A Better Way to Pilot Emerging Technologies
IKEA didn’t give up on drones for inventory management after pilots fizzled — it came up with a better approach for testing new technologies.
Companies that are considering adopting a particular technology typically base the decision on the strength of the business case. Such an assessment is straightforward when the technology will upgrade existing equipment or replace manual processes with automation, or when the technology is already in use at other organizations that have demonstrated its benefits. But it’s much harder to quantify the value of emerging technologies that are not yet being widely used.
In fact, budget-centered business case approaches are biased against novel technologies, partly because they don’t factor in the value of learning gains and spillover effects. But absent the discipline imposed by requiring a good business case, organizations that bring in new technologies via isolated pilot projects often find that these experiments go nowhere.
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To understand how organizations can successfully assess, pilot, and implement novel technologies, we studied how IKEA introduced drone technology into its warehouse operations. We describe the research in more detail in our 2022 Journal of Operations Management article, “Emerging Technologies and the Use Case: A Multi-Year Study of Drone Adoption.” The company’s experience demonstrates that a use case can be developed into a meaningful business case with a coordinated approach and the right partners.
IKEA may be the world’s largest furniture company, but it suffers from the same pain point as every other retailer: inventory accuracy. Knowing what you have in stock when, and where it is located, is critical, but human error still creeps in at a company that moves hundreds of thousands of different items daily. Every time a customer asks for a product that is not in stock, a potential sale is lost — as well as future sales, if the customer is disappointed enough with the company.
Correcting inventory inaccuracies drives up costs as well. One of IKEA’s distribution centers in Germany used to have several employees dedicated to fixing such errors through regular manual inventory checks. Using forklifts or ladders to count inventory is tedious, strenuous, and potentially dangerous work that is prone to human error.
One promising technology that IKEA thought might help solve the problem was drones — something it had already experimented with in uncoordinated trials at a few of its warehouses in 2018-2019. In Thailand, a warehouse employee had purchased a consumer drone and flown it in the warehouse to photograph pallets on high racks.