In our books, blogs, podcast courses, and workshops, we emphasize the importance of solid customer understanding for designing great value propositions and business models. In this post, we’ll look at how Ikea’s successful global expansion is centered around a rigorous focus on customer understanding and customer development exercises.
Fortune wrote a great profile on Ikea’s successful global expansion. The story shared many insights into the importance of customer development when exploring new ways to create value for customers and value for your company.
Here are the customer development habits Ikea picked up, and continues to use today:
Ikea allocates a lot of time to validating market risk.
Back in 1985, Ikea’s first foray into a foreign retail market outside of Europe resulted in a lot of mistakes. The organization assumed the European approach would work just as successfully in the U.S., and ultimately failed to capture success. The experience forced the organization to focus on a more stringent study of new markets with the customer at the center of the entire experience.
Ikea is ferocious about not expanding too rapidly, and it studies the market intensely. The company tries to validate what the market wants before implementing anything. In fact, Ikea spent 6 years studying the Korean market before opening its first location in the country. They focused on understanding what the market appetite was well before building a physical store in a new location.
Ikea collects evidence to build regional customer profiles.
The Fortune article points out how in one instance, Ikea studied over 8,000 people in eight cities to understand customer morning routines. What they observed are the jobs, pains, and gains that fuel customer priorities. How fast are residents of particular cities out the door each morning? What cities hit the snooze button? How do their homes play into morning routines? What are the morning rituals of people in Mumbai or Shanghai?
Ikea’s goal isn’t to assess the differences between each regional customer segment, it’s to understand where they intersect in order to design pain relievers and gain creators that can fit many segments at once (Ikea’s business model is centered around moving as much volume as possible, at a very low cost). In some cases, the company can create new value from existing products to respond to an updated customer profile.
Ikea doesn’t just listen to what their customers say.
Customer interviews are a cheap and effective way to kick-off customer development, but they don’t always display how customers will actually behave. Even after surveying over 8,000 people, the team at Ikea will physically observe customers participating in a variety of simulated environments. The company frequently does home visits, places cameras in volunteer homes, and will even send an anthropologist to live in those homes.
If you visit Ikea’s sample rooms in different locations around the world, you’ll probably find the same products but they’ve been integrated into how different cultures might place or use the item. The mock rooms will even mimic the local architecture and culture to relate to customers.
At Ikea, everyone steps into the customer’s shoes.
Steve Blank, father of the Lean Startup movement is famous for telling companies to get out of the building and talk to customers. There are no answers inside board rooms or cubicles.
At Ikea, stepping into the customer’s shoes takes place as early as a new hire at the company. New employees who aren’t yet fully accustomed to the tools and approach to Ikea products are asked to perform assembly tests. Employees are given the famous Allen wrench and are observed as they attempt to assemble products. If a product takes too long to construct (internally known as the “husband killer”), the Ikea team will iterate on the assembly experience.
Ikea makes plenty of mistakes, but works to correct them.
The Fortune article closes with a great quote from Ikea’s design manager, Marcus Engman. “We are world champions in making mistakes,” says Engman. “But we’re really good at correcting them.”
Ikea’s failures and missteps fuel much of the company’s ability to rethink its value to customers. This iterative approach is woven into the fabric of Ikea’s culture. Beyond exploring new value through existing products, Ikea iterates on assembly techniques, its packaging format, and even its popular catalogue to reflect evidence collected from customer development exercises and experiments. Every element of the company is hardwired to laser in on what customers really want.
Start Testing Like Ikea
Here are 10 essential links for testing your value proposition & business model. Get out of the building and start interacting with your customers!