Innovation and Relationship Management

Real innovation is about the creative configuration and reconfiguration of goods and services to track and meet the shifts and changes in consumer aspirations. It is this creative engagement with its customer base that is a mark of IKEA’s innovation. What IKEA offers is real customer relationship management: firstly, in the imaginative presentation of its products so that customers can readily relate to how they might look in a ‘real life’ setting; secondly, in the technological sense, with their stock and inventory system that is available to customers and which helps in keeping prices competitive. The following article, which first appeared in bottomline magazine takes a sideways look at innovation, creativity and CRM.

Just a few years back, depending on which papers you happened to be reading, Ingvar Kamprad, the founder of IKEA acquired the status of the richest person in the world – estimated to be worth £29 billion, as opposed to Bill Gates £25.5 billion. When I passed on this information about Ingvar’s new found status to a business colleague at my local business network – Pentyrch rugby club – he flatly refused to believe it. “No way! Not in a million years can someone who sells flatpack furniture be richer than Bill Gates.” Given that Ingvar Kamprad has a reputation as something of a recluse and that Bill Gates is a past master of ‘spin’, the reaction was hardly surprising.

But this reaction to Ingvar Kamprad’s wealth is perhaps symptomatic of more general perceptions as to what constitutes the keystone of a successful business. We seem to believe that modern, innovative businesses have to be founded on information technology. And if you happen to produce the software that drives some ninety per cent of the world’s PCs, then not only is this proof positive, but clearly you are a candidate to sit at the right hand of God. And while no doubt IKEA now makes full use of information technology to manage their supply chain and customers, arguably their most significant piece of technology is the allen key.

While there is some dispute as to whether Bill Gates or Ingvar Kamprad is actually the richest – not least by IKEA itself – Ingvar has clearly amassed a quantity of flatpack cash that would no doubt stack into the stratosphere and beyond.

While few are likely to view IKEA as an innovative business in the mould of Microsoft, on its own terms it is arguably more innovative. It is just that its business model isn’t built around technology for its own sake.

IKEA is innovative for the way it has tapped into the modern lifestyle zeitgeist – recognising what makes the modern consumer tick and finding ways of satisfying demand with products priced and made available in ways that meet changing lifestyle aspirations. Innovation may entail using technology but it is much more about determining what happens in market places that are increasingly dynamic and subject to constant shifts and change.

Real innovation is about the creative configuration and reconfiguration of goods and services to track and meet these shifts and changes in consumer aspirations. It is this creative engagement with its customer base that is a mark of IKEA’s innovation. What IKEA offers is real customer relationship management: firstly, in the imaginative presentation of its products so that customers can readily relate to how they might look in a ‘real life’ setting; secondly, in the technological sense, with their stock and inventory system that is available to customers. It is a far cry from Microsoft’s more recent approaches to winning customers, which has made use of the ‘bundling’ practices that has tested their innovative powers of argument with regard to litigation.

It is important – not least for the various business support agencies operating in Wales – to recognise that innovation is more than the acquisition and application of technology for its own sake. While the Welsh Assembly’s ‘Innovation Action Plan’ claims that innovation is not just about the application of technologies and R&D, its language, semiotics and criteria for business support suggest otherwise. If we are serious about encouraging innovation, we need to remember that technology is a tool and that technological invention is the product – not the driver – of creative thinking.

On the question of creativity, it is estimated that one in ten people are currently conceived in an IKEA bed. But if IKEA’s current rate of ‘penetration’ continues, it will give new meaning to the phrase ‘go forth and multiply’. So, while Bill Gates might qualify to sit at the right hand of God, he could well find that when he turns to his left and looks up, that he is sitting next to Ingvar Kamprad.

Glyn Fry

(This article first appeared in Issue 1 of bottomline, 2004)