In the loop: a new business model for IKEA
A few weeks ago, we were invited to speak at a conference on the circular economy at the Danish parliament. As winners of the IKEA Hackathon, we had a slot between well-known firms, such as 3XN, the Ellen Mac Arthur Foundation, and Skagerak. It reinforced my view of Denmark as a sort of more advanced civilisation, a land that inherited the future we could have had, focusing more on global warming, health, and employee satisfaction than on terrorism, debt, and national identity (Though there is a lot to be said on the rise of the nationalist parties here, as well).
The conference was aimed at businesses interested in the Circular Economy, a concept championed by the Ellen Mac Arthur Foundation. During the conference, they revealed the new Circular Design Guide made in partnership with IDEO. (Interestingly, making a design guide seems to be a growing part of IDEO revenue, this one being the second I see in a month, after Designing for public services).
For those unfamiliar with circular economy, here is a “explain like I’m five” video.
IKEA for life
IKEA for life is a subscription furniture offer that changes as one grows older. It aims at changing IKEA status from a disposable and cheap furniture supplier to a service provider.
We separated clients into different segments and created different plans based on their preferences.
By paying a little money every month, you benefit from all the advantages that come with your plan. When you change countries, your furniture “moves” with you: IKEA makes sure similar pieces are transported to your new flat and takes care of the one you leave behind. If one of your pieces of furniture is broken, it is repaired free. If you are making more money and would like something comfier, IKEA upgrades your furniture, delivers it to your door, and takes the old one.
Every piece of furniture in our model is used often. First, it is present in the premium package; when used, it is downgraded and given to a standard plan subscriber. Finally, at the end of its life, it is repaired and downgraded a last time to a budget package (such as the student one), before being recycled. This way, one piece of furniture has successively different owners, expanding its life cycle.
The business model
With IKEA for life, we are changing IKEA’s business model, making it circular by expanding its products’ life, recycling, and changing consumption habits.
We also change IKEA’s incentives, making it easier for it to focus on producing pieces that are easy to repair, recycle, and transport.
In the long term, our vision is that IKEA will be circular. IKEA owns several acres of land to grow trees and try to use recycled plastic. Our model goes beyond good sourcing of materials. By perfecting its recycling process, IKEA will master its whole supply chain using them repeatedly. IKEA will not be a furniture firm but a material owner. Those materials will just have the shape of a bed or a chair.
Being part of this project was great fun, and I encourage all the firms to use University Hackathon as part of their open innovation strategy. A big thank you to Chora Connection, the Danish Design Council, IKEA, and AAU for making it happen.