Last year, 650 million people across 30 countries visited an Ikea store, and the company’s website attracted more than 4 billion visitors. Those are staggering numbers that would make any retailer crow, but when an organization of that size decides it needs to streamline processes, those numbers suddenly become daunting. That is, however, exactly what Ikea decided needed to happen, and to do it the company turned to…more numbers.
Four years ago, Ikea teamed up with Celonis and began an undertaking referred to as “process mining.” The initial goal was relatively modest: to align the company’s finance systems and processes more accurately with what was happening in sales channels. However, the ultimate result has been a whole new way of thinking about omnichannel execution and communication across the organization.
“What process mining really offers you is an industrialization of doing a time-and-motion study,” explained Tim Hills, Process and Data Insights Development Manager at Ingka Services, a division of Ikea owner Ingka Group. “Rather than the more traditional standing there with a stopwatch and clipboard and timing how long it takes people to do things, we pull all of that information out of our systems. Almost everything that we do leaves a digital trace throughout our solution landscape, and that’s what we’re bringing in and representing. The data tells you what, the people tell you why and data-enriched people tell you how to become better,” he said in an interview with Retail TouchPoints.
How Ikea is ‘Modernizing Our Core DNA’
The results across the organization have been far-reaching — everything from removing organizational silos to improving distinct moments in the customer journey. And so, while the project started with one particular use case, it is now becoming a way of life at Ikea.
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“Our founder Ingvar Kamprad [which, by the way, is where the name Ingka comes from, a combination of the beginnings of his name and surname] released a book in 1976 called The Testament of a Furniture Dealer, and when you start looking into some of the things in there, all of these concepts around continuous improvements are baked into who and what we are as a business,” said Hills. “So really this is a case of modernizing our core DNA. That isn’t a project that you run and then it closes; it’s a project that you get going, and it then becomes part of the everyday.”
The Process Mining Journey
Here’s how it works:
1. Get the data: The first step is to gather all the available data from sources across the organization and “provision” it, that is, make it centrally accessible to various systems and users at the company. Ikea was aided in this effort by the fact that it had already been going through a years-long digital transformation that included extensive data cleaning and collation.
2. Understand the data (and maybe get more of it): Individual experts then come together to analyze the data and determine what it’s saying. Ikea initially focused on three core systems: selling, fulfillment and after-sales. “We started there with that red thread, and then by being able to connect those together and looking at a couple of use cases and a couple of things that popped out to us, [we would see that] maybe there’s some additional transparency we need in a couple of other areas,” said Hills. “So we would then bring in some more information to enrich what we were seeing and [come to some conclusions].”
3. Put the data to work: Hills and his team then draw on investigative and process improvement methodologies such as Lean Six Sigma to draw a line from a pain point to the root cause and then move toward solutions. They then develop a delivery plan for the solution and roll it out for adoption. “It’s great to have all sorts of analyses and pretty dashboards and so on, but unless it makes a difference to a customer and a co-worker, it hasn’t actually changed anything,” said Hills. “There’s been a real journey of delivering that methodology, putting that in place with global folks here in [headquarters] and out in the country units, because that’s where things really need to change to actually make a difference.”
How it Started and Where it Goes from Here
The first use case that Ikea tackled began with a dissection of the “order-to-cash” process, but even that term represents a shift in how the company operates. “Order-to-cash” essentially describes the lifecycle of a consumer purchase, from the moment they select a product to when they pay. That phrasing is drawn from the American Process and Quality Council’s Process Classification Framework, which has defined a whole set of these terms that describe business processes end to end. Other examples include “source-to-pay” and “hire-to-retire.”
“One of the things that we really needed and were able to facilitate through our work with Celonis is to have a common language with which to interact with each other to actually have this conversation,” explained Hills. “Often, if you were to get a salesperson, a marketing person, a logistics person, a finance person and an IT person in the same room, it would be like a meeting at the United Nations when all the translators have gone for a coffee break. Everyone’s saying the right things in their own languages, but no one’s really connecting. This gives us that that unbiased, unfiltered language with which to talk with each other,”
The primary aim of the initial process mining effort was to define every single step of the order-to-cash process from a financial perspective, in order to ensure compliance across reporting, ESG, taxation and more. But because at Ikea the finance division also includes business “steering and navigation” functions, future improvements also naturally surface throughout this process
One such example was recurring instances in certain locations of click-and-collect cancellations. In looking through the data, Hills and his team realized there was a notable difference in cancellation rates between locations that offered specific appointment windows for pickup versus any time on a specific day.
Changing the process in either direction would have huge implications for employees, who would have to pick orders either throughout the day (in time for those appointment windows) or all at once in the morning, and those staffing concerns had to then be weighed against potential upsides like reductions in returns and cancellations.
But in looking more deeply at the data and speaking to the folks on the ground, the team realized that the root problem wasn’t really the timeframes being offered for pickup but rather how those options were being communicated to customers. “Having that full end-to-end perspective, and that way to communicate and interact with each other, to come to these conclusions was absolutely differentiating,” said Hills.
Ikea’s Infinite Game
As the team’s approach to process mining matures, new areas for improvement are being surfaced, and in multiple ways. Sometimes suggestions come from the workforce, both corporate and store-based. The team also is using AI and machine learning statistical analysis tools with Celonis to discover specific pain points that are hindering optimization.
“Every single day, every single graph we look at surprises us in some way, shape or form,” said Hills. “In some cases [it’s something you] thought that might be true and now there’s proof. In other cases, you notice there is a lot of variety in outcomes from country to country or from store to store within a country. The transparency that offers us is to then bring together people with ridiculous amounts of experience, who can say, ‘I know why that’s happening,’ and then for other people around them to then say, ‘Oh, if that’s happening for you, that’s why this is happening for me, which is also why that’s happening.’ Click, click, click, click, click, and all of a sudden, the outcome and that growth in communal knowledge just explodes.
“And then as we look to improve and change things, we can also track the impact on customer experience, customer expectation and customer perception, which has been really valuable for us,” he added. “It’s not where you start, it’s where you finish. Anyone can raise a flag to say, ‘There’s an issue.’ That’s one thing. But then if everybody rallies around it, makes it a focus to improve and ultimately you reach that improvement, that’s the thing that, for me, is most interesting.”
This use of data as the starting point for these conversations has helped Ikea become more evidence-based in its approach to process improvements, so that “we make sure the anecdote is really relevant to reality,” said Hills. Another benefit is that it makes improvements easier to measure.
In the case of click-and-collect, as improvements were rolled out, baselines were set and specific metrics like cancellation rates and co-worker hours were meticulously tracked to ensure that the changes were having the desired effect. “For each one of the use cases we have a dashboard that tracks it over time, and then we bring [all of those] into a consolidated value realization tracker [to measure the overall benefit of the process mining initiative],” explained Hills.
Ultimately, though, it’s a process that will never be complete: “It’s a little bit like Simon Sinek and starting with ‘why’ in The Infinite Game,” said Hills. “Retail is never done; you can’t complete retail. Our customer expectations will continually change. Our business model will continually change — the way in which we realize our offer, the products that we sell, the services that we sell. At the moment, this is all much more accelerated whilst we’re getting up to speed. But I think soon there will be a transition to this being business as usual and continuous improvement just being part of the day to day.”
