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This is an MIT Sloan Management Review article. The success of the IKEA Group, the world's largest furniture retailer, is generally attributed to its highly innovative strategy. Through global sourcing of products and customer self-service in the areas of furniture delivery and assembly, IKEA achieves a low-cost position that enables it to charge low prices. Meanwhile, IKEA's use of Scandinavian design and an innovative retail environment increase customers' perception of receiving good value. By examining the history of IKEA, the author concludes that, while founder Ingvar Kamprad initially had a general vision, many important details of IKEA's strategy were developed through experimentation and adaptation to market circumstances rather than through preplanned strategy formulation. In academic literature, this approach to strategy is known as logical incrementalism. The author suggests that IKEA's experiences in strategy development demonstrate the importance of starting with a clear vision but refining it over time; experimenting constantly and being willing to make mistakes; seeking to turn problems into opportunities; and learning from other people's ideas.

This is an MIT Sloan Management Review article. The cost of information technology outsourcing involves more than vendor fees, but how much of that additional cost is really necessary? A survey of 50 outsourcing efforts shows that companies are largely unaware of costs associated with such activities as transitioning to a new vendor and, so, tend not to take measures to reduce them. Jerome Barthelemy of Audencia Nantes graduate school of management in France looks at four kinds of hidden costs that can erode the benefits a company anticipates from outsourcing. Drawing on lessons from company interviews, he provides anecdotes that show how a company's choices can lead to high hidden costs. When searching for a vendor, for example, companies often try to spend as little as possible. However, spending more at the search stage reduces hidden costs throughout the outsourcing effort and saves considerable expense later. Companies should include certain clauses in the contract, select a trustworthy vendor, and be certain about the vendor's role. Another hidden cost is the expense of transitioning activities to the vendor. This cost is elusive, because it is incurred as long as the vendor has not completely taken over from the internal IT department. The nature of the outsourced activities determines much of this cost. The cost to manage the outsourcing effort can be considerable, but companies tend to overlook it. Even spending money to hire consultants with IT outsourcing experience can be cheaper than enduring the high cost of contract renegotiation and dogging the vendor to get the desired performance. The last hidden cost category is the expense to switch vendors or reintegrate the outsourced activities. Many managers view the end of an outsourcing agreement that involves strategic activities as a failure and are uncomfortable preparing for that cost. Simple precautions, such as including a reversibility clause in the contract, can help reduce problems.