collaborate and allow consumer to create designs and see how effective they create or seek help from the organization.

The widespread and intensive use of service innovation is what truly differentiates IKEA from other players in the industry and is part of the reason why the company holds its current position of market leadership (DaSilva & Trkman, 2014). The firm is consistently striving to improve upon its use of recycled material in its furniture product to demonstrate both sustainability as well as durability. In doing so IKEA has generated a strong brand image for itself, this gives it unparalleled value as opposed to other firms of a similar nature or scale.

The current global trend towards going green and environmental conservatism provides a massive opportunity for the company to further excel. This could massively assist in future expansion and growth prospects. Furthermore the global presence of IKEA is still rather limited given the large brand name it possesses. It has only operations in 54 nations.

4. Innovation Strategy Response to Innovation Trend

How should the organization organize its innovation activities?

IKEA, for an effective innovation strategy would need to centralize all its innovation efforts so that the core objectives of the vision of the company may be followed. Innovation teams must not be autonomous but must have a communication link with a central department. The innovation process must be focus more on the empathy stage to understand and define user requirements this would ensure lower waste of R&D costs.

What additional innovation capabilities should the organization develop?

IKEA has established itself as a champion in conventional innovation in its product as well as service. Now it needs to incorporate innovation into improving its distribution networks and study of market demand. Focus can be on innovating all core elements of business model. With its plans to expand its e-commerce base, IKEA must  develop its Artificial Intelligence to optimize its logistical processes and eliminate inefficiencies. It can also employ big data analytics to create customer profiles and better understand the market it serves, which would provide it with a significant competitive edge over rivals.

What innovation initiatives should it pursue?

The most effective form of innovation initiatives IKEA could pursue would be through Co-creation by strategic linkages in partnerships and close collaborations with stakeholders looking to achieve similar end goals in one form or the other. A venture such as this would allow the sharing of resources and expertise which would result in an end product that is the culmination of the skills and hard work of both entities. Partnering up with a firm with a vastly different technical nature would help IKEA enjoy more benefits as it would have access to technical expertise and equipment it otherwise would not have had. Moreover, this can allow organization to innovate in augmented areas to advance its knowledge base.

How should the organization ensure that it creates and captures value from the innovation?

The way IKEA could truly derive benefit out of its innovative practices is to ensure that each innovation and effort it engages should firstly ensure that it is directly related to consumer needs to fully translated it into a meaningful final concept or product itself. The innovation should remain true to consumers and IKEA should not shy away from listening to consumers and even incorporating changes where necessitiated. Once customers begin enjoying the benefits as a result of the innovation value would be created for the organization through the creation of demand and hence solidifying IKEA’s strategic position in the market.

5. Recommendations for Strategic Alignment

It would be beneficial to IKEA if it establishes a central innovation unit being run under the careful watch of an executive directors of the company. The purpose of such an office would be to link up and coordinate with all innovation drives in all IKEA locations across the globe. A permanent think tank could be employed as part of this IKEA innovation center which would have communication access to all relevant functional divisions in the organization. They could be given the power and responsibility to authorize or reject projects after careful assessment and a study of viability and whether or not it serves the core objectives of the business.

Secondly, IKEA could restructure its performance management systems in a manner that innovation that is in line with the company objectives can be rewarded and hence incentivized. This would ensure that only the right type of innovation is encouraged and would send a very clear message across the  organization as to what is expected from its innovators. Remarks from the central innovation unit could be given weight in any appraisal process where teams can adequately be rewarded with raises, bonuses or other promotions.

As already mentioned above, strategic partnerships for innovation driven projects would be of immense benefit to the organization for a number of reasons. To ensure strategic alignment however, there needs to be stability in the relationship with these partners. Constantly changing players would mean constantly shifting design concepts.  Long term partnership would develop a relationship of mutual understanding of each other’s goals as well as priorities and would ensure that innovation practices remain consistent with the company’s goals. Through this it is unlikely for wasted costs and scrapped projects to occur.

References

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Alänge, S., Clancy, G., & Marmgren, M. (2016). Naturalizing sustainability in product development: A comparative analysis of IKEA and SCA. Journal of cleaner production, 135, 1009-1022 %@ 0959-6526.

DaSilva, C. M., & Trkman, P. (2014). Business model: What it is and what it is not. Long Range Planning, 47(6), 379-389 %@ 0024-6301.

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Prause, G., & Thurner, T. (2014). User communities—drivers for open innovation. Форсайт, 8(1 (eng) %@ 1995-459X).

Ritala, P., Agouridas, V., Assimakopoulos, D., & Gies, O. (2013). Value creation and capture mechanisms in innovation ecosystems: a comparative case study. International Journal of Technology Management, 63(3-4), 244-267 %@ 0267-5730.

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Vahlne, J.-E., & Jonsson, A. (2017). Ambidexterity as a dynamic capability in the globalization of the multinational business enterprise (MBE): Case studies of AB Volvo and IKEA. International Business Review, 26(1), 57-70 %@ 0969-5931.

Ye, C., Jha, S., & Desouza, K. C. (2015). Communicating the business value of innovation. International Journal of Innovation Science, 7(1), 1-12 %@ 1757-2223.