how ikea does it - nimdzi · managers who are responsible for individual corporate areas. the...

How IKEA does it A look at IKEA Group’s global localization program

Research: How IKEA Does it

Copyright 2017, Nimdzi Insights, LLC. All Rights Reserved

HOW IKEA DOES IT Introduction

For the purposes of this report, we will be discussing IKEA Group, otherwise known as Ingka Holding, which technically operates as a franchise for Inter IKEA Holding. IKEA Group, headquartered in Malmö, Sweden, is responsible for running the global retail operations for IKEA and this is where we focus our attention.

The information contained within this report has been gathered from various sources inside and outside the Language Services Industry. The insights are valuable whether you are a localization manager interested in learning from how IKEA does it, or an eager LSP who would like to understand the needs of this unique customer.

Information contained in this report: 1. TL;DR – Executive Summary

2. Organization structure and culture

3. Centralization of localization processes

4. Localization budget allocation

5. Project management structure and processes

6. Quality control processes

7. Vendor management structure and processes

8. Technology strategy and processes

9. Nimdzi’s insights and summary of information

We know you are busy! That’s why each of our reports are formatted so that information can be quickly and easily digested. For those in a hurry, we provide the TL;DR (Too long; didn’t read!) section in the beginning of each report. At the end of each report we also summarize key points with our own Insights.

For those that think the devil is in the details, we have you covered, too! In the body of the report we go into as much detail as possible about each topic discussed. Still not satisfied? Never hesitate to reach out to us directly to request additional information. We’re here to help!



TL;DR – Executive Summary

Employees

>10,000

IKEA Group employs over 10,000 employees, which accounts for only part of the 160,000+ total people worldwide in the

larger IKEA family of companies and franchises.

Founded

1943

IKEA was originally founded in 1943. In the last 75 years, the company has gone through

many organizational changes and is now represented by multiple separate business

entities.

Headquarters

Malmö, Sweden

IKEA Group is headquartered in Sweden and this is also the localization of the central

Localization Team.

Locations

330 IKEA Group stores in 28 countries

There are currently 330 IKEA Group stores in 28 countries, which represents the

majority of franchise operation of IKEA’s total 400 Stores in 49 Countries.



Vendor model

Two preferred MLSPs and multiple smaller vendors

IKEA Group has on-boarded two MLSPs with “preferred vendor” status, though individual groups within IKEA are still at liberty to work

with other suppliers who are not on the “proffered vendor” list.

Budget

Estimated EUR € 7.5 - 11.5M

An estimated € 1M – 1.5M is spent annual with the two preferred vendors, and an

additional estimated € 6.5 – 10M is spent with other LSPs.

Languages

51 Languages

IKEA Group operates in 30 markets and has a wide range of language needs, including

multiple dialects/variants for some languages.

TMS

No centralized TMS

The central Localization Team has not deployed a TMS, providing flexibility to individual LSPs to use their preferred

technologies.



Machine Translation

Relatively agnostic

IKEA Group does not mandate, forbid, encourage, or discourage use of Machine

Translation.

Challenges

Measuring quality, change management, and pricing

The top three challenges faced by the IKEA Group central Localization Team are 1)

defining a way to measure and track language quality, 2) managing internal

change necessary to continue centralization of localization, and 3) competitive pricing for

language services in low cost markets.



Organization and culture

Culture and enthusiasm for localization

It is rare to find an organization that is as global as IKEA. Global expansion is not just a strategy for IKEA, it is in their DNA. IKEA operates 400 stores in 49 countries and has suppliers located around the world.

Global IKEA retail locations (Note: map includes all locations, not just franchises operated by IKEA Group

Centralization

IKEA Group’s localization function is both centralized and decentralized. Individual groups and country managers have control over their localization process, but there has been a push in recent years to provide centralized support for the localization function through semi-centralized vendor management and company-wide best practices.

As part of the corporate overhaul, there was a localization “team” formed and tasked with driving the centralization and standardization of localization practices within the



company. This newly formed function in the company currently consists of a single localization manager (hence “team” in quotations). The localization function for IKEA Group falls under the Corporate Communications Team (Translation, after all, is a form of communication!).

The task of centralizing and standardizing the localization function within IKEA Group is not a small task, especially as IKEA as a whole seems to be moving in a direction towards less centralization at the corporate level, which consists of a breathtakingly complex system of multinational corporations, foundations and franchising operations.

Internal teams needing localization have been operating in a certain way for years. They already have vendors that they like working with and don’t want to give those up.

The Localization Team has limited authority over other groups within the company that are requesting localization services. The localization team can assist and guide internal teams, but has no ability to mandate any change to processes or even supply chain at this time.

Because IKEA does not have a full localization team that manages localization, they can only serve as trusted internal advisers to other groups performing localization. Actual localization projects are managed by individual stakeholders in these other groups that are requesting localization. The centralized localization function consists of a one-person team that is there to provide guidance to these teams on best practices and vendor selection.

A considerable accomplishment of the Localization Team has been to bring on two large MLSPs (Multiple Language Service Providers) as approved vendors to help service the various internal teams. These MLSPs enjoy “preferred vendor” status and are available to service any groups within IKEA. However, individual groups within IKEA are not under any mandate to work exclusively with these teams and are still free to work with their own preferred vendors if they so choose.

From a process and supply chain centralization standpoint, there is still much more work to be done. Currently, only an estimated 15% of localization work is being performed by these centralized vendors, with the rest being performed by various smaller vendors and freelancers that are still preferred by the various internal groups.

However, we must give credit to IKEA Group for having a localization team, however small, as it shows a commitment to streamlining their localization function. The process



of centralizing localization in any company is no small task, and this holds true even more so for a company with such as long history of decentralized localization processes, like IKEA.

Localization Budget

There have been rumored estimates of IKEA spending EUR € 17M per year on localization, but upon further investigation, this appears to be a bit on the optimistic side. This estimate was made based on certain assumptions about the level of centralization and volume of content to be localized that never turned out.

Currently, IKEA spends between EUR € 1M to € 1.5M with the two preferred MLSP vendors they have on-boarded. This is only part of the story, though, as it is estimated that only 15% of the total localization spend is spent with these preferred vendors. While there are efforts to promote further consolidation moving forward, currently 85% of localization spend goes to smaller LSPs, agencies, and freelancers, and this spend is not centrally tracked or reported. This means that total localization budget could be anywhere between EUR € 7.5M and € 11.5M globally.

It is important to note that currently there is no centralized localization budget. Localization services are bought and paid for by individual budget owners throughout the company. The Localization team provides guidance and best practices, but does not pay for any of the localization and has no budget allocated for any purchasing.

Estimating budget is further complicated by the fact that historically there has been no consistent cost center internally for different IKEA managers to use when purchasing localization. Often, these costs have been absorbed and “hidden” in other project budgets, making it impossible to track. This is something that will be expected to improve moving forward, though, because starting in 2017, IKEA has rolled out a new cost center to track localization costs regardless of where they are incurred.

Lack of evangelism and education about localization to different groups means that localization is often an afterthought and not included when people put together their initial project budgets. Ongoing education efforts from the Localization Team are seeking to improve budgeting by training project managers to more consistently and accurately include localization in their project budgets. These education efforts have already shown a level of success.



Project Management

The localization team serves as an internal source of guidance on localization process and best practices for corporate groups such as HR, Legal, etc, as well as country-managers who are responsible for individual corporate areas. The localization team does not provide services such as localization project management, engineering, translation, or LQA, but rather guides the various teams on how these services should be carried out and helps them to select a vendor to work with.

Two main types of localization requestors

The individual project teams are located all over the globe, though there are also requests for global content that comes from a centralized location. This means that there are two different types of sources for content needing localization.

Country managers Global content

Responsible for content specific to their specific countries. These managers work

with a web of freelancers and small companies, but are moving more towards

working with one of the two approved MLSPs to perform localization.

Global content teams generate content that needs translation that is not always

necessarily tied to a single country. Global Content teams have localization needs for internal support services such as HR, Legal, and Training. 80% of the global content is generated in Sweden and Netherlands, but there are many

regional training and distribution offices around the globe that also have global

content for localization.

Quality Control

IKEA provides subject matter experts that are responsible for reviewing and signing off on translations. This is a service that IKEA has no intention on outsourcing, as it is important that this expertise remain in-house. There are SME’s that have been working on this content for 10-15 years, and so it is best left in house.



Vendor Management

Current vendors

Currently IKEA Group is working with two MLSPs as approved preferred vendors, though they are seriously considering bringing on a third vendor in the near future.

Vendor selection

The selection process for these approved vendors consists of a standard RFP process, which is managed by the Localization Team with assistance from the Procurement Team. While the Procurement Team places an important role in the vendor selection process, ultimately, the decision over how many and which vendors to on-board is in the hands of the Localization Manager.

Vendor selection through RFP is only the first step in the process, though. Due to the decentralized nature of localization at IKEA, these vendors then work with multiple stakeholders inside IKEA to onboard different streams of work. For example, as of the time of this report, one of the preferred MLSPs has already worked with individual country teams to on-board about 8 different countries, while the second preferred MLSP has yet to on-board any countries. It is apparent that, from the LSP’s perspective, “winning” an RFP for IKEA does not mean that there is a guarantee of immediate work. Rather, it is winning a spot on the preferred vendor list and the right to work with individual teams within IKEA.

The central localization manager has the authority to approve vendors onto the approved vendor list, but then can only recommend these vendors to the various teams needing localization. These individual teams are free to work with whomever they choose, and so each LSP on the preferred vendor list needs to work to develop a global relationship with each of these decentralized teams.

SLA’s and KPI’s

The SLA’s and KPI’s tracked varies by team within IKEA. Generally, though, they are tracking KPI’s for cost, quality, on time delivery, and number of words translated by region. IKEA looks to the suppliers to provide reporting data for these KPI’s, which is generally provided quarterly.



A big challenge for IKEA has been on how to properly measure and report quality and put this into meaningful KPI’s. Currently, many of the groups have not yet defined a quality reporting methodology that they are satisfied with.

Technology

IKEA is a furniture company, not a technology company. This is important to keep in mind when considering the level of technology implemented into their internal process. IKEA performed a technology pre-study in 2016 to take stock of their current use of technology and identify areas of improvement that they are still working towards today. The central localization team would like to see central technology rolled out in the future, but at this point it is not a priority. The language technology that does exist is typically deployed and managed by the vendor LSPs.

TMS implementation

Because of IKEA’s multiple vendor strategy, they have chosen not to implement a global TMS as of now. This is a conscious decision made by the Localization Team. Not having a centralized technology mandate means that the LSPs are free to use whichever TMS they like. This provides greater flexibility for each individual group within IKEA and their vendors to work out a process that works best for them. Since work is typically split by language, there is no major concern to manage TM sharing between suppliers.

One of the downsides to not having a centralized TMS is that there is no centralized all-up reporting available. IKEA Group needs to rely on reporting provided by the LSPs to track volumes, SLA’s and KPI’s. The reporting that is taking place is usually not happening at the global level, but rather between the LSPs and the individual project managers coordinating the projects. This could mean that if an LSP is working with multiple groups within IKEA, there may be different reporting expectations and agreements with each group.

The exception is that the two preferred vendor MLSPs that are on-boarded are required to provide centralized reporting to the central Localization Team in the form of quarterly reports. Such reports may overlap with reports that are also being provided to individual groups, but they are not meant to replace any reporting agreements between the suppliers and these groups.



Workflow management

Workflow is different depending on the team requesting localization. Generally, files are transferred to and from the LSP through emails and/or file-share systems. This presents an opportunity for mature LSPs (ie: the two preferred vendor MLSPs) to work with individual project managers to deploy automated workflows to streamline and optimize multiple areas of the localization process, from file preparation to hand-back and everything in between.

Machine Translation

IKEA Group does not have a central MT strategy, but individual groups are free to use MT as they see fit. The only known instance where MT is consistently used is for translation of user-generated content (ie: product reviews and customer feedback).

MT is not mandated, forbidden, encouraged, or discouraged by the central Localization Team, so this decision is left up to the individual project managers. So long as the output quality does not suffer, MT is a perfectly acceptable solution. This presents an opportunity for LSPs to provide an MT post editing solution in order to either increase their margins, reduce costs for IKEA, or a combination of the two.

Top Challenges

Internal change management

The first of the top three challenges faced by IKEA today is getting internal groups and country managers to change suppliers and adopt the new way of working. Some groups are ready and willing to change, but most of them aren’t.

Since the localization team does not have any authority over other groups, they can only help guide these groups towards further centralization. Evangelism and education efforts will continue to show other groups the value of relying upon a central localization team.

Measuring quality

IKEA faces a challenge around measuring quality. This is not an uncommon challenge in the industry, as there are many very mature companies out there that are not working with an objective and consistent way to measure quality.



Relying heavily on internal SME’s to review translations for each region, it is difficult to implement a process in which quality meta data will be captured as part of this review process. Internal SME’s will not want to be confined to a restrictive QA process, or fill out scorecards. They will want to continue reviewing translations the same way they have been doing this for years.

An external, third party LQA program could benefit IKEA, but may be equally challenging to deploy. Internal SME’s have been working on the same content for years, sometimes decades, and it would be difficult to transfer their knowledge to new reviewers.

So long as the localization process remains mostly decentralized, IKEA would do well to work with their individual vendors to report quality. MLSP’s will have no problem adding a data driven quality review and reporting step to their existing workflows. If this data can be captured and is shown to be useful, this could also be used to build a good case for centralization of localization, showing benefit to the 85% of project managers in the company that are not currently using the preferred vendors.

Pricing

One of the main concerns that various internal groups have about switching to a centralized localization model is that of pricing. They feel that they can get the job done quicker and cheaper themselves if they engage directly with freelancers or smaller LSP’s.

This is particularly true of lower-cost geographies, such as Asia and Southeast Europe. Country managers for countries like China, Croatia, Romania, for example, are able to buy translation from local suppliers at a fraction of the cost that they would incur if they were to engage with one of the two preferred vendor MLSPs.

This presents the central Localization Team with the challenge of convincing internal groups to switch to using more expensive vendors than what they are used to. In order to make a convincing argument, the central Localization Team will have to build a strong case to each individual group and effectively demonstrate the real value that they are bringing through centralization, such TM’s and machine translation reducing cost, quality programs leading to reduced reliance on internal team members, scalability, and/or reduced turnaround times from standardized processes.



Nimdzi’s summary and insights

Information is meaningless without insights. What does all of this mean? Based on Nimdzi’s

analysis of the information collected while preparing this report, we can offer the following

insights.

IKEA is not a tech company

IKEA is not a tech company, and so it will be difficult them to manage the change required to implement technology driven localization practices. The central Localization Team is presented with the challenging task of influencing individual groups within IKEA to adopt technology, when those teams are perfectly happy without these processes in

place.

To centralize, or not to centralize... That is the question!

While the localization team at IKEA struggles to bring more centralization to the process, they are competing against their own corporate leadership, which has lead the company as a whole in the direction of decentralization and franchising. On top of this,

they are dealing with internal stakeholders that have been doing things a certain way for decades and so may be resistant to change.



Measuring quality

You can’t improve what you can’t measure. IKEA will continue to struggle to bring efficiency so long as they are not tracking data and KPI’s in a consistent manner. We

can expect to see continued improvement in this area, as they continue to roll out standardization.

Opportunities for LSP's

There is opportunity for growth for the current two preferred vendors and any other large MLSP that gets on-boarded onto the preferred supplier list. These mature MLSP’s can

open up new opportunities at IKEA by helping to guide them towards more efficient localization processes. Areas of focus would be workflow management, TMS centralization, machine translation, and end-to-end localization management

outsourcing.



Attracting new LSP's

IKEA will continue to be decentralized into the foreseeable future. LSP’s wanting to work with this global behemoth will have to weigh the allure of working with such a well-

known and respected brand against the potential overhead that will be incurred to service multiple stakeholders in this decentralized company.

how ikea does it - nimdzi · managers who are responsible for individual corporate areas. the...

Documents