Ikea: Furniture for the rest of usDecember 9, 2011: 8:19 AM ET
Our Weekly Read column features Fortune staffers' and contributors' takes on recently published books about the business world and beyond. We've invited the entire Fortune family -- from our writers and editors to our photo editors and designers -- to weigh in on books of their choosing based on their individual tastes or curiosities. In this installment, writer-reporter Beth Kowitt takes a look at The Ikea Edge, former CEO Anders Dahlvig's accolade to the global retailer.
Or at least that's the point Anders Dahlvig, the former CEO of the Swedish furniture and home goods giant, is trying to make in The Ikea Edge. Early on in the book he tells the reader, "Like any business, Ikea strove for professionalism and profits. But this was never an end in itself. The company has a social ambition that feels genuine: to create a better everyday life for people."
In these days of Occupy Wall Street, it's easy to scoff at that kind of message from a big company. But by the end of the book, it's hard not to believe him. In part that's because the company's objective isn't that grandiose: to improve ordinary people's lives by giving them the option of decent quality furniture at low prices. And most of us, unless you're part of the 1%, have experienced this part of the Ikea promise firsthand.
Much of The Ikea Edge is spent explaining how the company manages to offer ridiculously low prices that make it impossible to leave the store without a lengthy receipt. I'm sure I'm not the only person to have driven home from Ikea with a bag of 100 tea lights not because I have an extensive candle collection -- I don't -- but simply because the price tag was $3.99. (Each one is less than 4 cents!)
Dahlvig explains how Ikea keeps its costs low by buying in bulk and controlling the entire supply chain, not unlike Costco (COST) or Trader Joe's. The company also uses you, the customer, to help with distribution by delegating tasks like assembling and transporting purchases. Dahlvig claims consumers actually feel like they're getting a better experience when they're doing more themselves. (This point may be debatable for anyone who's ever wandered around an Ikea warehouse looking for the likes of a Grevbäck bookcase or Folldal bedframe.)
But Dahlvig argues that customers are compensated for their troubles: The bigger the role you take on in the supply chain, he points out, the lower the price tag. If you don't want to spend your Saturday afternoon poring over an Ikea instruction manual, you don't have to; you can select to have your furniture delivered and buy items that don't require much assembly. But you have to be willing to pay more as a result.
If you're looking for the Ikea story or a deep Ikea timeline, this book is not for you. Dahlvig gives fair warning right from the start that this is not his goal; rather, he's using his long-time employer as an example of how a big corporation can do the right thing.
Dahlvig does give a brief history of Ikea's evolution into the privately held retail giant that generated $31 billion in 2009. But more often than not, the book is about management -- motivating and inspiring employees, keeping an entrepreneurial streak as a company grows, creating loyalty and diversity, the role of a CEO. The book is rich in ideas about how to take a brand that has a strong regional culture and make it global. While some of these lessons are helpful and refreshing (Dahlvig suggests having numerous people report to you so you don't have time to micromanage or hover), I wanted more of a personal story about his time at the company. Instead the book is written in the style of Ikea itself: practical and no-frills.
Dahlvig does provide some telling examples about Ikea's operations. Take, for example, that its restaurants generate $1.5 billion in sales. But the main reason behind those 15 Swedish meatballs for $3.99 is not to make a profit -- it's to highlight the store's low prices and get the customer to shop longer. Or consider that in 2008, when Ikea had 125,000 employees and $29 billion in sales, its global staff functions like HR, legal, and property only had 260 members. Little snippets like these only made me want more.
By the end of the book it's clear that a company like Ikea could only have come out of a Scandinavian country like Sweden. Dahlvig, who spent 26 years at Ikea and started as a store manager, warns against things like setting high salaries because you'll attract people who are only in it for the money. He makes statements such as a "company's reason for existence should be to contribute to a better society." It's hard to imagine these words coming out of the mouths of most U.S. CEOs. But it might serve them well if they at least read the book.