Chapter 8- Learning Activity 2

IKEA and New Product Development

In this learning activity, we will develop skills related to differentiating between different types of new products, and new product development. The most common approaches to product innovation are market penetration, (focusing on current consumers with promotional tactics) and product development (developing a new product for current consumers). A market development or diversification strategy take a riskier approach of targeting new markets with either current products (market development), or moving into new arenas with totally new products (diversification).

Read the following mini-case study and respond to the questions that follow.

IKEA has been in the home furnishings business for decades. They have always focused on the goal of ensuring that all customers can have a welcoming household, at a moderate budget, with products that are produced in a sustainable way.

The Democratic Design Centre facilitates the new product development process at IKEA. Designers work with engineers to develop a product line that meets the 5 dimensions of Democratic Design: Form, Function, Quality, Sustainability, and Affordability. These are the factors by which new product concepts are evaluated as they move along the development process.

IKEA was founded by Ingvar Kamprad more than 70 years ago, initially as a mail order business which subsequently has grown to 400 stores in close to 50 countries. IKEA is known for offering a broad range of furniture and home products at affordable prices. Since its inception in Sweden, IKEA has tried to remain true to the value of creating a better everyday life for the many people.

Product development is core to IKEAs success. The Democratic Design Centre is the foundation of this process. The Centre is located at the IKEA of Sweden headquarters and it employs 1,500 people. Through its creative design process, IKEA gathers consumer insights with research and product ideas are developed by a creative team including designers and craftsmen who take an idea and create product prototypes for testing. Each year, 1,500-2,000 new products are developed internally and additional new products are created through collaboration with suppliers and other design experts.

Each product follows an approach to product development called Democratic Design. There are 5 dimensions of Democratic Design: Form, Function, Quality, Sustainability, and Affordability. These are the factors by which new product concepts are evaluated as they move along the development process.

The IKEAs history books are full of interesting stories about how product ideas were conceived and the end product produced. Take for example, the creation of the PS Pendant Lamp. The designer was challenged with creating a unique object that could defeat the darkness in homes across the planet, bringing light and hope to the many. The designer was inspired to create a lighting fixture that looked like an object in space. Certainly this product met the form and function criteria, but could it be manufactured in a way that would maintain its quality and be offered at a reasonable price? IKEA works closely with its supply chain to manage these elements of Democratic Design. In the case of the PS Pendant, IKEA worked with suppliers to decrease the number of parts and improve packaging, which decreased costs.

IKEA provides an excellent example of a product development process that encourages innovate new ideas, while focusing on principles that stay true to the corporate values. Ultimately, this process helps IKEA deliver a pipeline of new and products that meet the customer need for quality products at a reasonable price.

Questions:

1. What is IKEAs mission and vision for it's products? How does this vision integrate itself into IKEAs product development process?

2. Which drivers of new product success are incorporated into the IKEA development process?

3. Which type of product innovation does IKEA focus on?

4. Looking at the adoption curve, which group of consumers is most likely to purchase IKEA products (1) innovators, (2) the early majority, (3) the late majority, or (4) laggards?

5. Are IKEA products high learning, low learning, fashion or fad products? Why?