The Re-Assembled Man

You don’t build a $12 billion company without making a few mistakes. And some of them were whoppers.

Ikea founder Ingvar Kamprad, a notorious penny-pincher and alcoholic who has acknowledged with shame a brief interlude with the Nazi party, admits as much. “There are few people who have made so many fiascos in life as I have,” he once said.

At Ikea, however, fiascos often turn into profitable innovations. Take the revolution of Ikea’s “flatpack.” Around 1955, one of Ikea’s longtime employees was unable to fit a bulky Ikea table into a car. Frustrated, he disassembled the table and tucked the legs underneath the flat table top. Voilá, the flatpack was born. It was an ideal way to fit more items into trucks, reduce labor, and minimize shipping damage.

On the flip side, the flatpack also puts the burden of assembly on the customer, but Kamprad found people happy to make the trade-off for lower prices. Cities usually welcome the revenue that comes with an Ikea franchise, but store openings have been known to attract thousands, snarling traffic for miles and inciting dangerous frenzies. Ten minutes after the doors of Ikea’s North London store opened in 2005, six people were on their way to the hospital and 500 sale-priced couches were gone from the shelves. Not pretty for public relations, but when a similar mob crowded its flagship store, the store managers simply opened the warehouse and let customers collect the items they purchased themselves. Once again, the do-it-yourself fix reduced labor and increased profit margins.

Ikea operates 230 stores in 33 countries and works with 1,500 suppliers to produce its self-designed furniture. The company’s 90,000 employees operate in an open culture nearly devoid of hierarchy and titles. Each year, Ikea’s “Thank You” sale divides gross receipts equally among the company’s employees, which means some employees take home in one day what they might normally make in one month. Five “gotcha” cards – distributed to employees who go above and beyond – can be redeemed for a free gift, and employees-of-the-month are selected by a representative group of their colleagues. “We must take care of each other, inspire each other,” Kamprad has said. Each year Kamprad personally doles out Christmas presents to the 2,500 Ikea employees who work at the store’s headquarters.

Kamprad has always done well by listening to his market. As a young boy, he started selling matches in the farming town of Agunnaryd, Sweden. In just a few years, he was also selling fish, seeds, and pencils. Kamprad used the profits to buy his first bicycle. He started Ikea at age 17 with money his father gave him for excelling in school. By 1945 he was advertising in local newspapers and had a mail-order catalog. In 1951, he discontinued all other products to focus specifically on the furniture market. He opened his first showroom in 1953, where customers could see and touch products before buying them, a new concept that helped differentiate Ikea from its competitors.

In 2000, Kamprad left the company’s operations to his three sons, Peter, Jonas, and Mathias. Although his personal fortune is estimated to be $20 billion (in 2004, Kamprad briefly wrested the title of the world’s wealthiest person from Bill Gates), he still flies economy class, takes public transportation, and has been known to haggle with local merchants near Lausanne, Switzerland, where he currently lives. He never wears suits; every so often, he will splurge on a nice shirt.

“How the hell can I ask people who work for me to travel cheaply if I am traveling in luxury?” Kamprad asked in a BBC interview. “It’s a question of good leadership.”