How Does a Global Brand Like IKEA Reopen Following the Covid-19 Pandemic?

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0:51Hi everyone and welcome to HBR Quarantined. I'm Adi Ignatius, the Editor-in-Chief of Harvard Business Review, and my co-host is Josh Mott, who heads product and innovation for the company. We started this program maybe six or seven weeks ago to be a forum to discuss issues related to COVID-19, how they were affecting business, how they were affecting the world of work. We've expanded that some to also talk about the latest big national conversation that's happening in the U.S. in particular about race and equality. Today, we are going to pivot a little bit and really talk about business. As businesses start or continue the process of reopening, we want to talk about what that's like.

1:45So we have a special guest this week, Jesper Brodin, who is the CEO of Inca Group, which oversees IKEA. So we want to we're going to bring him in a little bit and talk about, you know, what it's like for one of the most beloved brands in the world as it begins to reopen around the world. I want to talk just a little bit, though, about the phenomenon of reopening. I spoke to a friend in New York City today who said it feels like the city is reemerging and starting to feel like its old self. I mentioned that because New York was, of course, the epicenter of the pandemic in the U.S. More than 200 ,000 people tested positive in New York City.

2:22More than 20 ,000 have died, either confirmed with COVID-19 or probable. But the tide seems to have turned. Positive rates are on the decline. Yesterday was the start of phase one of New York's reopening. Construction sites, manufacturing businesses, wholesale supply chain businesses, retail, both curbside and in-store pickup all kind of reopened. So safety protocols remain in place, and this is just phase one, but it's potentially a big milestone as society, as the economy starts to move back into normalcy. So Josh, I want to ask you about your perspective. You're up in Boston, which I think began phase, or is beginning phase two of its reopening.

3:10Yep. I think Boston, see, I'm slowly reemerging as well. I mean, you know, got my hair cut. That was kind of interesting. I went to a main street in, around where I live and noticed that cars were actually parked in front of stores, which I hadn't really seen so much of before. Stores were open. Restaurants had doors wide open. You could sense, you know, there, there was, there's something percolating at the same time, you know, just talking with friends who work downtown or in different places, you know, there's a little bit of traffic coming back. But it does seem like a slow process. And I guess everybody just has that comfort level, you know, and you get the sense that we're all like, this is, this is going to get back, like, we're going to get back somewhere.

3:56But you still have that, like, when or how, you know, it's just still has that murky sense of, we're still in the midst of something, but all the, you know, the positive signs, you know, we'll take them. Yep, absolutely. So let me let me So let me introduce our guest who will join us. Again, this is Jesper Broden, who's the CEO of the Sweden-based Inca Group, which oversees IKEA. If you just joined us, this is HPR Quarantine. I would urge any viewers to join us in the conversation. If you have questions for Jesper, please introduce them. He began his career as a purchase manager for IKEA in Pakistan.

4:34He's been at the company for more than 20 years, and he's been CEO for the past three years. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. Propel Fitness Water with Gatorade electrolytes, zero sugar and vitamins.

5:12Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade electrolytes. As an assistant to IKEA's legendary founder, Ingvar Kamrad, and to the then CEO, Anders Dahlvig. I think we have a picture of an opening in the UK. So you get a sense of what it can look like as a company reopens. So huge crowds, huge pent up demand, and you get a sense of the social distancing that is happening. IKEA, this is a brand that is beloved, that has a special place in our hearts. We all know the jokes, the tropes, the idea that marriages are broken up in its showrooms.

5:56We laughed at our own ineptitude in trying to put together the Billy bookcases. And if you look at the internet, there are a lot of IKEA jokes. Here's one that I can actually say is sort of a dad joke, Ikea joke. Going to my son's room is like going to Ikea. I just go to have a look and I come out with six glasses, four plates, three towels, and a ton of meatballs. But the fact is Ikea produces the chic and affordable furniture that can be found nearly everywhere, definitely in my home. As I said, it's one of the most beloved companies. Interbrand last year ranked Ikea very high, number 26 of all brands in the world.

6:35So the last thing I want to show, a quick TikTok video that shows how people are creative with IKEA things, including those blue bags that you carry your stuff in.

7:12So welcome from Sweden, Jesper Brodin. Thank you for being here. Thanks for having me. So let me ask you, so let's, I guess let's talk about COVID-19 and its effect on your global business. Maybe let's start with the pre-reopening moment. You know, how many stores were closed and how did you survive the worst period? Well, it's been absolutely the most strange period, of course, that anybody can remember from realizing during the days basically Covid was contained in China to realizing the pandemic and then acting on closures. So we had actually 90 % of our stores closed at the worst days. And of course, having in the old business model, 90 % of our revenue cut out is something that nobody could have a dream of them so that was the rock bottom that's um my gosh that sounds just crazy you know when you think about the experience of going to the stores and we can talk a little bit about how you're choosing to reopen but i'm really curious about the experience of retail because so much of the experience in a way is communal when you go to ikea you're you know you're you're you're all together and touching things and there's it's based on you know closeness to to a large extent do you think we're going to see sort of fundamentally just reimagining of the retail experience coming out of this it's an interesting question that i think it's going to be we need a bit of track record to understand the history when we're in it right but if i would take a guess at this moment the transformation that we were already into where we saw digital and services shifting the way we access people and serve people.

9:01We were already into that, you can say. But interesting enough, during these months that we have behind us now, our online share, which was a humble 10%, 11 % before the crisis, was actually up seven times at peaks. We chose that in spite of the pleasure of... This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense?

9:41There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. Propel Fitness Water. With Gatorade electrolytes, zero sugar, and vitamins, Propel hydrates better than water. to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade Electrolytes. Being together in an IKEA store, there is also the necessity, of course, in life at home to start with a lot of needs in working from home. A week after, the whole cooking wave came from us where people realized that they actually had to become better chefs at home.

10:20So the online was moving, And we will most likely see an IKEA that has taken market shares and expanded as we have responded to that demand. We hope that people will still enjoy and come back to our stores. And definitely when we see the opening, that would be a surprise for us how quickly people came back to basically visit us. Yeah. Talk more about how you decide. What's your threshold for deciding when to reopen stores? How to reopen stores? I think I'm right, correct me if I'm wrong, that even as New York has started to reopen, I don't think you've reopened your Brooklyn store. So we haven't opened.

11:00Actually, I'm not fully updated on the Brooklyn store in particular. But we are taking steps by steps. And from the closures to the discussions in between to the opening has been a close collaboration with authorities, which has been, I think, overall phenomenal around the world. where parties have, I think, authorities, companies, unions have come together in order to save jobs, to make sure safety is a priority for people and so on. So it's been fairly straightforward, both the decision to open and close, but the operational aspects of it is absolutely a humongous task that we've been standing before across this.

11:41And when it comes to safety measures, it's not only about caring for people, right? it's about our ticket to remain open so thereby we said we will we will try to be perfect in how we implement the best of standards in order to not only give people that sense but also make sure that it's a good place to come yeah it sounds like a huge amount of thought and process goes into figuring that out at the same time that you're doing that um there's this backdrop i think where CEOs today are expected to engage on some of the big issues, and we're certainly seeing those things emerge right before our eyes, and we're talking about a whole range of issues.

12:21CEOs definitely are asked to have their opinions and speak for their companies. I'm curious how you decide what are the issues that you're really going to engage on or when you might be silent on something well i believe ikea is one of the companies who is truly guided by a vision so we are foundation owned and we have a long legacy with that goes back to not only the 75 years we've been around but back in the 70s we formulated the vision of ikea and once and for all decided to be for the many people and i think in a way ever since we have been guided by that vision and it's been I think escalating the last decade saying that except for serving people with affordable furniture in life at home we have been looking at our total value chain and been into all sorts of more unethical questions to how do we actually run a company long term both to protect the future of the company but also doing what's right and then obviously you can say it's big topics but it's about people and planet so the whole climate topic which is a crisis that won't wait for covid 19 but it's emerging is high on the agenda as as well as of course the equality topics that has been uh rising the last weeks due to the events in in the u.s and around the globe these days um i want to remind viewers um submit questions of your own this is hbr quarantine uh we are interviewing the CEO of the group that controls Ikea.

14:03Yes, we're...

14:27Various 18+. Propel Fitness Water with Gatorade electrolytes, zero sugar, and vitamins. Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade electrolytes. So join the conversation. Jesper, you mentioned the racial inequality issue. I'd love to hear. I mean, this is this is a moment where I think companies are reckoning with their lack of progress. You know, maybe they've they've said the right things and even tried to do the right things, but have acknowledged they have not done the right things in recent years, decades even.

15:10So it's a moment when when companies are really seriously rethinking what they're doing in terms of diversity and inclusion. I know you're you're based in Sweden. You're not in the U.S., which is the epicenter of this conversation. now but but i'm sure you're thinking about okay what is the response that the ikea which has a big presence in the u.s and a big presence globally you know what is the response and that that that you need to make that you want to make now yeah very good but i think when i started in ikea back in the 90s actually i think i was a young manager at that time and i observed how it was the emerging topic of what is the responsibility of the company and i believe that previously it was thought that governments and authorities around the society and companies are isolated to their activities but through sourcing topics we realized that we need to have a point of view we need to drive an agenda where ethics are flavoring everything we do now we my predecessor Professor Anders, you mentioned before, already back in 2000 launched, I think a quite strong campaign for diversity.

16:20What IKEA did those days was to zoom in on gender equality, where we are one of the companies who are unfortunately quite unique being in a 50-50 position when it comes to gender equality. But obviously the equality agenda has flavoured our statements and positions on ethnicity, racial background, and making strong statements when it comes to being profoundly against any sort of discriminatory behavior. We are currently, due to the latest event, looking at ourselves in the mirror, are we doing enough? I believe we are doing a lot, but the question is are we doing enough in those things to side, to voice and to make sure we create preconditions for the future that we want to see.

17:06And we are, by the way, inspired by the 10 commitments that you recently launched in HPR as well. But I think we ticked some of the boxes, but not all.

17:17The interesting thing about your company is that people really do love it. And I wonder, and we can sort of pivot here to talk about how the company evolves, but there is a strong affinity. So I'm wondering, does that make changes more difficult for you or how does that factor in? I think possibly so. Success is always a challenge, right, when you want to develop, because it can become the biggest sleeping pill. What I think is the interesting and important part is that we are in such a fast-moving world that our concept and our past may not have all the answers for the future. and so how do you lead in a world where you need to bring a profound understanding of your legacy of your dna be really clear on your uniqueness um you could play some topics in the history book but you need to be clear on what are the things that's gonna profoundly make you the company of tomorrow and then you look at the space of exploration which is important to protect to a certain degree so both financially and with patience because new ideas are fragile so how do you allow yourself to explore and how do you have a calculated risk at the same time as you build on your strengths so i would say the danger would be to be average of those two but be even more resilient be even more on your clarity of your legacy and be even stronger this episode is brought to you by google chrome you think you know a browser but gemini and chrome that's new it can help you with practically anything on the web like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

19:00Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required compatibility and availability varies 18 plus. Propel Fitness Water with Gatorade electrolytes, zero sugar, and vitamins. Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade electrolytes. Founder on your entrepreneurship. Yes, for just as a follow-up, because we publish, you know, on this notion of the founder's mentality. And for you guys, that seems to be, you know, with such an amazing origin story of how this thing comes in.

19:40But is there a bit of like that you consciously try and hold on to that spirit of the founder that actually drove you to innovate in the first place? I think so. It is an interesting thing. Our founder here wrote a testament. It's called the testament of a furniture dealer back in 1976. And typically being him and typical, I think, for many entrepreneurs like him, there is a strong vision and a very sharp business idea. And then there's nothing, no strategy, no plans, no policies, but then straight over to values. and ever since i think ikea has been a strong on value drive and entrepreneurship testing new things being in renewal is one of them and you can say sometimes of course you wonder all these values alive and during this crisis during the covid crisis i can say one of the reasons why we've been successful is because of that what i didn't know before is the the speed of having a value-based organization because what we've done has partly not been dictated or steered from the top but really been people unleashing activities and doing the right thing at the same time and that takes some confidence and some culture i think so we're getting some great questions from our viewers keep them coming um but i want to i'm going to ask you a couple and they're there people want to know more about um about digital transformation and digital possibility so here couple.

21:06This is Tim from London. Could Ikea ever see a future of fewer stores and more digital VR experiences to help customers select the essentials from home? And then related, Ankita from Hyderabad, India, who asks, we all know that people value the ability to come into the store and imagine the look, but as of now, how can that work digitally? Can you give the same impact as the physical store? Are you considering 3D models? So two similar questions about future technology? So these are two. It's good. It's London and Hyderabad. We actually call it Hydra good after we open our store because it's been phenomenal.

21:44But we are... Another dad joke. We're having the... These questions are, I think, they're absolutely relevant. And in our transformation, and this is, of course, pre-corona, we realized that a former model holds a great value. and we believe a lot that our stores will be as relevant tomorrow. So we see, for instance, that before, again, the corona, which is, of course, an extreme incident, but we've been able to welcome more people to our stores the last years in spite of digital disruption going on. Now, what people have told us is that they want to come and they want to experience the physical full IKEA range.

22:27They might come for the meatballs, but they definitely also come for the instant gratification of being able to pick up the goods straight away. But then again on a Tuesday afternoon when kids are put to bed and it's late and you're on the market for four shares on the table, how do we show up? And to the questions even more, how do we not only offer stuff to sell, but how can we actually provide the competence in life at home? And that's why many of the latest digital acquisitions we have done and development is heading towards a place where I think in only a year or two, we will provide a very strong environment where you can, through VR, through augmented reality, access more and more of support to how you actually make your life at home better.

23:17Yep. So let me go to another question. And I love how international our audience is today. This is Camo Gello from Johannes. Experience a membership that backs what you're building with American Express Business Platinum. Unlock over$4 ,000 in business and travel value annually with statement credits on select purchases from brands like Dell, ChatGPT Business, Hilton and Adobe and other benefits. American Express Business Platinum. There's nothing like it. Based on total potential value of statement credits on select purchases and other benefits, enrollments required, monthly and other limits and terms apply.

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24:3221 and over, void in Canada. Bet with DraftKings Sportsbook to get bonus bets that expire in seven days or trade with DraftKings Predictions to get predictions dollars that expire in one year. Event contract trading involves risk of loss. Predictions offer void in New York. Non-withdrawable rewards issued as$50. Click to claim every seven days for 21 days. Terms at dkng.co slash offer. Limited time offer. Nationwide based on sportsbook predictions and free-to-play sports contest availability varies by state. Spurk who asks, how is your supply chain recovering? And how is that impacting the reopening of your stores?

25:03For both the furniture and the meatballs. Well, it's been deliciously complicated, I must say. It's to run a supply chain like we do with a global footprint, where we basically work with optimal sourcing. We have suppliers in Europe, America, Asia. Sometimes, of course, if you can imagine the network of sub-suppliers, it's a complex thing. We were amazed by our capability to take quick decisions early on in China. And I think thanks to the excellent work with our supply chain and the suppliers working for IKEA in China, we were a bit on our toes when the pandemic came to Europe. And that means we have been able to take good decisions on stopping, tough decisions early on.

26:01We've been, of course, relocating goods. we had to speed up a little bit as the online share took off stronger than we had planned actually or what we could imagine. And right now, to be honest, we are running faster because of indexes in our home markets like in Germany, where we are at an all-time high, both visitation and sales, which is something, to be honest, we are still trying to figure out how that happened as we expected a gradual return to the market, but it's gone very fast. Hmm. Yes, Ru, you have a reputation around experimenting and innovation. And so I'm curious, I mean, anything you want to share with us would be great about kind of things to come that you're experimenting with now, or even stories of things that you may have learned from experiments that just didn't go as planned, but at least you learned something from it.

26:58Yeah. How many hours do we have Josh.

27:03We try to encourage doing mistakes. Sometimes it becomes a bit of a cliche and you know that you want to do it but you have to understand the fundamental reasons of fear of making mistakes. I think that's one thing I learned. Secondly I think you need to protect ideas because they are fragile. It's so easy with the glasses of experience to shoot down a new idea. And finally, you need to make sure you finance your ideation and creation. And without those things, I think there is too little oxygen for the new things to grow. And then I think personally, to be, to cut down on the academics and the strategies and to work with people that are hands-on has been a bit of IKEA success in the past.

27:53people who are capable of turning their ideas to something tangible are the ones most successful. And then I learned over the years also that it's a benefit to be a bit naive, consciously naive maybe even, because normally if you understand the trouble down the road you would hesitate to try your new ideas. So I think we have done since the flatbacks and such. I think some of the greatest latest thing is we spoke about click furniture, switching from assembling furniture to actually clicking furniture together, which has a lot of benefits in saving time and making it easier, but also sustainability.

28:35And then if I take a total other example, the HomeSmart range in IKEA now integrating light and sound in an affordable way with also partners like Sonos has been phenomenal. And finally as a third one I would say the new IKEA alternative to the meat post that will be launched somewhere around August to December I think around the world will be also a beautiful proof point of sustainability. with something like just following up on that with something like the sonos uh partnership did those things happen organically in the company or is there just a you know a set unit looking for how to you know create new things through partnership well some things do happen organically and i think we are the last years we've tried to really stimulate that through co-creation platforms where we learn from the best from lego from other companies out there and it works.

29:33So you build a culture of entrepreneurship with, as in our case, 166 ,000 people. And it stimulates also a way of challenging the known, which is helping. In this case, it's a unit in Sweden that worked with product development. And it's been, I think, part of a conscious strategy since a couple of years to explore, I would say, two new areas for us in life. One being the digital smart offer and the other one being the sustainable. And sometimes they overlap. And these are young in the IKEA range and development. But I think we will see a lot of good solution coming the coming decade. So I've got a question from Michael from, of all places, Stockholm, who says, Jesper spoke about value-based management in times of crisis.

30:23he's wondering you know how do you actually involve employees and customers in finding solutions to the new covid related challenges i think it's a good question mikil in stockholm and i think probably we could do a better job in in engaging in particular customers more in the future historically we were limited but today we are not the digital and new arenas creates a lot of opportunities for us to not only interact with the customers in an easy way but also do it in mass if we like to so we launched about a year ago a co-creation platform that i referred to previously and that helps us both with customers and co-workers to post problems and and let people basically take a stab with ideas on how to solve it.