What better person to learn about running a successful business from than the man who ran Ikea for ten years from 1999-2009, through one of its most sustained periods of growth?
This is what I thought to myself when deciding to attend last night’s LSE-organised lecture by Anders Dahlvig, and I was not left disappointed.
Dahlvig, a man who came across as likeable, modest, but at the same time aware and proud of what he achieved at Ikea, as indeed he should be, talked for an hour and a half, shedding valuable light on how the cogs behind the company really work. He was not necessary the most natural, animated speaker in the world, but the content of what he was saying was so informative it more than made up for it. And he coped admirably with some truly awful, dull questions from the audience after his allotted speech time was up.
Under his leadership (and before becoming chief executive he had already worked his way up through the company for more than 15 years) Ikea achieved some astounding stats like average growth of 11% and profitability well above 10% every year.
There were a few things from Dahlvig’s talk which I think will really stick with me as I soon embark on setting up a business of my own. Some are likely obvious to many, but coming from a man with the success rate of his, these things have surely now been proven beyond all doubt to work.
1. You do not need to, and actually should not, pay top dollar to recruit and retain the best staff.
While running the England side of Ikea for four years, Dahlvig said he did not lose one store manager, despite being well aware that all of these managers were being approached at least weekly by competitors offering them higher salaries. He said it is the values of the company, and also the level of autonomy for managers in partiuclar, that actually keeps these people at Ikea.
And he also made the pointed out that the company does not want to attract people that are only doing the job for the wage packet – the idea being that the minute they get offered a few extra quid, whatever the job, they will be off.
2. Businesses can benefit hugely from an owner with a long term vision.
Sometimes difficult decisions that may not result in short term profit, in fact which may almost certainly result in quite substantial short term losses, should be made for the longer term good of the company. And if you have an owner or shareholders who only really care about the bottom line over the next year, it can be hard for these decisions to ever be made.
To illustrate this point Dahlvig used the example of Ikea going into Russia at a time when almost all other retailers were leaving. Even though this decision was very risky in the short term, today he says Ikea has some of the best retail sites available, and got them at prices that it never could have negotiated a few years later.
3. Values and vision need to be sustained, no matter what.
Dahlvig spoke for a long time about the comany’s vision and vlaues. These may sound like business buzzwords to many but it was clear he was very passionate about what this really meant at Ikea – where he said following these would take precedent over pretty much everything. And following this through can sometimes mean making tough decisions, he said.
For example, on the subject of staff, he said that occaisionally the company would actually let go of someone even if they were making Ikea profits and hitting or exceding their targets, if this person was not representing the values of the company.
4. Retailers tend to get higher margins and have a lot more power when they sell their own products.
He pointed out that in industries like food where there is power among product manufacturers who are not also retailers (using Nestle as an example), the retailers have a lot less power and therefore much smaller margins. Where this is not so so much the case, such as in DIY, margins for retailers tend to be much higher.
The answer? Try to get as many of your own products into your store as possible. Of course, this is a little bit difficult if all your customers are hooked on Cheerios and Shreddies for life. So Dahlvig, for this and other reasons, reckons with food retail it will only ever be possible for the big players’ items to be 50% their own products.
These were just a few of the highlights from a very informative talk. Dahlvig has recently released a book, so if you don’t get the chance to hear him speak, I would guess the book is certainly worth buying, given the content of last night’s lecture.
On a side note, high street coffee shops and sandwich bars, beware: Dahlvig also said last night that he will soon be joining Pret A Manger’s board. Having listened to him talk last night this is an incredibly smart move by the chain.
By Sophie Hudson