Jørgen Vig Knudstorp is a Danish Business Executive who is the former CEO (2004–16), Executive Chairman (2017-present) and Member of the Board (2017-present) of the Lego empire. He is known for his brilliant turnaround strategy with the Danish toymaker.
An all-time favourite, the Lego company has had some good times over the horizon but this wasn’t always the case. This Danish treasure went from strength and prosperity to disaster in the early 2000s. It all began in 1998 when the business began to falter. Lego posted a loss of €26m and by 2003 it was clear that the company was in grave danger and was heading towards bankruptcy. It had posted a record loss of €126m.
Kjeld Kirk Kristiansen, the grandson of the founder, invested a significant amount of his own money into the company to salvage the company but realized that was far from solving the crisis that was laid before him. Kristiansen then did something that had never been done before in the history of Lego – he handed over the reins to someone from outside the family.
Jørgen Vig Knudstorp was named the CEO of the Lego Company in 2004. He was a 35-year-old former academic and consultant, who previously worked with McKinsey & Company. He offered his outsider insights to transform the company and quickly gained a reputation as a turnaround expert worldwide. He moved quickly to save the company, acting on instinct and strategy to restore the brand to its former glory. Knudstorp implemented aggressive cost-cutting measures and shed underperforming businesses, one of the biggest decisions he made was to sell control of the company’s four LEGOLAND theme parks for nearly $460 million.
Knudstorp was well aware of his inexperience within this new industry but he was determined to do his best and turn this company around. He took on a mantra of the Danish saying of ‘managing at eye-level’ by making himself familiar to all teams. Mr Knudstorp said in an interview, “We have almost a circular structure. Instead of having a typical executive committee, I meet every month with a group of 20 senior vice presidents. It’s quite a flat management structure that allows me to have tentacles quite far into the operating business, and, at the same time, to get that broad group of leaders aligned around central execution matters, such as what are the financial estimate and targets, what is the demand plan, what are the supply capacities, and which customers are we putting a priority on. Those types of operating questions get resolved in this central group. It’s cumbersome to bring 25 people together in a room or at a video conference, but if you manage the material and the process well, you achieve huge speed advantages.”
He started his work with the production department and was on the lookout for more effective and efficient practices to reduce the development time for new products. In a bold move, he involved LEGO’s devoted adult fans in creative decisions through workshops in which new designs were discussed and thereby implemented.
Prof Dave Robertson, former LEGO Professor of Innovation and Technology Management at Switzerland’s Institute for Management Development (IMD) says Mr. Knudstorp’s main skill is getting the best from his team by giving them the proper support and resources. An example from 2004 was championing a marketing executive who pushed for a back-to-basics design for a new fire engine and the return of its Duplo line for toddlers, which had been dumped by a previous boss. “I think that is a much more powerful leader, somebody who can create a lot of Steve Jobses, rather than just one.”
Mr Knudstorp at his interview with BCG revealed that he was trying to curate the company around a simple culture, “The culture I’m trying to create is one where every year when we celebrate another record result, I get up on the beer box and I say, “Thank you for doing all of the things I never asked you to do.” I don’t want to control. I want to create a context. I want to create clarity of culture and strategic choice, but then I want people to surprise me. I don’t want a place where people are doing what they’ve been told to do because that stifles that creative bureaucracy, that creates fear.”
Once the company was standing on its two feet again, he positioned it for growth. He started experimenting with products, one of the best-selling creations includes the Japanese-inspired Ninjago line to the Friends range that was a major hit with kids. The results speak for themselves, in 2007-14 Lego’s revenues more than tripled and its net profits rose sevenfold.
The release of The Lego Movie in February 2014 gave a big boost to the brand. The little plastic blocks that have inspired imaginations for generations saw a record $4.4 billion in sales, which helped the already iconic brand regain its status as the most powerful.
“It’s amazing now how much a movie can impact a brand,” said Dan Lin, producer of The Lego Movie and The Lego Batman Movie. “That’s something we’re paying a lot of attention to and that hopefully, these movies do help to tell the brand’s story.”
Lego has also been very proactive with change ever since its impending disaster in 2003. It is now on the fast track to sustainability with rising concerns about its use of plastic. They have vouched to be 100% sustainable by 2030. “We want to use plastic in a responsible way, and particularly where it is in high quality, durable and reusable application. And that’s what Lego bricks are,” said Brooks. The brand is making the switch to bioplastics while focusing on the materials to give their consumers the same quality product as before.
In 2016 Knudstorp stepped down as CEO to become executive chairman of the newly formed LEGO Brand Group, which would “facilitate the owner governance of all LEGO brand-related activities.” The following year he also became executive chairman of LEGO.
Mr Knudstorp learned various life lessons from his time at Lego, including one of his famous quotes, “I don’t like stuff that can only go into one set; I want stuff that can be applied across sets. It’s a more real Lego building experience. And, of course, it’s the same from a manufacturing point of view. I want universal elements; that give me the best economics and best utilization of the mould.”