Case Studies: Richard Branson and Innovation at IKEA

Richard Branson's Diverse Business Ventures

The virgin Group is the umbrella for a variety of business ventures ranging from air travel to entertainment. With close to 200 companies in over 30 countries, it is one of the biggest companies in the world. At the head of this huge organization is Richard Branson. Branson founded Virgin over 30 years ago and has built the organization from a small student magazine to the multi-billion –dollar enterprise it is today.

Branson is not your typical CEO. Branson’s dyslexia made school a struggle and sabotaged his performance on standard IQ tests. His teachers and tests had no way of measuring his greatest strengths – his uncanny knack of uncovering lucrative business ideas and his ability to energize the ambitions of others so that they, like he, could rise to the level of their dreams. Richard Branson’s true talents began to show themselves in his late teens. While a student at Stowe School in England in 1968, Branson decided to start his own magazine, Student. Branson was inspired by the student activism on his campus in the 1960s and decided to try something different. Student differed from most college newspapers or magazines; it focused on the students and their interests. Branson sold advertising to major corporations to support his magazine. He included articles by ministers of Parliament, rock stars, intellectuals, and celebrities. Student grew to become a commercial success.

In 1970 Branson saw an opportunity for Student to offer records cheaply by running ads for mail-order delivery. The subscribers to Stu- dent flooded the magazine with so many orders that his spin-off dis- count music venture proved more lucrative than the magazinesubscriptions. Branson recruited the staff of Student for his discount music business. He built a small recording studio and signed his first artist. Mike Oldfield recorded “Tubular Bells” at Virgin in 1973; the al- bum sold 5 million copies, and Virgin Records and the Virgin brand name were born. Branson has gone on to start his own airline (Virgin Atlantic Airlines was launched in 1984), build hotels (Virgin Hotels started in 1988), get into the personal finance business (Virgin Direct Personal Finance Services was launched in 1995), and even enter the cola wars (Virgin Cola was introduced in 1994). And those are just a few highlights of the

Virgin Group—all this while Branson has attempted to break world speed records for crossing the Atlantic Ocean by boat and by hot air balloon.

Richard Branson's Nontraditional Leadership Approach

As you might guess, Branson’s approach is nontraditional—he has no giant corporate office or staff and few if any board meetings. Instead he keeps each enterprise small and relies on his skills of empowering people’s ideas to fuel success. When a flight attendant from Virgin Airlines approached him with her vision of a wedding business, Richard told her to go do it. He even put on a wedding dress himself to help launch the publicity. Virgin Brides was born. Branson relies heavily on the creativity of his staff; he is more a supporter of new ideas than a creator of them. He encourages searches for new business ideas everywhere he goes and even has aspot on the Virgin Web site called “Got a Big Idea?” In December 1999 Richard Branson was awarded a knighthood in the Queen’s Millennium New Year’s Honors List for “services to entrepreneurship.” What’s next on Branson’s list? He recently announced that Virgin was investing money in “trying to make sure that, in the not too distant future, people from around the world will be able to go into space.” Not everyone is convinced that space tourism can become a fully-fledged part of the travel industry, but with Branson behind the idea it just might fly.

1. Would you classify Richard Branson as a manager or a leader? What qualities distinguish him as one or the other?
2. As part of SRF Model, followers are part of the leadership process. Describe the relationship between Branson and his followers.
3. Identify the myths of leadership development that Richard Branson’s success helps to disprove.

Redecorating and renovating have become a popular international pastime. In a world facing persistent terrorist alerts and lagging economies, more and more people are opting to stay home and make their homes safe havens. This phenomenon has contributed tremendously to the success of IKEA, the Swedish home furniture giant. In the past 10 years sales for IKEA have tripled, growing from over $4 billion in 1993 to over $12 billion in 2003. Much of IKEA’s success can be attributed to its founder, Ingvar Kamprad. Kamprad used graduation money to start IKEA in the small Swedish village where he was born. He started off selling belt buckles, pens, and watches whatever residents in the small local village of Agunnaryd needed. Eventually Kamprad moved on to selling furniture. One day in 1952, while struggling to fit a large table in a small car, one of Kamprad’s employees came up with the idea that changed the furniture industry forever—he decided to remove the legs. IKEA’s flat-pack and self-assembly methodology was born, and it rocketed the company past the competition. “After that [table] followed a whole series of other self- assembled furniture, and by 1956 the concept was more or less systematized,” writes Kamprad.

Kamprad is dedicated to maintaining the corporate culture he has helped define over the past50 years. He is a simple man—his idea of a luxury vacation is riding his bike. He is fiercelycost-conscious and, even though his personal wealth has been estimated in the billions, herefuses to fly first class. He values human interactionabove all, and, even though retired, hestill visits IKEA stores regularly to keep tabs on what is going on where the business really happens.

The culture at IKEA is a culture closely connected with Kamprad’s simple Swedish farm roots. It is a culture that strives “to create a better every- day for the many people.” IKEA supports this culture by:

• Hiring co-workers (IKEA prefers the word co-workers to employees) who are supportive and work well in teams.
• Expecting co-workers to look for innovative, better ways of doing things in every aspect of their work.
• Respecting co-workers and their views.
• Establishing mutual objectives and working tirelessly to realize them.
• Making cost consciousness part of everything they do from improving processes for production to purchasing wisely to traveling cost- effectively.
• Avoiding complicated solutions—simplicity is a strong part of the IKEA culture.
• Leading by example, so IKEA leaders are expected to pitch in when needed and create a good working environment.
• Believing that a diverse workforce strengthens the company overall. The IKEA culture is one that resonates for many. The buildings are easy to identify—the giant blue and gold warehouses that resemble oversized Swedish flags are hard to miss. Millions of customers browse through the Klippan sofas and Palbo footstools(Nordicnames are given to all IKEA products) in the stark, dimly lit warehouses. The surroundings may not be lavish and the service may be minimal, but customers keep going back not just for the bargains but to experience the IKEA culture as well.

1. Discuss the three input components of the Congruence Model as they apply to the success of IKEA.
2. Consider Schein’s four key organizational culture factors as described in Highlight 12.6. What examples can you identify within the IKEA organization that contribute to the company’s strong corporate culture?
3. Based on the level of technological complexity and the degree of environmental uncertainty present at IKEA, what type of organizational structure would you expect?