How IKEA became a force in IOT
After a somewhat bumpy road in tech, the Swedish home furniture giant IKEA now seems well positioned to be a big player in the smart home.
** Full disclosure: I have a stake in the design agency People People that sometimes work with IKEA. This article is based on public information.**
In 2017 IKEA finished an internal digital transformation, partnered with the biggest players in Silicon Valley, launched this years coolest retail app with Apple and won the hearts of customers with smart wireless home products. Here is a breakdown of how the humble Swede became a force in IOT.
Humble beginnings
IKEAs foray into consumer electronics started in 2012 when they launched a range of TVs and sound systems together with TCL Multimedia. The drive behind this move was the customers need to be able to buy and integrate home electronics with the furniture in a simple way.
IKEA had The Uppleva TVs out for a couple of years, during a time when most TV brands launch many models per year forcing a fierce turnaround and price dumping. It quickly became hard for Uppleva to be perceived as a the affordable, high quality proposition that IKEA is know for.
IKEA’s massive digitalisation
IKEA’s very profitable franchising business models has been built on vertically integrated, highly optimised supply chains, big warehouses selling directly to visiting customers and catalogue orders. A very physical, brick & mortar kind of business model.
But like many others IKEA started having more website visits than store visits around 10 years ago. IKEA logically started opening online stores and digitalised their catalogue for the smart phone. With 400 massive stores globally we are talking about over close to a billion people walking into the stores and more than twice that touching and clicking the brand online yearly.
By 2015 e-commerce grabbed 3% of the turnover and growing 40% yearly, it’s now planned to reach 10% by 2020 (€5bn out of €50bn total). This shift (among other things) forced a big re-organisation of the 30 year old franchising structure to better fit the new multichannel strategy so that sales could be more centrally coordinated.
The shake-up has been backed up by many big scale investments in the underpinning IT structures, internet and inventory systems. The internal heavy lifting and business model ground work now seem to be falling into place and as a result IKEA’s digital confidence seems to have grown exponentially. It’s most publicly visible in their latest big app-launch “Place” that is in the forefront of useful mobil technology and customer digital purchasing experiences.
“You don’t need to read a manual, you don’t need to put on special glasses. You just pull out your iPhone, scan the floor, and it already has measured for you.”
Michael Valdsgaard, IKEA Leader of Digital Transformation to Wired
Navigating ecosystems and bets on platforms
IKEA’s embrace of technology is becoming more apparent in their actual products as well. When IKEA rolled out Qi wireless charging products in 2015, it was perceived as progressive (to some even premature). Many manufacturers where still hesitant on what would become the dominant technology for wireless charging. Google had just launched their first Qi-certified wireless Nexus phones a couple of year before and Samsung Galaxy S6 came out with Qi-suport around the same time. It was not until Apple launched support in late 2017 that the format solidified it’s position as an industry standard for wireless charging. Making a bet like this two years ahead of the majority technology “adoption curve” shows real leadership.
The second move from IKEA Home Smart is the wireless smart lighting products using Zigbee Light Link (an open standard) that was rolled out this year. The range managed to put together a clear value proposition: make smart lighting easy and affordable for many people. For $20 you can get started with a bulb and a wireless dimmer and at $80 you get a wifi-gateway, remote control and 2 bulbs to play with. They are both easy to get started with.
Some interoperability concerns was voiced from customers that where already overload with an array of different standards and manufacturers. The answer to the question came quickly: IKEA will work with all major format including not only Philips Hue Bridge but Amazon Alexa, Apple HomeKit and Google Home.
“If you look at IKEA furniture, you can match with furniture from other retailers. We want to tap into the same behavior, and same type of story…It should be the same type of freedom to choose.”
Björn Block, Business Leader IKEA Home Smart to Wired
It might sound obvious but this neutral and open approach is probably IKEA’s biggest differentiator in the internet of things (IOT) landscape.
People centered approach
One of IKEAs core design philosophies is to really make life easier and more meaningful for many people. That is the final piece of the pussel to understand IKEA unique potential in the IOT market place. Most IOT companies have been pushing technology for the sake of technology itself. In contrast, IKEA is a player that has extensive knowledge of how people actually live their life in their home environment. They are taking the time to make simple, affordable products that make sense in that context. Technology actually helping you to do things that you already understand and want to do.
If you combine this design philosophy with their organisation wide digital transition they have positioned them self to be a real leader in the years to come.
