Furniture industry is rarely talked about in case studies and examples. It is a tough industry to be in. High transportation costs, low productivity, poor margins and high competition plague the furniture industry whether you are a small local business or a national retailer. To add to the woes, this industry is very cyclical and is very susceptible economic conditions.
Even in the furniture industry there is an exception!
IKEA. To start with here is IKEA’s 2012 financials: Turnover 27 billion Euro. Net profit 3.2 billion Euros. IKEA’s food revenues 1.3 billion euro. In 2012 they had 690 million store visits and 1 billion online visits!
How?
In an industry plagued with poor standards, inefficiencies, marketing challenges, massive lead time and frustrated customers, how can IKEA dominate and thrive? If you think it is low prices alone, think again. You and I know it is not possible to build a worldwide giant simply by cutting prices. (Although in the past decade they have lowered their prices by 2-3% every year!). What makes IKEA a popular destination for families most weekends? Why millions love to eat, dream, physically pick their own furniture from the warehouse, queue to pay for it and assemble it at home with the infamous IKEA instructions?
It all starts with Ingvard Kamprad the founder of IKEA. Ingvard started his company with a very clear PURPOSE (Ingvard articulates it as a CONCEPT). “We are a concept company. We offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them”. Their aim is to create “a better everyday life for the many”.
IKEA is very clear about its purpose. IKEA lives its purpose in everything it does.
The purpose
The purpose of any business should answer, why it exists, the unique value it brings to the world, what sets it apart and why and to whom it matters. IKEA answers all these questions. Again let me stress that if this appears to be a purpose statement to pile high and sell cheap, think again.
Ingvard Kamprad explains his purpose in “a furniture dealer’s Testament” as follows: We have decided once and for all to side with the many. The many usually have limited financial resources. It is the many whom we aim to serve. The first rule is to maintain an extremely low level of prices. But they must be low prices with meaning. We must not compromise either functionality or technical quality”. (Download “A furniture dealer’s Testament“)
Low prices with meaning that creates a better way of life for the many is IKEA’s purpose.
This blog is NOT about articulating a purpose so that it can impress people with a stylish brochure or a stunning plaque in an office. This is about the power of purpose that can create a massive difference to a market that propels a business to excel beyond expectation.
In fact the source of any business is its purpose. Everything begins from the purpose. A business without a purpose at its core is business simply chasing money and profits – like a ship without a rudder in turbulent waters.
A great purpose
Purpose is a leader’s rudder. Strategies, plans and actions of a business should be governed by the purpose. Just like a conductor using a baton to conduct an orchestra, the leader inspires and guides his/her business – governed by its purpose.
A great purpose drives the business to become better and better. The stakeholders in the business feel they are part of something bigger and important.
A great purpose draws a line in the sand. It declares that we stand for this (and therefore NOT this).
A great purpose let us you (the business) shine. When the reason ‘why’ you exist, the unique value you brings to the world, what sets you apart becomes clear, your business becomes distinct and stands apart.
A great purpose paves the way for the customer to win (value creation) and as a result allowing the business to succeed. The purpose should give the difference that matters in your industry.
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