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Team 23: Dominik Grill (761539), Anca-Elena Macovei (777128), Matan Manzoor Koopman (598149), Yan Yan Sun (743349)

The Problem and Opportunity

In the current digital age customers expectations are constantly evolving at a fast pace. Research by McKinsey (2021) concluded that 71% of customers expect personalized interaction from the companies they purchase from. In addition, 76% of customers are frustrated when personalization is not provided (McKinsey, 2021). Currently, IKEA offers a post-sale experience that lacks active-interaction and personalized assistance. However, with IKEA’s previous digital and AI capabilities combined with their global digital hub, the company can leverage this to construct a GenerativeAI (GenAI) assistant chatbot into their app.

The Solution: GenAI Assembly Assistant Chatbot

The proposed GenAI solution provides an extension to the famous assembly process IKEA is known for. Utilizing a chatbot interface in the current IKEA app allows customers to use text or voice to receive a step-by-step guidance to assemble the furniture. Moreover, the assistant provides visuals in the form of pictures and short videos with real-time responses to the user questions regarding the respective furniture. To eliminate false or misleading information, the system will employ Retrieval-Augmented Generation (RAG), ensuring that all outputs from the chatbot assistant are verified from IKEA’s manuals and databases. This further guarantees that all information is factual and accurate, causing less operational malfunctions. The solution goes beyond solely customer assembly guidance, it collects real-time insights from customers on where customers find difficulties and when the process is seamless, thus, helping IKEA improve its assembly process. The analytical offerings provide a neverending feedback loop bridging the customers experience with management.

Impact on IKEA’s Business Model

The GenAI chatbot assistant aims to strengthen IKEA’s current business model by proving the following four business processes as seen in Figure 1:

1. Customer Experience is personalized, offering an interactive post-purchase experience increasing satisfaction.
2. Operational Efficiency is achieved via automated assistance, thus reducing customer success costs.
3. Return Reduction due to personalized instructions complemented by continuous help.
4. Data Insights provided through the analytical dashboard presenting any customer difficulties in the assembly process.

Figure 1 IKEA Business Model

Challenges and Mitigation

Altering a business model using GenAI comes with its hurdles and risks. A few identified risks for IKEA’s chatbot assistant are AI hallucinations when using a large language model (LLM), data privacy of the user, and customer adoption barriers. Given the hurdles, the proposed mitigation strategies are building the system using RAG as a complementary to the LLM (ensuring the output is accurate and relevant), implementing a privacy-by-design approach, curating an intuitive user interface, and a multi-model architecture that discourages dependency on a single AI vendor. 

Prototype

Figure 2 IKEA GenAI Chatbot Assistant

References:

McKinsey & Company. (2021). The Value of Getting Personalization right–or wrong–is Multiplying. Mckinsey & Company. https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/the-value-of-getting-personalization-right-or-wrong-is-multiplying

4.5/5 (2)

In these digital times, customer trust needs to be high on the priority list of firms. Banks and digital financial services are transitioning into dependence on network effects. An increase in the number of users results in improved value in transfers and payments. On the other hand, once users feel that their data, money, or privacy is at risk, the network effects are quickly reversed and become negative. Revolut, a leading FinTech bank, faced a drastic increase in APP scams compared to its competition in the UK (Gani, 2024). The aforementioned setbacks lead to eroded trust of customers as their security confidence in the bank decreases, potentially leading to either closing their accounts or moving to competitors. Additionally, a negative feedback loop is bound to happen once a certain number of customers leave due to the reduced attractiveness of using the financial service.

From my point of view, cybersecurity and data protection are unforeseen network effects currently occurring in the financial industry. The network effect notion tells us that as users attract users, it is critical to mention that insecurity will push them away. It only takes one data breach to cancel years of digital growth; banks must view security as a growth strategy, not another cost. Companies should curate and give a platform for cybersecurity to maintain their customer base (Muhly et al., 2025). In the era of AI, where attacks are becoming quicker and more dangerous, banks can leverage this by marketing their superior security as a USP, contributing to its positive network effects. 

While AI is making attacks more prominent, it has the power to protect through anomaly detections, better decision-making, and trend prediction (Kovačević et al., 2024). From my perspective, the first financial service incorporating AI in its cybersecurity solutions has a significant competitive advantage in continuing its network effects.

References:

Gani, A. S. (2024, September 11). Revolut Grapples With Surge in Scam Complaints That Threatens Its Ambitions. Bloomberg.com; Bloomberg. https://www.bloomberg.com/news/features/2024-09-11/revolut-grapples-with-surge-in-scams-that-threatens-its-ambitions?embedded-checkout=true

Kovačević, A., Radenković, S., & Nikolić, D. (2024). Artificial intelligence and cybersecurity in banking sector: opportunities and risks.

Muhly, F., Jordan, J., Cialdini, R. B., & Neidert, G. P. M. (2025, June 24). Create a Company Culture That Takes Cybersecurity Seriously. Harvard Business Review. https://hbr.org/2025/06/create-a-company-culture-that-takes-cybersecurity-seriously

Scherbina, A. (2024, May 3). How much do US businesses lose due to malicious cyber activity? The Hill; The Hill. https://thehill.com/opinion/cybersecurity/4641199-cyberattack-businesses-money-loss-malicious-cybersecurity/