IKEA and a Culture of Innovation (AQA - 12 Marks)

Here is a suggested answer to Question 1 in Set A of the AQA Paper 3 exam questions on the IKEA case study used at the Grade Booster 2017 workshops.

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One advantage to IKEA of encouraging a culture of innovation is that it supports the strong flow of new product development that is vital to IKEA's continued success. Employees at IKEA are empowered and encouraged to continuously seek small improvements (like Kaizen) in the way that products are made and sold (process innovation) and to research ways in which innovation can improve the everyday lives of customers (product innovation). By enabling the whole organisation to be involved in the search for innovation, this is more likely to result in a consistent flow of new product ideas, which in turn means that IKEA's product catalogue will continue to be updated each year with around 25% of new products (usually 2,500 out of 9,500 products featured) in addition to the timeless classic IKEA products such as Billy bookcases and Poäng armchairs. A further consequence of this is that IKEA customers can expect to discover new products on display each time they visit an IKEA store and will therefore be more likely to increase the amount they spend each visit, thereby improving IKEA's financial returns.

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Another advantage to IKEA of an innovative culture is that it helps motivate and engage employees to work in a way that is consistent with the mission and values of the business. IKEA's longstanding vision to "create a better everyday life for the many" is quite ambitious and requires more than just market research to generate the innovations that enable IKEA to achieve its vision. The case study helps explain how innovation is at the heart of IKEA's organisational culture and how this allows innovation to be part of the "DNA" of the business. We are told that every employee's contribution is considered important and each is encouraged to develop their skills and paths in the business. Everyone in the business is expected to "embrace constant change" which is likely to mean that resistance to change will be minimal, thereby reducing the barriers to innovation and achievement of the company vision. By bringing employees together from across different parts of the business to explore ways of creating better everyday lives, IKEA also appears to be adopting a kind of "task culture" which may be the most appropriate way for IKEA to take advantage of the business opportunities of constant innovation.