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September 21, 2018

Focus on service not profit: Modest mogul's legacy

Ingvar Kamprad, founder of Swedish multinational furniture retailer IKEA, at the company's head office in Almhult, Sweden, on August 6, 2002 / TT News Agency/Claudio Bresciani via REUTERS/
Ingvar Kamprad, founder of Swedish multinational furniture retailer IKEA, at the company's head office in Almhult, Sweden, on August 6, 2002 / TT News Agency/Claudio Bresciani via REUTERS/

There is not a Swede visiting Africa that has not been asked when IKEA will come to the continent. Unfortunately, it is not going to happen any time soon.

The founder of the world’s largest furniture company IKEA, Ingvar Kamprad, died at the end of January at the age of 91, in his native province of Småland, Sweden. He left a business empire with 150,000 employees, Sh4.5 trillion in turnover and over 300 stores in a quarter of the world’s countries.

The IKEA catalogue, issued once a year, is said to have more readers than the Bible. If anything could be said about his life achievement: he was a super entrepreneur. The person himself, the circumstances he grew up under and the timing of his creation were all crucial to his enormous success.

On TV advertisements and in the media in Africa, businessmen are all dressed in smart suits, driving luxury cars, staying in upmarket hotels and surrounded by beautiful women. Or portraying that is how a successful businessman can live.

Ingvar Kamprad, who was worth Sh5.8 trillion by the time of his death, had none of that. He started on a very humble and small scale in 1943, expanded in Sweden in the 1960s and went international in the 1970s.

  

FRUGAL LIFE

When visiting and checking out the IKEA store in Madrid some years back, the staff remember him for taking the metro train to the hotel from the airport. He always took 2nd class on train trips, economy class on an airplane, a cheap hotel and dressed casually. That was what he also expected of his staff.

In his “A furniture salesman’s will”, written more than 40 years ago and which was his way of communicating his business ideas, he points out: We don’t need any fancy cars, nice titles or tailored uniforms or other attributes of status. Only those who sleep do not make mistakes. Fear of making a mistake is the cradle of the bureaucracy and the enemy of all development.

He became legendary for living the frugal life he preached. It became his and IKEA’s image. He provided household goods that ordinary people wanted. Design and function at a low price. He saw a demand and could satisfy it, a common feature of the thrifty people from Småland. Although very respected throughout his lifetime, a shadow over it was his Nazi leaning during his youth, which he never spoke about, but could to some extent be attributed to his grandparent’s German origin.

He was lucky to start his business at a time when neutral Sweden was benefitting from a Europe recovering from World War 2. Government policies were geared towards social justice combined with economic growth for the “small people”. An expression coined just before the war — “folkhemmet (the people’s home) — and associated with the then Prime Minister Albin Hansson, stayed as a popular image for many years. So, not long after followed: “Albin Hansson byggde folkhemmet, Ingvar möblerade det” — Albin Hansson built “the people’s home, Ingvar Kamprad furnished it”.

Other circumstances Kamprad took advantage of were increased trade and incomes for ordinary people, and most recently, globalisation. He saw the emergence of motoring and consequently placed the stores outside city centres, where land was cheaper and there was ample space for parking, so you could load your flat packages and drive home and assemble the goods.

He kept a close eye on his creation all his life and had no intention to let be bought or floated on the stock exchange. IKEA used globalisation to bring the world to Sweden and Sweden to the world. As a testament to it, visit any IKEA store you will find: among the Billy book shelf, Swedish meatballs, gravlax and the Swedish blue and yellow colours, the sales staff all have name tags with their name and the languages they speak.

 

 SUCCESS BEGINS AT HOME

What could an African entrepreneur learn from this? I think the first is that one has to be successful at home before one can go abroad. It doesn’t only apply to IKEA, but to most of today’s international enterprises. There are more that people have in common, than that separates them.

 Kamprad had no doubt that what could attract people in Sweden would also do so abroad. He had an ingenuity and a great ability to combine things that made him all the time stay ahead of competitors, always looking for the most simple and efficient methods in mass production and distribution.

 He also had as “guiding star”, the idea to always serve the people, the ordinary. Where other business people try to control staff with pure financial incentives, Ingvar Kamprad took the exceptional step to craft a business ideology based on fellowship, solidarity and equality, building a loyal and idealistic staff that related to the then small company’s business.

 When IKEA grew and became a worldwide enterprise, it could not escape the iron cage of restricting rules and complicated organisational structures common in any successful enterprise. But Ingvar Kamprad saw a deeper and different meaning in business and the company: a meaning that goes beyond profits and growth.

   

AFRICAN MARKET

Finally, why won’t there be any IKEA store in Africa any time soon? The simple answer is that is there is not a market for it, yet. Despite the “Africa rising” narrative and all modern gallerias shooting up, the African middle class is not as big and it does not grow as fast as many believe.

The Swiss bank Credit Suisse gave in its Global Wealth Report in 2015 the figure of 3 per cent of the continent’s 570 million adults being middle class, which is less than 20 million spread over 54 countries. A quarter of those live in South Africa, a big chunk in Nigeria, Egypt, Morocco, Tunisia and Algeria, which leaves less than 5 million in the remaining 48 countries of the continent.

IKEA needs around half a million middle class customers for every store and around 40 stores in a market (could be more than one country) to make it viable. Low prices are partly due to huge, enormous volumes, which is not what can be said about the markets in Africa. Nakumatt’s demise is also a testament to an inflated belief in a middle-class segment that did not exist in the same scale as the expansion. Shopping malls must tremble!

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