Gillis Lundgren stood beside a car with a colleague, looking into the boot. The wooden table in his hands was never going to fit. In the Guardian’s 2004 telling, set in Älmhult, Sweden, in 1956, he said: “Oh God, then, let’s pull off the legs and put them underneath.”
The Guardian opened its piece with the line “Flatpack furniture was invented by accident.” The story credits one man and one stubborn table with making IKEA cheap.
The IKEA Museum doesn’t tell it that way. In its exhibition on the founder, Ingvar Kamprad, it says plainly: “Neither Ingvar nor IKEA invented the flatpack.” Its page on a coffee table from the 1956 catalogue adds that three tables in IKEA’s 1953 catalogue were already self-assembly.
So the box was not the secret, or not IKEA’s alone. What IKEA had was harder to copy, and it began with a choice about whom to serve.
Three ways to be worth choosing
In his 1980 book Competitive Strategy, Michael Porter set out three generic strategies: cost leadership, differentiation and focus. Win on lower cost, on something buyers value that others don’t offer, or by focusing on one slice of the market. Focus comes in two flavors, aimed at a narrow segment either on cost or on difference. Lower cost is not the same as the lowest price. In Competitive Advantage, in 1985, Porter wrote that a cost leader performs above average “provided it can command prices at or near the industry average.”
Sixteen years later, in the Harvard Business Review, Porter sorted a few companies into the boxes. Vanguard, the mutual fund company, was a cost leader. Neutrogena soap was a focused differentiator. IKEA, “with its narrow customer group,” was “an example of cost-based focus.” So was Southwest Airlines, though its focus was on one kind of service rather than one kind of customer.
IKEA’s group, as Porter described it, was “young furniture buyers who want style at low cost,” customers “who are happy to trade off service for cost.” Much of the low cost came from having them “do it themselves”: pick the boxes off the pallets, carry them home, put the furniture together. The flat pack was one part of a whole set of choices built around those buyers.
Focus did not mean cheap at everything. IKEA offered in-store child care and long opening hours, services its rivals did not. They fit the same customers, Porter wrote: young, not wealthy, “likely to have children (but no nanny),” and working for a living, so they shopped at odd hours.
The warning about the middle
The framework came with a warning. It “introduced the need to choose,” Porter wrote, “in order to avoid becoming caught between” what he called “the inherent contradictions of different strategies.” By 1996 he explained those contradictions as trade-offs: activities built for one position work against another. When Continental Airlines ran a cheap, no-meals service on some routes while staying full service on the rest, he wrote, it paid “an enormous straddling penalty.”
The evidence for that warning is thinner than the warning is famous. In 2000 Colin Campbell-Hunt pooled earlier studies in a meta-analysis. Cost and differentiation did work as broad ways to tell strategies apart. But its “theoretical proposition on the performance of designs,” the claim about which kinds of strategy earn more, “has yet to be supported.”
IKEA itself is a reason for caution. It sold style and low prices at once, and Porter still classed it as a cost-based focuser. By his own account in 1996, the three boxes describe positions only “at the simplest and broadest level.” The detail is in the activities.
The choice also had a price for the customer. In many countries where IKEA opened stores in the 1970s, the museum says, doing it yourself was a brand new idea. Instructions were hard to follow. Through the 1970s and 1980s, people joked about “IKEA divorces.”
The shop between the chain and the boutique
Imagine you own a bike repair shop in a town with a big sports chain on the ring road and a boutique downtown that sells road bikes costing more than a car. You charge middling prices, fix anything, and quote a ten-day wait.
The chain is cheaper. The boutique is better at racing bikes. Your only steady customers are commuters who ride to the train station, and they keep asking the same thing: can I drop it off at seven and ride it home at six?
You decide to be the shop for them. You open at 6:45, stock the parts commuter bikes need, and stop taking full rebuilds of racing bikes, which tied up a mechanic for three days at a time.
The first Saturday, a racing club member who has come to you for six years wheels in a carbon frame. You write the boutique’s address on the back of a receipt and hand it to him.