BMA4000-20 The Business Environment

BMA4000-20 The Business Environment

Case Study Organisation: Successful Innovation – How IKEA Innovates

Task 1: An explanation of methods of undertaking technological and skills gap analysis carrying this out on IKEA to identify development areas (LO1,3,5)

For organisations to detect gaps in knowledge, skills, or technology and to develop plans to bridge these gaps and foster innovation and competitiveness, a technical and skills gap analysis is essential. The technique of identifying differences between the technological capabilities of a workforce and industry improvements is known as technological and skills gap analysis. It entails investigating and comprehending contemporary technologies as well as evaluating and contrasting contemporary skills. By contrasting technical and soft skills, gaps are found. Organisations also need to estimate the adoption of specific technologies and the accompanying skill demands, projecting future skill requirements based on expected technological evolution (Tallon et al. 2021). Employing new personnel, outsourcing work, or creating training programmes are some of the ways that organisations might close skills shortages. To make sure that these tactics are working, they should be often reviewed. Organisations can maintain their competitiveness and provide their staff with the skills they need by conducting regular technical and skills gap analyses.

Strategic planning, improving competitiveness, and detecting skill gaps all depend on technological and skills gap assessments. It assists companies in determining the gaps in the capabilities of their current workforce and the skills that are needed, in effectively allocating resources, and in keeping up with technological changes. By doing this, businesses can maintain their competitiveness and acquire the newest information and abilities. Organisations must recognise and fill skills gaps if they hope to lower attrition, boost productivity, encourage innovation, and lower risks (Cappelli, 2015). Organisations can increase customer happiness, lower error rates, and provide higher-quality goods and services by making investments in employee development. A varied workforce is better equipped to adjust to shifts and trends in the market. By proactively filling these gaps, you can sustain competitiveness in a fast-changing technical landscape and assure long-term success.

From the case study, it has been found that established in 1943, IKEA is the largest furniture retailer globally, boasting over 350 stores in 50 countries. Recognised for its cutting-edge architectural designs and unwavering commitment to product development, the company brought in more than 31 billion USD in revenue globally in 2014. IKEA has been able to adapt and remain ahead of the market for 70 years because of its focus on client purchasing behaviours and ongoing innovation. This success in innovation has been possible because the company always believes in undertaking technological and skills gap analysis to identify development areas. In the following section, methods of undertaking technological and skills gap analysis to spot areas for development have been discussed.

Method of Technological Gap Analysis

For technological gap analysis serves as the basis for a report that compares actual and intended outcomes. Business executives might receive access to a detailed report with particulars. Following are the main points that should be included in that report.

1. Define objectives

Ingvar Kamprad, the company’s creator, fosters an innovative culture within the company, and upper management implements improvements. Innovation accomplishments are measured by key performance indicators, which are bolstered by a well-established value system [Referred to case study]. Ingvar acknowledged that in just three years, the e-commerce sector has grown, turning physical storefronts into fulfilment centres. This necessitates adjusting supply chains, store floor designs, and the flow of commodities. E-commerce necessitates operations that run around the clock. Decision-making is changing as data and analytics grow. This change has been further impacted by the pandemic. Ikea recently introduced Lilla Äventyret, an augmented reality game, in Sweden to teach consumers about sustainability and marine life in collaboration with Meta and Warpin Reality. In two markets, IKEA aims to introduce the concept of ‘Home on the Go’ and small-scale multipurpose furniture solutions in 2024 that can adjust to shifting needs both during the day and at night using high-tech technologies (Ingka, 2023).

1. Assessing current technological and innovation performance

Ikea is modernising its approach to online shopping by utilising digital technologies to offer clients a smooth and uninterrupted experience. The goal of the new approach is to improve customer interactions and maintain consistency between in-person and online shopping experiences by providing individualised guidance and compact access to all Ikea merchandise. In 2021, Ikea stopped publishing its physical catalogue, signalling a move to online sales (The Agility Effect, 2022). The savings of the corporation will be put towards purchasing digital technologies, like the augmented reality system from Geomagical Labs. The application and website for Ikea will incorporate the tool. Ikea has made over $200 million in investments in 23 businesses to support the industry and fulfil its long-term goals. The business intends to use this tactic more often in the future. The company is using digital technologies like augmented reality-based geolocation systems and “Shop and Go” payment options. Additionally being developed are chatbots, AI-based recommendations, and design tools for 3D visualisation (The Agility Effect, 2022).

iii. Identify current technology gaps 

SWOT analysis has been done to identify the gaps in the form of weaknesses and threats.

1. Evaluating potential solutions

IKEA must employ cutting-edge techniques, such as electronic invoicing and flat-pack ship designs, to cut expenses. This lowers costs, increases profit margins, and keeps prices competitive. Furthermore, IKEA ought to put the convenience of its customers first by providing a variety of payment methods and a prompt dispute resolution process. The total experience and satisfaction of customers will be the goals of these initiatives. To address the technical gap, the company has already started working on its innovations to offer new items, distribution methods, and operational strategies, IKEA is undergoing a digital revolution (Golden Owl, 2022). Nonetheless, the organisation is dedicated to its primary goal of maintaining the company’s identity, which necessitates a digital strategy in every facet of operations.

1. Monitor and review the results

The last phase entails employing KPIs and metrics to track and analyse the outcomes of the technology gap analysis and implementation, as well as gathering input from customers and staff to gauge adoption and satisfaction.

Methods Skills gap analysis 

At IKEA, a skills gap study entails defining organisational goals, identifying critical roles and competencies, and evaluating current competencies. Understanding strategic objectives, determining the skills required for each function, and assessing individuals’ abilities through performance reviews, self-evaluations, and input from peers and managers are all part of this process. Next, strategies for filling up the gaps are created. Compare employees’ present skill sets to positions that are necessary and organisational objectives to find skill gaps. Sort the gaps according to their practicality and impact. to compare an employee’s skill level to a job requirement, a skills gap analysis can be performed on an individual basis. It can also be performed on a team or corporate level to ascertain hiring needs. Skill gaps make it difficult for employers to fill positions, yet some contend that these are unjustified demands. Examine the company’s values and the competencies that employees require for their present and future positions in order to solve this. Employee participation in this process can promote development and enhance the success of the business. Surveys, tests, interviews, performance reviews, skills management software, or the creation of a unique skills spreadsheet for every role can all be used to gauge the skill levels of employees. Skill gaps can result from a lack of experience, particularly in recent hiring. These gaps can be filled with on-the-job mentoring, which emphasises Excel and negotiation skills over CRM software. Ikea can hire or train employees to cover skills gaps (Resources, 2023). The gaps between one’s present and ideal skill levels can be filled with training. Expert training companies can plan conferences, workshops, seminars, events, online courses, subscriptions, optional mentorship programmes, and certifications. Create plans for training and development that include formal programmes, on-the-job training, coaching, and mentoring to close these gaps. Execute programmes for training and development, making sure staff members has access to tools and assistance (Resources, 2023). Track developments, make necessary adjustments, and assess efficacy. Make iterative changes to the process in response to input and organisational objectives. Assess the efficiency of the skills gap analysis procedure regularly and put efforts into place to keep improving workforce development.

References

Cappelli, P.H., 2015. Skill gaps, skill shortages, and skill mismatches: Evidence and arguments for the United States. ILR review, 68(2), pp.251-290.

Golden Owl, 2022. How does IKEA utilize digital transformation in business?. [online] Available at: https://goldenowl.asia/blog/how-does-ikea-utilize-digital-transformation-in-business (Accessed on 16 January 2024)

IKEA, 2022. IKEA looks to innovation for new small-space solutions. [online] Available at: https://www.ikea.com/global/en/newsroom/innovation/ikea-explores-new-solutions-for-small-space-living-through-innovation-221206/#:~:text=IKEA%20looks%20to%20innovation%20for,2023%20in%20two%20IKEA%20markets. (Accessed on 16 January 2024)

Ingka, 2023. IKEA Retail imagines life at home in 2030. [online] Available at: https://www.ingka.com/newsroom/ikea-retail-imagines-life-at-home-in-2030/ (Accessed on 16 January 2024)

Mineraud, J., Mazhelis, O., Su, X. and Tarkoma, S., 2016. A gap analysis of Internet-of-Things platforms. Computer Communications, 89, pp.5-16.

Resources, 2023. How to conduct a skills gap analysis. [online] Available at: https://resources.workable.com/tutorial/skills-gap-analysis#:~:text=Conducting%20a%20skill%20gap%20analysis,perform%20in%20a%20given%20role. (Accessed on 16 January 2024)

Tallon, P.P., Queiroz, M., Coltman, T. and Sharma, R., 2019. Information technology and the search for organizational agility: A systematic review with future research possibilities. The Journal of Strategic Information Systems, 28(2), pp.218-237.

The Agility Effect, 2022. How IKEA is stepping up its digital transformation. [online] Available at: https://www.theagilityeffect.com/en/case/how-ikea-is-stepping-up-its-digital-transformation/#:~:text=Ikea’s%20Chief%20Digital%20Officer%20said,web%20traffic%20and%20online%20orders. (Accessed on 16 January 2024)

Task 2 : Assess an Innovative solution relevant to the identified technological and skills gap and the potential benefit of implementation on IKEA.

Technological and skills gaps have occurred in IKEA due to a lack of education and awareness of changes in how they work and the adoption of technological innovations. As a result, it reduces productivity, becomes a barrier to competitive advantage, enhances the risk of cyber security, workforce challenge and barriers to digital growth contributing to disruption in the organisation’s financial and market stability. Hence, as per Berger and Frey (2016), the adoption of innovative strategies and solutions is crucial to reduce the technological and skill gap and ensure business growth. In this respect, to adopt such strategies the first step should be to remove the distrust between business and technology and resistance to change among the employees. If the employees doubt the ability of the technology, then the derided result will remain underestimated contributing to failure in digital transformation. As per Enders et al., (2019), reducing such distrust helps in addressing the company’s needs and ensures the potential to deliver the predicted goals to the organisation. Not only that it also helps in identifying the loopholes in the current business process, assists in the resolution of existing challenges, and takes precautionary steps against any potential threats. Moreover, the adoption of user-friendly design and establishing a vision of putting user experience first is another strategy that can help in removing the challenge of technology and skill gap from IKEA. Nowadays employees are tech-savvy and have high expectations of businesses. Hence, the organisation must have a requiring the development of a basic and user-friendly business app use can be opened from any system and mobile, which will assist in employee retention and fill the technology gap.

The technology goals need to be primarily focused on how technology integrates with the company, how it can meet employee and customer expectations, and how it can support new and innovative business opportunities to competitive advantage. In this regard, data-driven training and development for the employees is crucial for fostering digital transformation in IKEA and reducing the skill gap. According to Azmat et al., (2020), data analytics tools play a significant role in addressing the skill gaps of the employees and ambiguities within the organisation. With the help of analysing the performance matrices and feedback of the employees, the organisation can identify the developmental areas and take the initiative to improve them same. Furthermore, in order to reduce technology and skill from IKEA, the adoption of a personalised learning path can be considered. With the help of integrating the AI automated algorithms, the organisation can easily implement a personalised learning path for their employees. It allows customising the learning paths for each employee based on their skill gap, learning style, job role and expectation for career growth. Thus, as a result, it helps in maximising their learning growth, and efficiency, fills their skill gap, makes them motivated and ensures job satisfaction. In addition, as stated by Farshid et al., (2018), Virtual Reality (VR) and Augmented Reality (AR) are other crucial advanced technologies which foster the skill growth of employees and make the organisation to adapt the market trend and rapid change in a technological environment.

Here, VR refers to a computer-generated environment that is perceived through a device named a Virtual Reality headset or helmet, representing scenes and objects which seem to be real. It makes the user feel they are plugged into their surroundings. In the same way, AR refers to the interactive experience which enhances the real world with computer-generated emotive and perceptual information (Verma and Paul, 2022, p. 57). By integrating software, hardware and apps like AR glasses AR overlays digitally transformed content onto real-life environments and objects. These two devices are not only useful for entertainment but also immensely applied to education and business across the world. VR and AR allow the organisation to provide hands-on training and experience for technical skills and approaches. This process is completely safe and helps the employees to practise with real-world scenarios and enhance their learning effectiveness. Moreover, in the strategy to foster digital transformation and reduce the technological gap a huge amount of investment in research and development is required. As reported in IKEA (2024), the company has been found to invest more than $2.2 billion in its omnichannel growth strategy in the US over the next three years. Thus, only investment in its channels and marketing networks is not enough, allocating financial resources to upgrade the technologies and equipment and modernising the technological information in the organisation is crucial to be adaptive to the market needs and fostering satisfaction to the employees and customers. It may involve integrating AI automated software and devices, the Internet of Things (IoT) and a cloud-based system like a CRM system. Thus, the technology and skill gap have an immense negative impact on a company’s growth and success which can be reduced with the help of such mentioned strategies or solutions.

References

Azmat, F., Ahmed, B., Colombo, W. and Harrison, R., (2020), June. Closing the skills gap in the era of industrial digitalisation. In 2020 IEEE Conference on Industrial Cyberphysical Systems (ICPS) (Vol. 1, pp. 365-370). IEEE.

Berger, T. and Frey, B., (2016). Digitalisation, jobs and convergence in Europe: Strategies for closing the skills gap (Vol. 50). Oxford: Oxford Martin School.

Enders, T., Hediger, V., Hieronimus, S., Kirchherr, J.W., Klier, J., Schubert, J. and Winde, M., (2019). Future skills: six approaches to close the skill gap. World Government Summit.

Farshid, M., Paschen, J., Eriksson, T. and Kietzmann, J., (2018). Go boldly!: Explore augmented reality (AR), virtual reality (VR), and mixed reality (MR) for business. Business horizons, 61(5), pp.657-663.

IKEA, (2024), IKEA announces $2.2+ billion investment to grow in the U.S. [Online] Available at: https://www.ikea.com/us/en/newsroom/corporate-news/ikea-announces-usd2-2-billion-investment-to-grow-in-the-u-s-pub50be6e70#:~:text=Conshohocken%2C%20PA%20%E2%80%93%20April%2020%2C,over%20the%20next%20three%20years. [Accessed on 10 February 2024]

Verma, J.K. and Paul, S. eds., (2022). Advances in Augmented Reality and Virtual Reality. Springer.

Task 3: Describe the barriers to implementation of innovation, technological and or behavioural that may impact the proposed solution.

As reported in Statista (2024), IKEA operates its business operations in around 59 countries and 3 territories including a diverse workforce with 231,000 employees. Hence, due to the incorporation of such a huge number of employees, the biggest challenge to adopting the mentioned solution can be the resistance to the change. The diverse workforce of IKEA includes employees belonging to different backgrounds, education, demographic characters, experiences and skills that serve different vision, values and interests. Thus, all may not agree to the strategies resulting in conflict, delays in communication, decision-making, and technology integration. In this regard, to reduce resistance to change, IKEA needs to be focused on a two-way and open communication process, analysing employees’ feedback and ensuring leadership support. In addition, time and cost are the major constraints that mostly influence the effectiveness of strategies of technological and skill gaps in IKEA. As per the financial rapport presented in IKEA (2024), the value of operating expenses incurred by this organisation was reflected at EUR 25,900 million in the year 2021 which has increased to EUR 27,331 million in 2022. Thus, the adoption of advanced technologies and equipment may greatly affect the growth of operating expenses influencing profitable growth. Thus, the financial resource constraint can become a great barrier to implementing the solutions in this organisation.

In the same way, the procedure of integration of advanced technologies and ensuring change management to digital transformation involves several steps, such as, establishing businesses, addressing employees’ and stakeholders’ requirements, communicating reading the change, exploring similar visions, achieving short-term achievements and finally implementing the change, which is quite time-consuming. In this respect, to reduce the technological and skill gaps in the organisation, retention of skilled and talented employees in the respected field is crucial which can be affected by the declined brand value of IKEA. Based on the report presented in Statista (2024), the brand value of IKEA amounted to 15.9 billion U.S. dollars in 2023, which has declined from 17.43 billion dollars in 2022. Thus, it may increase barriers to talent acquisition and influence the growth of digital transformation. Furthermore, according to Serpa (2016), organisational culture is another crucial factor that may lead to the failure of the suggested strategies for the organisation. Establishing a workforce that includes collaboration, encourages creativity and shares their ideas and long-term vision with others ensures innovation in the business operations. A lack of clear vision and business goals also can be the cause of failure in filling technical gaps. The created goal or vision needs to be flexible and align with the market trend and the values of the employees. Otherwise, it will increase resistance to change, contributing to failure.

Regulatory and compliance constraints are other crucial factors that influence the transformation of IKEA. The organisation operates in 59 countries and 3 territories which increases regulatory requirements and the constraints of completed increases barriers to innovation. Industrial norms and standards increase risk complexity in business operations, resulting in failure. As stated by Belbin and Brown (2022), team collaboration is crucial for the adoption of new strategies and approaches in the organisation. Cross-cultural collaboration in a diverse workforce helps generate creative and innovative strategies, ensures uniqueness in production and increases the opportunities for competitive advantage. Moreover, as per Muhammed and Zaim (2020), most importantly leadership support is the key to achieving success and footer business growth. The leaders are responsible for managing the team members, assessing their skill gaps and abilities, fostering training and educational workshops and boosting their knowledge related to their job roles. It helps in establishing a collaborative and positive working environment, contributing to innovation and opportunities for competitive advantage. Hence, lack of leadership support will result in a lack of motivation and engagement among team members which will reduce productivity and growth of innovation. Addressing these barriers will be helpful to IKEA to foster more strategic approaches and practices to enhance motivation among the employees and develop a culture of innovation.

References

Belbin, R.M. and Brown, V., (2022). Team roles at work. Routledge.

IKEA, (2024), Annual report of IKEA. [Online] Available at: https://www.inter.ikea.com/-/media/interikea/inter-ikea-holding-bv-annual-report-fy22-final.pdf?sc_lang=en&hash=5BEB9B30743A49B96BC6112A49FDA40D [Accessed on 10 February 2024]

Muhammed, S. and Zaim, H., (2020). Peer knowledge sharing and organizational performance: the role of leadership support and knowledge management success. Journal of knowledge management, 24(10), pp.2455-2489.

Serpa, S., (2016). An overview of the concept of organisational culture. International business management, 10(1), pp.51-61.

Statista, (2024). IKEA’s brand value worldwide. [Online] Available at: https://www.statista.com/statistics/980112/brand-value-of-ikea-worldwide/ [Accessed on 10 February 2024]

Statista, (2024). Number of employees of the IKEA Group worldwide. [Online] Available at: https://www.statista.com/statistics/241825/number-of-employees-of-the-ikea-group-worldwide-by-function/#:~:text=In%202022%2C%20the%20number%20of,staff%20members%20compared%20to%202013. [Accessed on 10 February 2024]

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