Leadership and Change – IKEA’s digital transformation
Introduction
In order to support e-commerce sales and competitive position in the global market, IKEA has undergone a digital transformation, which will be highlighted in this assignment. As a result, it will be concentrated on providing a background on IKEA management’s effort to achieve a digital transformation. Evidently, the task will also include critically analysing IKEA’s entire strategy for the digital transition. Thus, the assignment will also emphasise demonstrating how leadership approaches and talents are reflected, as well as suggesting appropriate leadership skills that might assist IKEA concentrate on its future development.
Part 1: Case study analysis
Background to the change process
The management of IKEA has been offering services to avoid a large audience for almost 80 years in terms of selling its distinct brand of home goods (HBR, 2021). Although the company has been operating effectively in the international market, IKEA was witnessing a moderate flow of sales revenue in the global worldwide market. For instance, IKEA has noted a sales revenue growth of €38.8 billion in 2018 as compared to €38.3 billion in 2017 (Statista, 2022). Thereby, the official management of IKEA was focused on implementing different initiatives to enhance their overall performance in the global market as well as adapt to digital transformation to be competitive in the worldwide market. The concept of digital transformation is the adoption of digital technology by an organisation’s management that might provide them with the ability to digitalise each and every non-digital product and service within their operational facilities (Zaoui and Souissi, 2020). Apparently, the official management of IKEA developed a plan and focused on implementing a digital transformation for the company. As of 2018, the management of IKEA appointed Barbara Martin Coppola to provide guidance to the organisational management to go through the overall digital transformation process in terms of developing their capabilities to achieve greater performance and a competitive position in the global market (HBR, 2021). One of the primary reasons that the management of IKEA focused on adapting digital transformation is the reason for growing their overall e-commerce at the global level. However, it can be stated that the company has successfully tripled their overall e-commerce levels in the last three years through the help of digital transformation.
Figure 1: Ikea.com: E-Commerce net sales from 2015 to 2022
(Source: Peters, 2022)
As referred to figure 1, IKEA has witnessed a significant increase in their overall e-commerce net sales from the year of 2018 to 2022 (Peters, 2022). In 2018, IKEA was holding up value in the e-commerce sales of US$3 million which got significantly higher with the help of digital transformation in their operational units that resulted in the company witnessing $12.9 million in their overall net sales through the e-commerce platform in 2022 (Peters, 2022). Based on this particular factor, it has also provided a huge boost to IKEA in their overall enhancement of market sales and financial revenue over the years. For instance, the digital transformation had a huge influence on the overall annual revenue for the year 2022, which stands at €44.6 billion (Statista, 2022). As per the model of ADKAR, IKEA has focused on implementing significant ways that provide them with the ability to align their process with this specific model. For instance, one of the primary steps that were implemented by IKEA was to focus on enhancing their performance regarding the need for improvement within the market. Therefore, it is prominent that the management of IKEA has been focused on increasing their awareness regarding digital transformation (Theagilityeffect, 2023). The second primary factor that could be aligned with the case of IKEA in terms of the digital transformation with the model of ADKAR is reinforcement. Based on this particular factor, it has been found that IKEA has been focused on appointing a professional individual that might provide them with the ability to acquire the necessary reinforcement and knowledge required for this transformation (Theagilityeffect, 2023). Even, the digital transformation of IKEA has also created new possibilities for its retail sector that might provide them with the ability to bolster its relationship with customers in the international market. IKEA has successfully managed to implement the digital transformation in order to trace the provinces of materials, monitor their usage, and be able to get goods back for recycling for better efficiency and waste reduction.
Organisational approach of managing the change
With regards to signify the digital transformation considered by IKEA within their business operations, adequate engagement can be highlighted from the perspective of change agents in their approach. The topmost case in this context highlights increasing preference of digitization throughout the globe. The leaders and managers of IKEA have provided explicit attention to identify the ongoing trend of digitisation due to which their digital transformation has taken place as an integral part of coping with the market demands and preferences. For example, the conceptualisation of an emerging website can be highlighted from the perspective of IKEA where the company has partnered with Taskrabbit (IKEA, 2023). This aspect has been helping IKEA to ensure online services for their target audience.
Even the leaders of IKEA have also paid attention to consider technological advancement and innovation in the core of their change management approach. Thus, IKEA has been attentive to signify the preference of advanced technology like augmented reality (AR) and others. This approach has been largely helping IKEA by enabling their consumers to virtually place true-to-scale 3D models (Ayoubi, 2023). The mobile app of IKEA has also been enabling their users to save and re-enter their design room in augmented reality, which has added a greater value to the digitisation of IKEA. Even, successive implementation of AR has also been supportive from the company perspective to ensure a seamless user experience (Ayoubi, 2023). Concise focus is also maintained by the organisation to launch an emerging augmented reality-oriented application that has been helping potential consumers to test the products and offerings of IKEA on a real-time basis.
However, the consequences of transformational leadership theory can be taken into account in order to highlight the leadership attributes of IKEA behind the digital transformation. The theoretical understanding highlights a purposeful leadership approach that can ensure successive change in individuals (Siangchokyoo et al. 2020). The creation of valuable and positive changes can eventually play a significant role as per this theory to empower leadership ability among an individual. In the case of IKEA, successful application of transformational leadership can be certified as the IKEA leaders and managers have successfully implemented digitisation by creating a visionary change among their workforce and business operations (Kwan, 2020). As a result, different strategies such as incorporation of emerging websites, implementation of innovative technologies like AR and others have taken place in order to help IKEA with their digital transformation process.
The management of IKEA has also been attentive to signify artificial intelligence-powered interactive design experiences for their potential consumers (IKEA, 2021). As a result, the organisation has been able to ensure smarter demand forecasting operations that have significantly improved their accuracy. Moreover, this approach has also been reflecting the farsighted vision of IKEA leaders and managers to help their consumers with effective designing and visualisation of their own living spaces with digitised furniture on their smartphone devices. This rapid focus over digitisation can also be signified as a strategic concern from their leader’s perspective to obtain significant competitive growth opportunities in the market.
Figure 2: IKEA revenue generation
(Source: Statista, 2023)
For example, the annual revenue generation of IKEA group can be highlighted which has ensured constant growth over the previous two decades. By the end of 2022, IKEA had obtained revenue around 44.6 billion Euros, which had also come up from 41.9 billion Euros during 2021 (Statista, 2023). Moreover, the graphical elaboration of IKEA financial performance has also been illustrating gradual and rapid growth behind which significant contribution of their digital transformation can be certified.
IKEA management has been attentive to consider a top-down approach in order to effectively guide and implement changed vision with a focus on digitalisation. In this regard, proactive implications of participative leadership concept can be signified which help IKEA to successfully support the change circumstances. The theoretical belief highlights to consider active participation of the employees in the decision-making process in order to address relevant business issues (Khassawneh and Elrehail, 2022). In this case, successive collaboration can be highlighted from the perspective of IKEA where the management and workforce have combinedly worked in order to support the digital transformation process. It can also be signified through the cultural values of IKEA where a profound focus has been kept on collaboration and togetherness while caring for people and the planet. Due to this reason, a participating leadership approach can be signified within the operations of IKEA due to which their digital transformation process has obtained distinctive growth and pace.
Recommendations for future change practice
Based on the overall analysis of change process in IKEA, a set of suggestions are provided for the company with the implications of theoretical evidences-
Rapid evolution for improvement
For IKEA to reach its market aims and objectives in terms of extending its financial performance and operations with the aid of e-commerce, it is necessary to guarantee that the digital transformation initiative started by the organisational management continues to run in a successful manner. The management officials of IKEA would have to constantly look for any flaws in the new data collecting system and other aspects of digital innovation that may provide them a considerable edge in meeting ongoing client needs (Attaran, 2020). Additionally, it can be stated that it will be crucial for the management teams to pinpoint any weaknesses or completely inadequate functionality in data collection sales performance. This would help in enhancing the overall systems for successfully achieving analytics that can help IKEA maximise sales through the use of digital transformation (Hoque, 2023). In order for IKEA to sustain their performance with the aid of digital transformation, training and development for the workforce may also be seen as a quick evolution for improvement. Giving employees the right information will provide IKEA management the chance to see a major improvement in their overall performance capabilities, which may assist management meet specific goals for the performance of e-commerce in the global market.
Recommendations for change management roles
Based on the overall study, it is observed that the company has to improve its management role, which helps to change the marketing approach of the company for generating more productivity.
Improves decision-making
The mangers of IKEA have to improve their decision-making skills for better outcomes. Sound decision-making is important for a manager to improve workflow and productivity. The proper decision-making skill helps the manager to analyse and solve complex business problems within the organisation (Marr, 2020). The strong decision-making power also helps to implement a plan for moving towards a competitive market. The implementation of the “3C’s of management theory” improves the leadership skills of a manager that includes “constructive conflict”, “consideration” and “closure” (Marr, 2020). Achieving the strong decision-making power, IKEA would able to maintain regulates its business operation in global market.
Building better communication
Strong communication skills are one of the influential hallmarks of a manager that helps to be successful in management (Marr, 2020). The IKEA managers have to be transparent in every aspect of the task and develop good communication among the team members. Moreover, continuous update is required in a working process that helps to promote business effectiveness with the help of a good communication.
Empowerment of analytical approach
IKEA is highly suggested to conceptualise an extended analytical approach within their business operations as an integral part of identifying the upcoming industrial trends. As a result, the management of IKEA would be able to effectively point out the transformation over consumer behaviour and their purchasing intention. Even, IKEA would also be able to empower the data-driven approach based on which the company might be able to successfully address consumer demands and requirements with a focus on technology advancement (Zhang and Chen, 2020). The company is also recommended to formulate an advanced data centre in order to simplify their analytical operations with the touch of creativity and innovation. With the identification of latest and upcoming industrial trends, their competitor’s offerings and others, IKEA would be able to improve their brand recognition and awareness while improving their unique selling proposition.
Based on the above discussion regarding the digital transformation of IKEA, it is observed that the empowerment of an analytical approach with the incorporation of updated technologies such as big data analytics would be helpful for increasing the effectiveness of the change. In this regard, the ideas of the TAM (Technology Acceptance Model) indicate that using technology can be influenced by perceived usefulness as well as perceived ease of utilisation (Najib and Fahma, 2020). Perceived usefulness is seen as the degree to which technologies are believed to improve performance. Hence, it is extremely crucial for IKEA to increase its knowledge regarding the use of data analytics among employees and its effectiveness in performance improvement.
In this regard, IKEA must also be attentive to ensure adequate financial support based on which their existing IT infrastructure can be improved (Das et al. 2019). In order to avoid the consequences of technology failure and disruptions, IKEA is also suggested to include a team of IT expertise where the focus would be kept upon ensuring flexible business operations as a core part of the digital transformation. The management of IKEA can also look forward to appoint an independent ombudsman. The ombudsman would be provided the responsibility of effective surveillance of the technology operations within the company based on which the management would be able to obtain timely report to the issues and failures.
Part 2: Case study analysis
Reflection on own leadership skills
Having leadership skills are extremely crucial for individuals for achieving excellence in their personal as well as professional lives (Guzmán et al. 2020). In order to reflect upon my own leadership skills, I have considered using Gibbs’ Reflective Cycle. This reflective cycle includes different stages for describing the experience, and the feelings of individuals, and analysing them to draw a general conclusion about their learning and conduct a proper action plan for future improvement (Miller and Konstantinou, 2022). Some key leadership skills are critical or strategic thinking, conflict resolution, emotional intelligence, adaptability, creativity, decision-making, and communication.
Considering my previous experience of working in a team in previous group projects, I have realised that I am adaptive, along with having effective communication skills. This is because, in the group work in my schools and college days, I was actively participating and flexible to adapt to different changing circumstances. Furthermore, communication skills are extremely crucial for leaders, which allow them to be able to properly communicate and encourage others (Moldoveanu and Narayandas, 2019). I feel that I have effective communication skills, as during my previous group work, I was able to clearly convey my thoughts and ideas regarding the project, along with actively listening to others. I can even remember that I was once able to resolve conflicts among my team members during a school project, which also indicates my effective communication and skills for motivating others.
Considering Gibbs’ Reflective Cycle, it is extremely crucial to describe personal feelings while describing or evaluating previous experiences (Miller and Konstantinou, 2022). Hence, by evaluating my previous experience of work, I feel that I can be more creative with the improvement of my critical thinking as sometimes I cannot think strategically and make long-term plans for developments. Critical thinking skills are extremely crucial for leaders as it allows them to evaluate their decisions at every level and the impacts of their decision, which further ensures continuous improvement in the business management process (Van Laar et al. 2020). Therefore, I believe that it is extremely crucial for me to improve my critical thinking skills. As mentioned, I sometimes find it more difficult to make long-term plans and take proper decisions by critically evaluating different aspects. Therefore, I think I should be focused on increasing my critical thinking and decision-making skills, as they are the most important skills for leaders.
Recommendation for future improvement
Leadership skills are very specific that vary from one person to another. I have observed that I have to improve my leadership approach by taking some necessary steps. I realised that there are mainly two types of leadership skills such as hard skills and soft skills. The hard skill depends the type of business and nature of work whereas the soft skills help to improve career and ability to lead a team (Yurtseven et al. 2021). The leadership skill can be achieved by identifying and measuring some key skills, which are necessary for the development of a leader. These skills include critical thinking, effective communication, encouraging and motivating others, strong decision making and managing conflict. I rather like transformational leadership style of Sundar Pichai, which motivates me to improve my leadership skills as a leader. This leadership style enhances my “opportunistic traits” that help to build a strong career in future.
However, I have observed that I have to improve my critical thinking and strong decision-making skills that will help me to develop my career path in future. I can improve my decision-making skill by identifying my strength and weaknesses, taking a management and leadership course, brushing up on my hard skills, and determining my goals and deadlines. Problem-solving and decision-making are important skills for a leader that regulates the overall working performance (Marr, 2020). I can improve this skill by identifying the core problems, asking a question, considering more than one point of view and analysing the best solutions. Moreover, the application of brainstorming helps me to enhance my critical thinking power. Moreover, the implementation of the Contingency theory of leadership will also help me to improve my drawbacks by understanding an individual’s leadership style and its benefits.
Conclusion
It is probable to conclude that the digital transformation process done by IKEA’s management in order to strengthen their overall e-commerce position in the worldwide market has enabled them to boost their performance and sales income. Based on the findings, it has been proposed that critical thinking, communication, inspiring others, and decision-making be regarded as some of the major initiatives that IKEA may improve in order to increase overall efficiency through digital transformation.
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