The Breakthrough

IKEA decided to connect, coordinate and direct drone initiatives as part of its Global Development Innovation Network (DIN) which was established two years ago as a governance unit for new logistics and fulfillment technologies. Later in 2020, employees of the corporate supply chain development function at IKEA realized that the problem was not just with the technology but rather the result of the company's piecemeal, uncoordinated approach to testing drones.

DIN covers a total of six areas including: automation and robotics, packaging and identification, service fulfillment, handling and storage, transportation and digital technology. Each of these six areas is led by two leaders who dedicate half their time to this role. DIN's leaders and experts are geographically spread throughout IKEA, so that each area forms its own network. Although the DIN does not directly manage local pilots, it allocates resources and helps build top-management. First it collects experiences from successful and failed pilots and later shares them. Where the unit's high-level view plays a crucial role in matching emerging technologies and the right technology providers to the best use cases in the right locations.

In 2020, the leaders of the handling and storage network decided to systematically test three drone technologies. While one of them was canceled after the initial pilot because it did not reduce labor costs, the study revealed. Originally it was a semi-autonomous solution from a French warehouse management specialist that left IKEA with an autonomous solution from Swiss drone startup Verity. IKEA followed a three-step process to test both drones in parallel at multiple warehouse locations, including: solution exploration, proof-of-concept pilot and deployment. In this case the DIN was responsible for the first two steps.

Later, pilot tests gave IKEA the opportunity to identify advantages and disadvantages of drones while vendors iteratively improved the technology to better fit specific use cases. But semi-autonomous drones proved to be technically fit-for-purpose such that manual setup and administration costs dwarfed any other cost benefits. When extensive testing failed to make a clear business case, the semi-autonomous option was ruled out.

Reader, early pilots of autonomous drones were more promising. By June 2020, IKEA's store warehouse in Spreitenbach, Switzerland had successfully incorporated eight of the drones into its operations where the devices required no human intervention. It flew at night to check the locations of all pallets moved during the day. But on Sunday the drones flew over all the pallet locations providing up-to-date information about the warehouse's stock status directly into IKEA's warehouse management system.

Dear Reader, Making a business case for investing in cutting-edge technologies is very important. The best approach here is to focus on the use case first: having a solid understanding of how the technology can be applied to solve a meaningful business problem. The potential business case can then be developed iteratively as the company gains experience testing the technology in pilot projects. Unfortunately, there are many companies that do not progress beyond the piloting stage and fall into a cycle of endless testing when using new technologies. But IKEA's successful adoption of drone technology demonstrates that companies can avoid this trap.

A Better Way to Pilot Emerging Technologies

Piloting emerging technologies is an important step in assessing their feasibility, value and potential impact. To ensure successful pilots and maximize their benefits, IKEA didn't give up on drones for inventory management even after pilots became uncomfortable as they came up with better methods to test new technologies. Readers, companies that are considering adopting a particular technology usually make decisions based on the strength of the business case. Such assessments are easier to make when technology upgrades existing equipment or replaces manual processes with automation. The truth is that it is very difficult to measure the value of emerging technologies that are not yet widely used. By following these guidelines, organizations can more effectively pilot emerging technologies, minimize risks, and maximize the benefits of innovation.

The Breakthrough

IKEA decided to connect, coordinate and direct drone initiatives as part of its Global Development Innovation Network (DIN) which was established two years ago as a governance unit for new logistics and fulfillment technologies. Later in 2020, employees of the corporate supply chain development function at IKEA realized that the problem was not just with the technology but rather the result of the company's piecemeal, uncoordinated approach to testing drones.

DIN covers a total of six areas including: automation and robotics, packaging and identification, service fulfillment, handling and storage, transportation and digital technology. Each of these six areas is led by two leaders who dedicate half their time to this role. DIN's leaders and experts are geographically spread throughout IKEA, so that each area forms its own network. Although the DIN does not directly manage local pilots, it allocates resources and helps build top-management. First it collects experiences from successful and failed pilots and later shares them. Where the unit's high-level view plays a crucial role in matching emerging technologies and the right technology providers to the best use cases in the right locations.

In 2020, the leaders of the handling and storage network decided to systematically test three drone technologies. While one of them was canceled after the initial pilot because it did not reduce labor costs, the study revealed. Originally it was a semi-autonomous solution from a French warehouse management specialist that left IKEA with an autonomous solution from Swiss drone startup Verity. IKEA followed a three-step process to test both drones in parallel at multiple warehouse locations, including: solution exploration, proof-of-concept pilot and deployment. In this case the DIN was responsible for the first two steps.

Later, pilot tests gave IKEA the opportunity to identify advantages and disadvantages of drones while vendors iteratively improved the technology to better fit specific use cases. But semi-autonomous drones proved to be technically fit-for-purpose such that manual setup and administration costs dwarfed any other cost benefits. When extensive testing failed to make a clear business case, the semi-autonomous option was ruled out.

Reader, early pilots of autonomous drones were more promising. By June 2020, IKEA's store warehouse in Spreitenbach, Switzerland had successfully incorporated eight of the drones into its operations where the devices required no human intervention. It flew at night to check the locations of all pallets moved during the day. But on Sunday the drones flew over all the pallet locations providing up-to-date information about the warehouse's stock status directly into IKEA's warehouse management system.

Dear Reader, Making a business case for investing in cutting-edge technologies is very important. The best approach here is to focus on the use case first: having a solid understanding of how the technology can be applied to solve a meaningful business problem. The potential business case can then be developed iteratively as the company gains experience testing the technology in pilot projects. Unfortunately, there are many companies that do not progress beyond the piloting stage and fall into a cycle of endless testing when using new technologies. But IKEA's successful adoption of drone technology demonstrates that companies can avoid this trap.

Taking a Coordinated Approach to Program Governance

In addition to IKEA, Robert Bosch GmbH - a German engineering and electronics company with similar experience - took this hard-earned know-how to manage the program. When Bosch launched its I4.0@Bosch transformation program in early 2014, senior management aimed to achieve speed and scale while bypassing program governance. This choice has led to many experiments in technology-driven use cases throughout the Bosch production network. At the time, a senior manager who attended an internal Bosch conference to share best practices lamented to one of us, “In every booth, I saw geographically dispersed units trying to solve the same problem with the same solution. That's when we realized we needed a more integrated approach."

Later, Bosch established the Connected Industry Innovation Cluster responsible for management and collaboration related to the implementation of advanced digital technologies in its manufacturing network. It now offers a catalog of over 100 technology use cases to internal and external customers.

Five Key Lessons

Based on IKEA's successful adoption of current state-of-the-art technology the following steps can be employed by other organizations as they now work on their own implementations.

1. Create a governance structure for the exploration of emerging technologies: Readers, For drone technology the “let a hundred flowers bloom” approach was unsuccessful at IKEA. It spread resources so that experiences of failure were kept secret. To establish a governance structure at IKEA, the DIN unit facilitated a strategic process to discover an effective solution to a real problem by allocating funds and personnel without overly interfering with local drone pilots.

2. Start with the use case, but keep a close eye on the business case: As always, companies are used to aggressively looking at the business case in technology acquisition projects. If you ask "What is the return on investment?" Asking can easily miss an opportunity. In this case, it is difficult to answer this question before implementing the technology. So instead, consider what impact the use case could have on the business if it succeeds.

3. Select partners strategically: Many vendors offer technology that is interesting but won't necessarily solve the problem at hand, which is why IKEA's initial local trials with various drone vendors often failed. Selecting some strategic vendors, on the other hand, requires closer interaction and, critically, a greater commitment from vendors, who see the potential to serve the entire company. After all, IKEA has actively engaged one of those vendors to co-mature the technology until it's fit for purpose.

4. Iterate the use case until the business case evolves: It is important to remember that moving from a use case to a business case is not always a linear process. These are operational and technical changes that require discussion and problem solving among agents. However, technical implementation and economic viability may vary in different locations.

5. Take a phased approach to scaling: Readers, as soon as a technology is effective and robust and the benefits outweigh the costs, it's time to start scaling. Because disruptive technologies evolve so quickly that they allow for more efficient iterations where there is more advice than direct corporate-wide adoption. IKEA's phased rollout of the drones has ensured that they are deployed first in areas it expects to be most cost-effective.

Final thought

Readers, when piloting emerging technologies, it is important to set clear goals, measure key performance indicators and collect feedback for continuous improvement. Additionally, scalability and potential challenges that may arise during implementation need to be considered. It is important to remember that the success of a pilot project can provide valuable insights into the wider adoption or refinement of the technology. In this regard, marchcroft will provide increased transparency in Advanced Technology Pilot Program areas to help you pursue emerging technologies that provide a partnership opportunity to study the effectiveness of integrating emerging technologies that increase system reliability, operational and market efficiency and resilience.

A Better Way to Pilot Emerging Technologies

Piloting emerging technologies is an important step in assessing their feasibility, value and potential impact. To ensure successful pilots and maximize their benefits, IKEA didn't give up on drones for inventory management even after pilots became uncomfortable as they came up with better methods to test new technologies. Readers, companies that are considering adopting a particular technology usually make decisions based on the strength of the business case. Such assessments are easier to make when technology upgrades existing equipment or replaces manual processes with automation. The truth is that it is very difficult to measure the value of emerging technologies that are not yet widely used. By following these guidelines, organizations can more effectively pilot emerging technologies, minimize risks, and maximize the benefits of innovation.

Taking a Coordinated Approach to Program Governance

In addition to IKEA, Robert Bosch GmbH - a German engineering and electronics company with similar experience - took this hard-earned know-how to manage the program. When Bosch launched its I4.0@Bosch transformation program in early 2014, senior management aimed to achieve speed and scale while bypassing program governance. This choice has led to many experiments in technology-driven use cases throughout the Bosch production network. At the time, a senior manager who attended an internal Bosch conference to share best practices lamented to one of us, “In every booth, I saw geographically dispersed units trying to solve the same problem with the same solution. That's when we realized we needed a more integrated approach."

Later, Bosch established the Connected Industry Innovation Cluster responsible for management and collaboration related to the implementation of advanced digital technologies in its manufacturing network. It now offers a catalog of over 100 technology use cases to internal and external customers.

Five Key Lessons

Based on IKEA's successful adoption of current state-of-the-art technology the following steps can be employed by other organizations as they now work on their own implementations.

1. Create a governance structure for the exploration of emerging technologies: Readers, For drone technology the “let a hundred flowers bloom” approach was unsuccessful at IKEA. It spread resources so that experiences of failure were kept secret. To establish a governance structure at IKEA, the DIN unit facilitated a strategic process to discover an effective solution to a real problem by allocating funds and personnel without overly interfering with local drone pilots.

2. Start with the use case, but keep a close eye on the business case: As always, companies are used to aggressively looking at the business case in technology acquisition projects. If you ask "What is the return on investment?" Asking can easily miss an opportunity. In this case, it is difficult to answer this question before implementing the technology. So instead, consider what impact the use case could have on the business if it succeeds.

3. Select partners strategically: Many vendors offer technology that is interesting but won't necessarily solve the problem at hand, which is why IKEA's initial local trials with various drone vendors often failed. Selecting some strategic vendors, on the other hand, requires closer interaction and, critically, a greater commitment from vendors, who see the potential to serve the entire company. After all, IKEA has actively engaged one of those vendors to co-mature the technology until it's fit for purpose.

4. Iterate the use case until the business case evolves: It is important to remember that moving from a use case to a business case is not always a linear process. These are operational and technical changes that require discussion and problem solving among agents. However, technical implementation and economic viability may vary in different locations.

5. Take a phased approach to scaling: Readers, as soon as a technology is effective and robust and the benefits outweigh the costs, it's time to start scaling. Because disruptive technologies evolve so quickly that they allow for more efficient iterations where there is more advice than direct corporate-wide adoption. IKEA's phased rollout of the drones has ensured that they are deployed first in areas it expects to be most cost-effective.

Final thought

Readers, when piloting emerging technologies, it is important to set clear goals, measure key performance indicators and collect feedback for continuous improvement. Additionally, scalability and potential challenges that may arise during implementation need to be considered. It is important to remember that the success of a pilot project can provide valuable insights into the wider adoption or refinement of the technology. In this regard, marchcroft will provide increased transparency in Advanced Technology Pilot Program areas to help you pursue emerging technologies that provide a partnership opportunity to study the effectiveness of integrating emerging technologies that increase system reliability, operational and market efficiency and resilience.