Get to know: Ingvar Kamprad
This is the story of how Ingvar Kamprad, a 17-year-old farm boy from a rural village in Sweden, founded what would become a global furniture empire. The story of IKEA is filled with valuable lessons on entrepreneurship.
Kamprad was extraordinarily young when he started thinking in business terms. For example, at age five, his grandmother helped him import 100 boxes of matches which he then sold to neighbors and family members for a hefty 2-3 times the profit. And he was not older than "10-15" when he started thinking about the "expensive middlemen," meaning the discrepancy between wholesale or factory prices and end customer prices. The pencils he ordered in bulk and resold could cost up to ten times more in the local store.
Ingvar’s aim to get a better deal for the many people
You could say that it became Kamprad's life work to eliminate middlemen and transfer cost efficiencies to his customers. That was one of his earliest big insights that would later shape both IKEA's core concept and its culture - its operating system if you will. Kamprad spent his entire childhood and school years buying and reselling things, and at 17 (in 1943), he decided to turn his obsession into a formal business, and IKEA was born. The acronym stands for:
Elmtaryd (his family farm)
Agunnaryd (the village where it is located)
What is not widely known is that IKEA started as a mail-order business selling everything under the sun. Kamprad experimented extensively with pricing, market positioning, products, and target groups by advertising in various magazines.
The second big insight came to Kamprad when he started combining high-quality products with low prices, targeting poorer consumers (for ex., farmers, who Kamprad identified with). Kamprad realized he could make up for the lower margin on volume while increasing customer loyalty. That insight was not unique, but Kamprad was early. Four other incredible entrepreneurs leveraged the same understanding to launch empires of their own:
Walmart’s Sam Walton during the 60s
Price Club's Sol Price and Costco’s Jim Sinegal during the 70s
Amazon's Jeff Bezos during the 90s.
So, during the late 40s to early 50s, Kamprad made it IKEA's core mission to "create a better everyday life for the many people" and instilled in his employees that nothing could ever change this policy.
The IKEA furniture
It wasn't until the mid-50s that IKEA started designing its own furniture. Although, if it hadn't been for the borderline-criminal methods used by the furniture industry to squeeze IKEA out of business (because of their low prices and high growth), it might have never happened.
By being forced to find suppliers overseas (Poland mainly) because of the industry boycott of IKEA, they also had to take design into their own hands. This, ironically enough, led to even lower prices, better quality, a unique look, and, most importantly, the next big insight.
The legendary flat cardboard packages
It happened one night in 1956, as a product designer, Gillis Lundgren, couldn't fit the sideboard table “Lövet” (still a classic in production) into his car. It struck him as a bolt of lightning that simply removing the legs would take up a fraction of the space. His big insight was the seed that spawned a complete revamp of IKEA's product design philosophy, logistics infrastructure, and store concept. The now iconic flat cardboard packages have saved the company and its customers multiple billions of dollars over the years.
In the early 60s, IKEA had, with Kamprad's natural talent for business and ingrained frugality, already become a very uniquely positioned business armed with three core insights:
Middlemen are expensive
Volume > Margins
IKEA successfully grew its "houses" (company language for stores) during the 60s and 70s, opening its first store outside Sweden in 1963. Kamprad's Potato Field Principle was applied when choosing the spot for a new store and buying cheap and huge land lots outside the city center.
Successful in-store concepts
Over time, more and more iconic store ingredients like the restaurant, the children's playroom, and the self-service warehouse section were added to the concept. Kamprad also established the rule that each department must have at least one "breath-taking offer."
Although, despite having a proven store concept that would improve by increasing its size (economies of scale), Kamprad, as the sole owner, always insisted on controlled growth: "Half of our resources shall be used to improve our existing business."
"The Testament of a Furniture Dealer"
During the 1970s, Kamprad increasingly worried that the culture and business concept would get hurt as IKEA expanded. This made him write what would become an internal bible, "The Testament of a Furniture Dealer." Here are some describing quotes from the bible:
"A job must never be just a livelihood. If you are not enthusiastic with your job, a third of your life goes to waste"
We don't believe in waiting for ripe plums to fall into our mouths. We believe in hard, committed work that brings results.”
"It is not difficult to reach set targets if you do not have to count in the cost."
"Exaggerated planning is the most common cause of corporate death."
"By refusing to accept a pattern simply because it is well established, we make progress."
"The general who divides his resources will invariably be defeated."
"Only while sleeping one makes no mistakes."
A half-decade later, in 1982, Kamprad did something very unusual. He wanted to give IKEA "eternal life" and transferred his full ownership to a foundation. It is one the most complex ownership structures ever created to make IKEA immune to takeovers and misaligned interests.
IKEA in the present time
Today, IKEA is the world's largest furniture retailer, reaching about 700 million customers annually through its more than 370 "houses" in 31 countries. Its mission is still to create a better life for the many people. Its culture is world-renowned and extensively studied for its strength.
...and a last sentence from “The Testament of a Furniture Dealer:
"Most of the job remains to be done. Let us continue to be a group of positive fanatics who stubbornly and persistently refuse to accept the impossible, the negative. What we want to do, we can do and will do together. A glorious future!"