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Thinking end-to-end to find better ways to build customer loyalty: IKEA’s digital journey - Interview with Per Berggren

Thinking end-to-end to find better ways to build customer loyalty: IKEA’s digital journey

 Per Berggren interview

We interview Per Berggren, Industrial Strategy Manager at IKEA Industry, a keynote speaker at the 2019 CIM Symposium. Per shares his perspective on implementing digitalisation strategies in manufacturing, keeping customers central, and looking for integration across the end-to-end supply chain

1.       What are you trying to achieve at IKEA with digital transformation? What are the business benefits?

Digitalisation for us is about helping our customers, making it easier for them to buy from us, and making the interactions between shop floor and customers as smooth as possible. Our promise to our customers is to be a low-price retailer with creative products which improve everyday lives. As a business we serve mass consumer markets, and we want to grow our reach, and digitalisation can certainly help us to do both of these better.

The first and foremost objective of our digitalisation programme is to improve the customer experience, reduce cost and friction, reach more people, and keep our prices low.

Secondly, digitalisation brings more stable processes, which in turn bring improved quality service capability. These improvements in our day-to-day operations enable us to run more efficiently and maintain our low-cost promise.

Thirdly, digitalisation enables us to ‘meet’ customers in new ways – making sure we become more accessible and more relevant to customers. We can explore different ways of distributing goods too, which in turn can open up new markets and new product offerings.

Fourthly, we have been considering digitalisation strategies across our supply chain, and we can improve the flow of goods between supply chain partners as well as integration of systems, again ultimately to keep prices low and supply reliable for our customers.

2.       How have you been implementing digitalisation in your business?

We are running an extensive digitalisation programme at IKEA to introduce Industry 4.0 capabilities. When I spoke at the Symposium three years ago, we were in a much more exploratory phase of the programme. Now that I’m returning as a speaker again this year, we are much further along the journey, so I can continue the story from a more developed perspective.

Our journey has led us from exploration of technology options, through development, into piloting and now going into roll out across our 40 manufacturing plants.

At the Symposium I will share the learnings, explain our objectives, why we’ve approached it in the way we have, and what we have learnt so far along the way. I’ll also share my thoughts on what I think the challenges are going forward.

 

  1. 3.       What shifts and trends have you seen in customer expectations and behaviour over the three years of your digitalisation programme?

 

Just like any other retailer, IKEA is seeing a rapid shift towards online shopping, and changes in the way we meet customers. Online shopping may still bring customers into stores to collect their goods, so we still have some face-to-face contact, or could mean we ship directly to their homes.

A revolution driven by technology and by retailer strategies is shaping this change in customer behaviour. At the same time, we have the emergence of ‘connected manufacturing’ through technologies used in operations and across supply chains. So for us, the challenge is to ensure we are leveraging both of these significant changes to maximise benefits for the business.

4.       Where in the supply chain do you see the most opportunity with digital transformation?

We have to step back and look at the big picture. The real opportunity is about integration across the end-to-end supply chain, not manufacturing in isolation.

We originally conceived our digitalisation programme as ‘Factory of the Future’, but realised we were restricting ourselves by thinking inside the factory walls. It’s important for any firm to think more broadly, and particularly a consumer-facing retailer like IKEA. To create the most value from the potential of digital technologies we need to look across the supply chain at integrated solutions. This is a monster undertaking, but we have prioritised steps towards achieving it!

5.       What has this enabled you to do that you couldn’t do before?

We are able to transport data end-to-end across the supply chain and extract value from the data, to improve interactions both with customers and with suppliers. There are challenges with this, particularly when suppliers are not yet set up to offer new digital initiatives. We can make things happen faster in areas where we have direct control within the company, such as in logistics and distribution.

As with all supply chains, there plenty of issues. For example, everyone wants to have data from across the supply chain, but we’re finding that nobody really trusts the reliability of their own data, so there is some reluctance to share it. It’s one thing to isolate packages of data which inform the immediate next process step in the supply chain, but if we try to use data to extrapolate forecasts from one end of the supply chain to the other, there are limits to how much the quality of these data can be relied on.

6.       What do you see as the key barriers to digital transformation?

Broadly we have to focus on how best to manage people and change through digital transformation. We need to be able to communicate to different stakeholders and people at all levels in the business what we want to achieve, and the benefits of digitalisation for them and for the business. This is not an easy matter.

For top level management, it can be challenging to give them enough confidence in the decisions they need to make around digital transformation. At middle level management, we often see a reluctance to embrace new technologies because they don’t really understand what benefits it will give them.

So one of the main challenges is around building a business case, both for top-level management decisions, and for getting middle-management on board. This can be hard to do when you have a time lag – it takes a while to demonstrate the benefits of the continuous improvement gained by using real-time, high quality data.

There’s typically less of a problem with buy-in on the shop floor, as long as staff are involved early enough in the introduction of digital technology, because they can more immediately see the benefits to them in terms of convenience. Our responsibility is to ensure we make robust, easy-to-use solutions available to people on the shop floor.

7.       What issues have you identified around workforce skills, and how have you tackled those? 

We’ve been looking at skills gaps since the beginning of the programme. We picked our main pilot unit because the skills gap was one of the smallest, and their willingness to run the pilot was high, and it has run even better than we anticipated. This unit is in the Polish countryside, so it’s not where you might expect to find a technology-savvy unit.

In fact we do anticipate that we’ll have skills gaps in particular types of geographic areas, and in some places it may be challenging to fill jobs. We’ll need some new capabilities such as advanced analytics, and we did not have a problem attracting this talent at central level, but we may find our existing geographic footprint over our 40 manufacturing units presents certain challenges for recruitment. So the logic may change from finding the cheapest location to finding a location where we can recruit the digital skills we need, for example moving closer to metropolitan areas.

8.       How do you ensure digital transformation remains focused on customers rather than becoming about the technology itself?

It’s vital to remain focused on customer-facing benefits. We’re using the strategic roadmapping framework that the Institute for Manufacturing has taught us, which helps to keep our efforts directed towards customers. The real value is partly the mindset that this gives us, making sure we start by identifying the problems we’re trying to solve, then helping us to connect solutions with clear benefit cases. A ‘roadmap attitude’ is helpful!

9.       How do you think manufacturers can use digital transformation to achieve sustained competitive differentiation?

The opportunity for differentiating yourself based on digitalisation is here and now. Companies need to ensure they still have a place at the table.

Looking at digitalisation only in terms of operational improvements will provide limited advantage for a short period, maybe two to five years – mainly because a lot of companies are still struggling with introducing digital technologies. But to achieve a sustained advantage for a longer-term period, companies need to make more fundamental changes and re-engineer their business models.

10.   How do you think firms can use digital technologies to become more sustainable?

One of IKEA’s main objectives is to embrace more sustainable strategies including circular business models. This of course relates to efficiency – digital monitoring will enable us to decrease our energy consumption, with a smart factory which switches off equipment not being used, and only consumes the energy that’s really needed.

When it comes to circular business models, having access to data throughout product lifecycles is one way to enable reusing, refurbishing, renewing resources, even once the product is with the customer.

11. What are your key takeaway messages for other firms tackling digitalisation?

Firstly, focus on integration rather than application. It is important to think about digitalisation in a holistic way – taking a step back and looking at the end-to-end supply chain, rather than focusing on individual applications.

Secondly, remain customer-focused throughout digital transformation. It’s about the customers, not about clever technologies that go ‘ping’!


 

Per Berggren cropPer Berggren is the Industrial Strategy Manager at IKEA Industry. In this function his responsibilities include Manufacturing Strategy, Footprint, M&A, Product development, R&D, Technology, IT, Business Processes and Sustainability. IKEA Industry is IKEA’s manufacturing branch operating 40 plants across 10 countries and employing some 20 000 coworkers. Per has experience from SCM and Manufacturing where he has been running operations in a number of countries as well as headed global business units.

Per holds a M.Sc. in Industrial Engineering & Management and is an alumnus of INSEAD and Wharton.

Per Berggren is the Industrial Strategy Manager at IKEA Industry. In this function his responsibilities include Manufacturing Strategy, Footprint, M&A, Product development, R&D, Technology, IT, Business Processes and Sustainability. IKEA Industry is IKEA’s manufacturing branch operating 40 plants across 10 countries and employing some 20 000 coworkers. Per has experience from SCM and Manufacturing where he has been running operations in a number of countries as well as headed global business units.

Per holds a M.Sc. in Industrial Engineering & Management and is an alumnus of INSEAD and Wharton.

Per Berggren crop