An online meeting with the Director of Information and Digital Technologies of IKEA KSA & Bahrain Paolo Cinelli took place in mid-February. We want to share how the digital transformation is going at IKEA. Thrillingly, an international company with significant financial resources also faces difficulties in the operation of an online store and it isn’t always able to clearly define a digitalization strategy. How the company overcomes these difficulties is the speech of Paolo Cinelli.
Highlights of Paolo Cinelli's speech.
When we first began to think about digital transformation, the key question that we began to ask ourselves was — why is it needed? The answer is that digital transformation is not just a choice of technologies. It's about business transformation.
Until 2015, IKEA went through three main stages: an entrepreneurial phase, expansion and then consolidation under the slogan "one IKEA". But in 2016, we realized that something was changing, a new era was beginning. We noticed that the number of physical store visits began to decrease, while the number of virtual visits to the ikea.com website began to grow. This process went very quickly. In just 3 years, we have seen that the number of visits to our site has already become 3 times over then the number of physical visits to IKEA stores. In 2021, the number of visits to the ikea.com website reached 4 billions online visits. And 1 billion are unique visitors. This means that approximately one in seven people on the planet visited ikea.com last year.
Here are examples of macro trends we saw in 2015: it's a multi-speed economy, middle-income population growth, continued globalization, moving to cities. One of the trends turned out to be simply revolutionary: it is the growth in the number of technologies and media consumption. And, of course, that's what I'm going to focus on right now.
How is the current revolution different from previous industrial revolutions? The key point is the speed spread of new technologies. It took 75 years for technology like the telephone to reach 50 million users. However, the most cutting-edge technologies, thanks to digitalization, take months, if not weeks, to spread to 50 million users.
Another difference is that absolutely all industries are affected by this revolution. Today, the largest companies in the hotel industry do own a none hotel, and the largest companies in the taxi industry don’t own a fleet of their cars. In other words, entire industries need to reconsider the principles of their existence. But there is a blessing in disguise, and we can benefit from the situation.
For example, with the help of digital technologies, we can sell more. Also, the new reality provides us with a large amount of data, with the help of which we get insights. Thus, we can capitalize this information even more, more significantly.
The next two questions that interested us were how to change and what exactly should we change? When companies realize it's time to make a change, they usually go to a consulting company, hire a consultant, and develop a change plan based on three key questions: "Where are we now?", "Where should we go?", and "How should we get there?" I have nothing against consulting companies, but it seems to me that something is wrong with this approach. Because we live in a complex world, it is versatile, volatile and full of uncertainties. If we really cannot predict what it will be very soon, then we can hardly determine exactly where we need to go.
But what should we do if we don't know where to go? The only thing we know for sure is where we are now. The metaphor that will help us here is the metaphor of the horizon. Why is the horizon important? The horizon gives us a sense of direction. If we are all looking at the same horizon, it means that we can move in the same direction. What else is good on the horizon? The closer you get to it, the clearer it becomes to you that the horizon line is constantly moving away. You can't reach the horizon. And it seems to me that it is with such a vision that one should treat such a phenomenon as digitalization.
In order to determine where our common horizon lies, we held a joint creative workshop, a joint workshop called Future Search. We gathered our leading specialists, players, shareholders, those who are related to IKEA, reflected on the past, present and future of the company, compiled a Mind-map and identified 9 key statements that form the overall horizon of IKEA.
- Ecosystem. IKEA is at the center of an ecosystem that allows people to live the life they want.
- Great availability. Yes, many people have already come to IKEA. But our goal is to attract even more people to our company, and to do this with the help of digitalization.
- Knowledge. We can use the knowledge we have to bring people's ideas and solutions together in the best possible way under today's digital circumstances.
- Data. This is a key asset for us. But for now, we are not creating enough value with the data we have. We need to think about how to transform it.
- Innovations and research of the possibilities of their implementation.
- Buyer orientation.
- Introduction of new technologies.
- Integrated value chain.
- Empowering IKEA employees.
As soon as we defined this horizon, consisting of 9 principles, we immediately noticed how the situation began to change. We saw the emergence of a variety of initiatives. For example, many of our products are now smart products. That is, they can be connected to the Internet. And many of these solutions we received with the help of crowdsourcing programs.
Another striking example is IKEA's augmented reality software. Now you can visualize in a special application using AR how new pieces of furniture will look like in your home.
I could go on and on with this list. In total, we can count more than 400 initiatives that have appeared since we launched this new movement - the movement towards the 9-pillar horizon.
In conclusion, I want to share three of my personal observations that I personally took away from this experience:
- Inclusion. We need to find a way to expand the circle and include as many participants as possible in the processes. Our workshop can serve as an example — people were very happy to be able to take a personal part in determining the future direction of the company.
- We don't want to follow anyone else. We want to lead this movement. At the same time, we want to act differently from others. Go your own way, but do it consciously, and not just because this new technology has appeared and you need to use it somehow.
- It is necessary to remember more often the quote of our founding father, who liked to say: "most things still have to be done." Yes, sometimes the amount of what needs to be done can amaze you. But everything happens step by step, gradually. You need to understand that this is a process, this is a journey, and not a goal that we have reached — we are only on the way there.
Questions from the meeting participants:
How is the IKEA IT infrastructure built? Cloud or on your own hardware?
The on premise format prevails, but I would say that we are moving towards the cloud. Now the distribution is 60 to 40 in favor of on premium.
What is IKEA's IT priority?
The main thing now, of course, is data, and the question is how to convert the absolutely fantastic amount of data that we receive into energy, into cost. We are working on how we can transform this data into new products, into insights into how we can better serve our customers and respond to their aspirations with this data.
The 9 most important things that were mentioned to define the horizon answered the question “How?”, that is, these are tools. How does this not lose focus?
It's all about how the decision-making model is organized. It is not centralized for us. Because if it were centralized, it would be too slow a process. Therefore, the initiative is transferred to the divisions of the company, and they themselves can largely determine the direction for development. The condition is that they must properly inform us about what is going on with them.
Could you tell us, please, what are the main efforts in terms of IT spent in your company now?
The first is safety. The second is revision, improvement of customer experience, customer jorney. And third, it is a reorganization of resources and talent in order to optimize data analytics and the use of new technologies. These are three key points.
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