How IKEA Builds Sustainable Innovation Into Its Business Model To Improve Lives

Judith Magyar

Most people think of a discarded plastic bottle as waste. But at IKEA, it’s a resource.

The IKEA brand has a set of commandments for doing business, and not wasting resources is one of them.

For example, every year, about 100 billion plastic water bottles are used worldwide, but only 30 percent are recycled, the rest ending in landfills or polluting the ocean. The furniture giant is committed to proving that recycled plastic can be used in the large-scale production of household goods. One example is a new line of kitchen fronts made of plastic and reclaimed industrial wood. The result is a product line that’s not only durable and beautiful, it’s sustainable.

Thanks to some of IKEA’s other business commandments, such as thinking differently and taking responsibility, the company is showing the world how a circular economy can function at scale in every part of their business.

“We’re even looking into circular solutions for our hardware equipment so it won’t end up in a landfill,” says Kristin Grimsdottir. As sustainability manager at operations & shared services at IKEA Group, she is responsible for a team that runs and enables sustainable IT solutions for IKEA Group.

Democratic design

When asked to describe IKEA’s vision for the future at the recent ThinkX event in Stockholm co-sponsored by SAP and Singularity University, Kristin Grimsdottir responds with passion.

“We are not merely a home furnishing company; we focus on life at home and how we can make it better for people. For instance, we’re already helping customers generate their own energy with home solar panels and battery storage options and exploring the area of urban organic farming so you can grow your own food in your kitchen,” she explains.

It is one of IKEA’s core beliefs that everyone has a right to a better everyday life. IKEA’s business idea is to offer well-designed furniture at an affordable price for the many people. One of the big movements going forward is about becoming even more affordable so that many more people can enjoy a better life at home– without compromising on sustainability, quality, or design.

This is possible thanks to the company’s principles of Democratic design. For every new product, the design team first sets the price and then works from there to create functional, attractive, high-quality items from sustainable materials.

Purpose-driven growth

A circular IKEA that reuses or recycles all materials is one way to prepare for the future, another is to drive efficiency through digitalization.

Clearly, there is no lack of innovation in the company. What’s missing is the seamless experience for customers that is a must in the digital world.

While IKEA is actively rolling out its e-commerce solution, Grimsdottir admits that they still have areas of improvement on the e-commerce front. But IKEA is embracing digital technologies elsewhere too. “For example, we’ve implemented IKEA Place, an augmented reality app that helps you decorate your home virtually”, she says.

For IKEA, continued growth requires the transformation of business and IT to implement a more modern IT landscape, develop advanced analytics capabilities and implement more efficient end to end processes. But more importantly, it also requires full buy-in from employees.

“Change is the new normal,” says Grimsdottir, “so it’s important that all of us try to embrace it. We are not implementing automation technology/AI in order to get rid of people but to streamline processes in order to reduce waste and increase efficiency and precision. It is important to be better to meet our customers’ expectations. And that gives our co-workers the opportunity to grow and develop more human, less robotic skills that are believed to be even more critical in the future.”

Every company has a purpose. For IKEA, it’s about creating a better everyday life for the many people without compromising on price, form, function, quality, or the environment.

After all, as IKEA founder Ingvar Kamprad said, “To design a desk which may cost $1,000 is easy for a furniture designer, but to design a functional and good desk which shall cost $50 can only be done by the very best.”

This story also appears on SAP Innovation Spotlight.