To the uninitiated, the name Ikea is associated with large, garishly coloured, out of town superstores selling flat-packed modern design for the home that can lead to marital discord as the hapless customer tries to self-assemble a kit that sometimes lacks essential parts. Hardly the formula for a runaway global success story that is bucking the current economic crisis and whose CEO of the past ten years is winning awards for socially responsible business leadership.
And yet, over the past ten years under the stewardship of chief executive Anders Dahlvig, Ikea has grown from 7.3 to 21.5 billion euros, with over 565 million visitors dropping in to one of 296 stores in 36 countries during the last financial year alone. During his ten years at the top, Dahlvig has received the Swedish award for Good Environmental Leadership (2002), in recognition of his work with environmental and sustainability issues; the US Foreign Policy Association’s Global Social Responsibility award (2006), given to individuals and companies who are committed to good corporate citizenship in the communities they serve; and the first annual Oslo Business for Peace award (2009) – presented in May of this year with the aim of inspiring and encouraging business leaders worldwide to do business in a responsible way.
In presenting the Oslo award, Nobel laureate Professor A. Michael Spence said, “Ikea and Mr. Dahlvig have an extraordinary influence in the world. He has participated in building a business of a size and character where all stakeholders are winners; my children shop there, the designers, the manufacturers and not least the employees who also seem to enjoy working there.”
Asked what challenges he had to overcome to pursue an aggressive growth strategy while still maintaining his sustainability agenda, Dahlvig gives a rather enigmatic reply: “There has been very little conflict between aggressive growth and sustainability.”
Save money – and the environment
Dahlvig himself might be the first to admit that he had, perhaps, a head start. “One of the great things with Ikea is that our vision, business idea and values fit perfectly with driving a sustainability agenda,” he comments.
When, in 1956, a young draughtsman working for Ikea founder Ingvar Kampard decided to remove the legs from a table in order to fit it into a colleague’s estate car for transport, he inadvertently created the foundation on which much of the company’s future success was built. Manufacturing and transporting ‘flatpack’, as it became known, cut out significant portions of the production process and shipping bulk, allowing the company to pass on huge savings to customers who were willing to do the final assembly work on their furniture at home. The idea caught on quickly with the company’s target market – young, aspiring middle-class buyers who wanted to bring a touch of modern design into their homes at an affordable price. It was, perhaps, a stroke of luck that the flatpack concept and Ikea’s constant drive to cut both costs and retail prices also delivered environmental benefits that have recently become of considerable importance to that same market segment.
“Whether it would have been possible to deliver our record on sustainability in another industry would depend on the values and insight of the owners as well as the leadership of the CEO,” Dahlvig claims modestly. “There are still many business people who claim that sustainability is expensive and contradictory to profitability. I have so far seen very little evidence of that.” During his ten years at the helm, the company not only saw two hundred percent growth, it also managed to cut sales prices by 20 percent and increase profitability.
What differentiates the Ikea approach is the way the idea of sustainability infuses every aspect of the business, from product concept to store design to waste disposal. It may take up to three years for each new product to move from concept to shop floor, as the designers work closely with production experts to find materials that will deliver to Ikea’s exacting requirements for design, performance, social and environmental sustainability and low cost. In its retail operations, the company has appointed an ‘environmental coordinator’ for each store, whose responsibility is to oversee waste recycling, energy conservation and education. The company prefers brownfield sites for locating new stores, follows the latest environmental technologies in their construction, and pursues an ambitious target of recycling 90 percent of all store waste.
None of this would be possible if the company’s values were not understood and espoused at every level, from the chief executive to the guys in the distribution warehouses. In an organisation of over 127,000 employees (called co-workers in Ikea-speak), that takes strong leadership, but also a sound framework of old-fashioned management development policies. “It is not so difficult to maintain a culture of total commitment to living the principles of our organisation,” comments Dahlvig, “because we have a strong and living Ikea culture, with management systems in place where we can track progress and make conscious decisions on recruitment and promotions to support continuous progress in these areas.”
The strong culture he refers to has been described by some people who have visited the Ikea headquarters in Älmhult as bordering on cultish, with co-workers reciting the company vision of ‘making a better life for the many people’ while they go for their scheduled exercise break. However, around the hype there is solid evidence of the company making a difference. Partnerships with external organisations such as WWF, Unicef and Save the Children further develop the company’s work within social and environmental fields. A commercial belief that the management teams of each operating unit should reflect the customer base in which it operates has resulted in a female complement at store and country management level of nearly 50 percent. “Regretably we still have a lot to do in many other categories,” says Dahlvig, “and not least in group management where currently we only have one female participant.”
But it’s not all about headline growth, diversity and saving the environment: there is a shrewd financial acumen to Dahlvig’s tactical leadership. In a recent interview with Jeremy Caplan of Time magazine, he conceded that sales have been down slightly in the current economic recession, but went on to point out how well placed the company is to ride out the storm. “We have a very conservative policy when it comes to borrowing money. We basically only use our retained earnings and don’t borrow very much. People know when they have less money what Ikea stands for.”
Dahlvig told Kampard in 2008 that he would be looking to step down within the next twelve months. His replacement has recently been announced as Mikael Ohlsson, currently head of Ikea’s South Europe and North America businesses, who takes over on September 1.
Dahlvig’s recent appointment as chairman of the Board of the New Wave Group AB, a brand management company with strong ethical and environmental values, signals his intention to pursue his interests in sustainability in the future. First, though, he intends to take a well-earned rest. “My intention now is to take some time to reflect on the future,” he says. “I will look at opportunities and suggestions that arise and take on some company board assignments rather than look for a new CEO assignment too quickly. This is a once in a lifetime possibility that I have planned for, for some time.”