To spot an opportunity to create a new market category, look for the intersection of context, missing and innovation.
In category design, we think of it as a formula: f (category) = context + missing + innovation. The story of IKEA and the emergence of the category of ready-to-assemble furniture illustrates how that works.
Context refers to what is going on in the world and in technology. Changes in context open up new category possibilities. Such context shifts can be driven by any number of things – the mass adoption of a new technology; changing demographics; or even an economic event like a recession.
For IKEA, the context was the rebuilding of Europe after World War II and the concurrent explosion of consumer purchases, including cars.
In his small Swedish town of Elmtaryd, Aggunaryd, Ingvar Kamprad started selling things at age 5 to help make ends meet. After he graduated from school during the war in 1943, his father signed the paperwork so the 17 year-old Kamprad could have a legal business, which he named IKEA, using his own initials and those of his town. (During the war, Kamprad had been involved with two different Swedish fascist groups, though he would later publicly disavow those beliefs.)
The Swedish government was funding the construction of new houses and offering home furnishing loans. In 1948, Kamprad saw this emerging market and put out a mail order brochure featuring furniture from local manufacturers. He sold direct to consumers all over the Swedish countryside, and eventually moved from buying from local factories to making some of his own furniture.
At the same time, more and more people bought cars amid the postwar boom, and in Europe most of those cars were quite small – and not suited to transporting furniture.
One such car owner was an IKEA furniture designer named Gillis Lundgren. Lundgren bought a table, but he couldn’t get it to fit in his car. Frustrated, Lundgren resorted to cutting off the legs to make the table fit, but that was obviously not a great solution to this problem. He recognized there was a missing that the context had created: Swedes were buying homes and cars and furniture — but that created a new problem of not being able to get the furniture to the home in the car.
Lundgren saw that this missing opened up an opportunity for an innovation: furniture made so it could be sold disassembled and packed flat to fit in cars.
This wasn’t a completely new idea. Ready-to-assemble furniture first appeared in Europe around 100 years before Lundgren sawed the legs off his table. But that furniture was sold completely assembled but marketed as easy to take apart.
Lundgren’s spin was to have the furniture already disassembled and easy to transport. He took his idea to Kamprad. The context plus missing plus innovation gave IKEA a chance to develop a new category of furniture.
Kamprad also realized that selling furniture that you put together yourself could lower costs, making his furniture more affordable to a wider audience. When he added ready-to-assemble furniture to the company’s catalog, the product line took off. A few years later, Kamprad opened a physical IKEA store so customers could see furniture already built, and leave with a box that fit in their vehicles. The category flourished and IKEA became its leader and symbol.
While other producers saw IKEA’s success and began to copy its model, they just helped IKEA by growing and evangelizing the category. That is the power of great category design, because it is very hard to unseat a category winner.
The ready-to-assemble furniture category has since caught on in places that were less impacted by the original problem. American cars might as well be aircraft carriers compared to the small European models Lundgren was familiar with. And yet, American consumers spent $13.8 billion in 2020 on ready-to-assemble furniture, largely because it can be good quality at low prices.
To see how ubiquitous IKEA has become, not just in the ready-to-assemble category but in the larger furniture market, you only have to look at the BILLY bookcase. Designed by Lundgren, this piece of furniture has sold over 60 million units worldwide. It is so popular that Bloomberg uses it as a pricing index to compare relative costs around the world.
Seventy years after its founding, IKEA has stores in 52 countries and is the largest furniture retailer in the world.
Contributing: Noah Telerski