Lego: Jørgen Vig Knudstorp

From "Builded Productions" and "Luminary Media," it's wisdom from the top. Stories of crisis, failure, turnaround, and triumph from some of the greatest leaders in the world. I'm Guy Raaz and on the show today, the story of your big newt store, in Lego. The city bank arrived and they basically said, "Sorry, you have to pay us tomorrow because you're no longer living up to what you promised us." In that way, the road ahead, the first six to twelve months, was pretty clear and there were no sacred cows. There was nothing that could now no longer be touched because this was duodied. How a team of leaders took over Lego at the brink of collapse and turned it into the biggest toy maker in the world. Okay, who among us doesn't have a Lego story. When I was a kid, I would race home from school on Fridays and pull out my bucket of Legos from which I would build an elaborate village in the middle of my bedroom to celebrate the end of the week. When my mom and dad would walk in after a long day at work, I would proudly unveil my creation and I know that story is not unique. We're talking about one of the most iconic brands in the world. In fact, the biggest brand to ever come out of Denmark. The company was actually founded in 1932 by a carpenter named Ole Kier Christensen. Now remember, this was when the world had plunged into a global financial crisis, the greatest economic depression in history. And the carpentry trade wasn't exactly paying the bills for Ole Kier Christensen. So he kind of pivoted and started tinkering with ideas for toys. Now after a few fits and starts, he came up with interlocking plastic blocks that could be built into virtually anything. And by the 1970s, Legos could be found in virtually every single country. As the company grew, the brand and the family became the pride of Denmark. But by the end of the 20th century, Lego was actually close to bankruptcy. The Lego brand was over leverage. The company oversaw TV production, theme parks, books, games, you name it. And even though it was and is a beloved brand, the balance sheets told a different story. Now in the middle of all this arrived a young consultant, an economist by training named Yorn Vignutztorp. In Yorn and some other smart leaders in the company realized that unless they turned things around, Lego would disappear. So how did Yorn and his team do it? Well, we'll get there. But long before he ever imagined he'd work for the company, Yorn was just like you and me and every other kid in the world, obviously in Denmark, who grew up playing with Legos. I remember Lego very well from my very early childhood, probably like four years old. My dad was an engineer and very structured systematic person who even he would catalog his DVD collection and books and say, "Hey, dad, do you have so-and-so book?" And he said, "Oh, wait a minute." And he'd look it up and he'd say, "Oh, shelf B2." Wow. Everything was very structured in his own house. My mother was a very creative kindergarten teacher. So in a way, I think they loved Lego because it had those two aspects to it. And they kept telling me when I grew up in the '70s, no batteries. You can't have a toy that uses a battery. Has to be engaging. It has to challenge you. I did convince them to get a Lego train set. That was the one exception to the rule. So Lego was a very, very big part of my childhood and we would make these big layouts on a ping-pong table, you know, built cities or lunar landscapes and wild west landscapes and then trains would be driving around. So it was really a very, very formative part of my life and I feel so connected to the values and the very different set of values that my parents gave you, but they came together in the brick. Can you explain like, what does Lego mean in Denmark? Is it, I mean, is it something that everybody just is sort of the national, the pride of the nation kind of thing? I would say so. It is something that people identify with very strongly. I think this notion of playing well and developing through play is at the core of the Danish philosophy to racing children. But it's definitely also a company that people are proud of and have a very emotional connection to. And I think some of that probably comes from, that's how people all over the world feel. So when you are a Dane and you travel the world and people might say, so what companies are in your little tiny country, which is sort of the size of the state of Massachusetts, the first thing they'll say is Lego. And people say, oh, I never knew it was a Danish company. Interestingly, I've found many Americans who think Lego is the quintessential American brand. It's like such a classic American experience. In Germany, they tell me, this is really an example of German engineering tradition. So in Switzerland, this is the precision tool industry. And in Sweden, they'll tell you, this is like IKEA. It's our design heritage, our furniture traditions. Wow. It's this amazing universal toy that virtually every kid at some point comes into contact with, comes out of this tiny country with a population of 5 million people. 5 million people. So kind of safe to say the biggest brand in Denmark. Yes, definitely. So you like every other Danish kid and pretty much every other kid in the world, you grew up playing with Lego. Absolutely. Do you have any specific memories of any sets that you played with? Yes, very much. I mean, I love the train sets. I built big, big train garages and goods cargo stations connecting it to ships and cranes that would lift over the goods and containers into the ships. And those sorts of things, I loved doing a, what we call a city layout, landscapes and how everything would connect and just sit down and enjoy the trains driving around. And I even made an oil rig because my dad worked for Shell Oil. So, you know, I've been an engineer and so I built an oil rig and we had an ocean with blue bricks. Yes, fascinating. Yes, tell me about this. You are a train economist. You're a PhD economist, right? Yes, that's right. I actually spend a very long time in university. I actually, when I left high school, I went to Japan. This is 87 and everybody was so fascinated with Japan, China was emerging. And I learned myself a bit of Japanese and culture as I stayed there for a long time. When I came back, I want to do something with Japanese. The only way I could get access to that was to study economics. Huh. So, after my first year at economics, I could so frustrated with the local monopoly on books being imported to this university. So I started my own bookshop and I get infatuated with running a business. I just love it. And I eventually go away from the Asia and Japanese streak. I go into economics, but also do an MBA and a combined business and economics and I end up being offered to do a PhD in the area. Wow. So, was it in your mind where you going to become an academic, a professor of economics? I thought so. And I taught and I was quite a popular teacher. I think I come back at the, yeah, it's called Augusta University. And I think I have a neck of sort of explaining things so people can understand it and are engaged and motivated. And so I thought that was where it's been my life. But over the years, I had been approached by McKinsey and company, the management consulting. And they kept saying, oh, but you know, maybe one day you will come work for us. But after five years, a senior partner called me and said, you are now the person who have joined most parties at McKinsey without ever having done any work. How about it? And so I eventually said, okay, I'll try this. This will make me a better academic. Huh. So you were sort of drawn away by the pull of McKinsey. You leave academia. Yes. Because I mean, getting a PhD is a big deal. That's a huge commitment. Yes. How did you, what do they want you to do at McKinsey? So I thought I'd be like this sort of great expert on strategy because this was really what my PhD was on to analyze strategy from microeconomics and so on. And they had connected me with those people. I came in and I started working with a client. And after a couple of months, that client basically told McKinsey, if you're going to do work for us, we need this bearded guy. Huh. Who was the client? McKinsey, but it's a big pharmaceutical company. And so I ended up serving that client and another one over a period of three years. Like general consulting, general consulting. And I kept coming back to the university. I was actually part time teaching. I kept subscribing to academic journals. I was still thinking I'm definitely going back to academia. This is just, You know, like if you want to be a great chef, it's great to do some cooking and try some various travels around the world and see how people do this. But eventually I'm gonna go back to what really drives me this intellectual curiosity. - So this is in the 1990s, right? - Yes, late 1990s. - And you're working at McKinsey, and I guess there's a specific client that would go on to transform your career trajectory, right? - Absolutely, but what happened was actually my first son was born and I was taking some paternity leave and a search firm called me and said, we have this client, it's called Lego, you probably know who it is. - Yeah. - It's like, yes. Big passion of my life. And I said, you know, they're really looking for somebody who can come and help them on business development, forming alliances, thinking through its major strategic choices. And I said, well, I love the brand. I'll get in the car and drive over to that part of the country. - So you get this call and you go, you go check out their headquarters? - Yeah, I go, it's March 01 actually. And I meet the owner, I meet the present leader of the company, his official title is Deputy CEO, he's effectively running a company. And I'm thinking, this is a pretty crazy guy. I mean, like it's almost like a hippie within management, it's so exciting, but so different from the people I've met at McKinsey, I could feel something was definitely not right, but I thought, well, this is going to be a huge challenge. And it's such a lovable company and people were so happy. So I thought, wow, I want to do this. - But what was it that they wanted you to do? Because I thought they just invited you to come check it out. Do they tell you what they wanted you to do? - Yes, they asked me to become the vice president of business development. - And that was purely based on your work at McKinsey? - Well, I think somebody had told them that I was a little bit different than the usual McKinsey person, but that I had on the one hand, the analytics, the thinking to think about fairly complex issues, also due to my background in academia, but at the same time that I had something that made me stand out with a couple of clients, and I think they liked that human connection. And I remember they were grilling me a lot on, "Are you really an analytical guy or are you a people person?" I said, "What silly question is that?" I mean, don't all people have soft skills and hard skills? Don't you want the combination? Can you only be one of them?" And they laughed and they said, "Well, okay, we'll see." But they did come back and actually offered me the job. - What was your impression when you got there? Because people, I've seen documentaries on Lego, and I have this impression of this very secretive, like almost like Apple, where it's just a really secretive place. You can't go inside, you can't know what's going on. Was it, when you first got there, was it like that? Was it like entering a secure facility? - Yes, it was quite, I mean, Denmark is a very trusting society, by some measures, the most trusting society in the world, and that's why it was a danger, so happy. But by Danish standards, it was high security, compared to a US defense company, it wasn't high security, but it was very secretive. Nobody knew how the company was doing. The company was organized in more than 20 different separate legal entities. And only the owner family had a clue of how everything stacked up to use a very corporate term, there was no balance sheet, which means nobody knew how much the company owned and owed other people. That was a deep secret. And this is a family owned company, even to this day. - Yes. - Privately a held, privately owned company. - Entirely privately held by just one family. - The family of the man who invented Lego. - Absolutely. - So you get there, they offer you the job as vice president of strategic development. - Yes. - And when you got there in 2001, did you become aware of the state of affairs at Lego? Where are you, yeah? - It took me a long time. So I started in one corner, if you like, and what I found was quite troubling, but I enjoyed it. - What was troubling? - So I discovered eventually after probably about 18 months that looking back over the past 10 years of the company's existence, the owner had not returned a single year of positive returns on his investment in the company. So the company during that time had four times been named the most admired company in the country, not by, quote unquote, "normal consumers ordinary families," but by business people. And so due to this lack of transparency on how we were actually doing, we were kidding ourselves, we were telling ourselves we were great when in fact we weren't. - So essentially because it was a privately held company, they didn't have to answer to shareholders. The family was losing money, but they were just sort of subsidizing the company and kind of not worrying about it, I guess, or maybe worrying about it. - Yes, there was a sense that things were not as good as they should be, but like one of the really shocking things we found, and this also took me some time to internalize this, was the company was trying to grow its way out of its issues. And in fact, in some years it had hit upon quite some strong growth, the company had grown on average seven, eight percent per year, which is impressive in most mature businesses. Unfortunately, the more you push the speeder, the bigger hole you were digging. So actually the real terrible insight was, the more we grew, the worse the outcomes for the company. So we simply had to stop and take a very different path. - How does that work? When the company is growing seven or eight percent, you're saying their losses also increase. - Yes. - What did that specifically Lego, what did that mean? - So what it means is you're basically making something that can't sustain itself. And you're hoping that, ah, but if only I make another hundred, somehow it will solve itself, but it was to the roots of the proposition, not healthy. So the more we grew, the more money we were losing. - And presumably Lego had been a profitable company in the years and decades before. - Absolutely. So company is founded in 1932. And until 1998, the company had never recorded a loss. - Wow. - Now, it had had a couple of years where it should have made more money considering all the risk it had taken on. But 98 was the year where finally there was a big hole in the bucket and things became a bit more accelerated and dramatic. - And nobody knew about this. - Nobody knew about this. - Wow. - By the way, how much money were they losing a year? - So it's losing to the tune of perhaps in the worst year, about 10, 15% of the sales of the company that that level of loss, which is-- - That's like $50 to $100 million. - Yes. - Exactly. So when you are in that situation, I mean, this is very important and that's why people were so excited despite the loss. This is a company that has a much greater purpose than making money. But the example I used is a bit like getting oxygen into your body. I mean, none of us sit in this room with the hope of just gaining some oxygen. I mean, we have a bigger purpose in life in just getting air. But if we don't get air, we're dead. - Yeah. - And that's basically the situation the company was in. It was not generating enough liquidity to stay alive. - So what was the reason why? I mean, why was the company losing so much money? This amazing product, this amazing brand? Why? What was going on? - Well, it took me a while to figure it out. What I think we found two really interesting things. One is the company had lost its own sense of itself. It wasn't true to itself anymore. There was no integrity to what the company said. It was all about its idea, its product, and then the actual products on the market. This is very typical of later learned of companies that have overexpended, overstretched themselves. Growth becomes the objective in its own right. So you do things that really don't mess you up to your brand. And of course, your customers are not stupid. They see straight through that and they say, "Wait a minute, this is not legal. "This is not what I used to get. "I don't believe in this and I'm not gonna pay for it." So that was a very fundamental issue, which really also came down to what I'd say, a division between those who believed in the idea and the brand and those who were commercial and somewhat cynical. And unfortunately, to run a great business, you need not one or the other, but both. You need to be passionate about the purpose and the idea that you're building on. But you need to be a true businessman as well. You need to know how to make business. Otherwise, you're not in business. You're a charitable organization. The other one was, we simply did too many things at the same time. - Like? - So theme parks, books, TV, film, stereotypes, apparel. And one day I was sitting on an aircraft with a wonderful man who wrote a book called Profit from the Core, flew from Boston to Amsterdam and he had written this book. And in this book, he talks about how difficult it is to move beyond what you're really good at. And most people fail when they go out of that space, so-called core of a business. Yeah. And in this book, Chris, "Sook the author." So, suggest, well, maybe once every five years you can do one major step away from what you have always been about, you know. And there are so many examples. You make wine and you suddenly think you'd be great at making beer. It's so obvious it's just another drink, but hey, it's really difficult. It's something completely different. So he says, "I've found if you want to do that, you need five years in between such steps." And we talked about what Ligo had done and he said, "Oh my God, you read my book upside down. You've done five things every year." So, we couldn't get it done and we thought we could do everything ourselves. And that is something we had to break with. So it sounds like you were almost an internal consultant. Like you were still doing what you kind of did at McKinsey, but now you're working for Ligo. You start to think about these things and presumably you start to talk about them with your bosses and what do they say? Yeah. But that's very true. I traveled. And then I got involved in all aspects. I said, "I've got a 360 view on the business." And I didn't see it back then. I see it now. I was very naive. The positive side of that naivety was, "I didn't make any foes. People appreciated my perspective and I never went behind their back. I let them present my analysis." But of course it all stacked up to quite a concerning conclusion. I tried Spring of 2003. So I'd been with the company a little bit less than two years. I was asked to write up a paper on all of those observations because the company had a very difficult year. I know three. In terms of losses. In terms of losses and sales fell by 30% in just one year. And so through a number of events, I was also certainly interim, the so-called chief financial officer. I was now sitting on the trashy. Running the finances. So I wrote a paper to the board and if you see the paper today, it's an academic's work. It's 30 pages. It's much too long. It's very passionate. Suggesting way too many things. But it does fundamentally say there's something terribly wrong in this company. And if we keep going on this path, we're going to lose our independence. Basically we'll be sold or go bankrupt and have to fundamentally restructure. So I shared that with the leadership of course. And people read it and said, "Whoa, okay, this is a gutsy move." And that's why I said I was naive. I did not realize the politics of what I was doing. My boss, the deputy CEO of the company said, "Well, you should come and present this to the board. The day before the board meeting, the chairman, which is not the family owner, is a non-executive and non-executive director and outsider. He called me and he said, "I read your paper three times. Are you serious?" And I said, "Well, I am. I am." And he said, "You have to come over and see me." So I traveled over to his house. We walked through it. He said, "If you really mean this, we need to share this with the full board tomorrow. I want you to be in the meeting and talk us through it." So even the board was not aware of the situation? They did not have the transparency. So they must have been freaking out? They freaked out. And after a very intense debate where I would also say my conclusions were refuted by the senior management and the owner, the chairman of the board then said, "Well, let's not shoot the messenger. I think you need to leave now, Jan." And so I stepped out of the board meeting. Beautiful summer day in June. I remember walking out calling my wife and said, "Hey, this was two great years with a brand I love. Now I'll go back to academia because I'm about to be fired." "I will be fired. There's no way around it." Right. So I came back to the office. The meeting finished a little later in the day and nobody spoke to me. There was no. This is terrible. How could you do it? But there was also no sort of great work. It was just silence. So no one said anything to you for how long? Like weeks? Yes, for weeks. And in the meantime, the company recruited a new chief financial officer to fill that position I was temporarily looking after. Very sharp person. And he came in and read this and had many interesting observations. But the fundamental conclusions he sustained. So we came back to the board. This was now November. And conclusion. Fundamentally the same. And the week after the leader of the company was let go. Wow. Decided to let go. This is in 2003. This is 2003. And what happens? What happens to you? So the board actually didn't really inform me that they would let the leader go. So it's the weekend just before Christmas holiday. And late Friday afternoon I get a phone call and it's the owner that's calling me to come to a secret location to have a conversation with the chairman. From the Christians and family? Yes. So I sit down with the owner and the chairman of the board and it's late Friday afternoon and they're saying we've decided to let the leader of the company go. And we want you together with the new head of finance to articulate a survival plan. So now we're on the same platform about the urgency of this situation. And how old are you at the time? So this is 2003. So I just turned 35. I think. Wow. So you were a young guy. Yeah. In just a minute, how you're managed to come up with a plan, a controversial one, that hoped to bring Lego back from the brink. And how eventually it turned the company into the biggest toy maker in the world. Stay with us. Guy Ross is near listening to wisdom from the top from Delta Productions and Luminary. Hey, welcome back to wisdom from the top. So it's 2003 and your Vignute store has been asked by the chairman of Lego to come up with a plan to make the company profitable again. So your does what an academic often does. He comes up with a complicated presentation. He decides to run it by the company's CFO. And the reaction wasn't exactly what he was expecting. And I had these 50 power points lies that explained how the company would be saved and all the wonderful things we would do. And he just looked at me and he said, you really don't know what to do. Do we call it return to growth or survival 2.0 or back to fit. And he said to me, I think we should call it an action plan. And I was like, you can't be serious. He said, that's what it is. Because this company is not acting on its situation. And we're going to change that. Now we're going to start acting and actually doing something. Don't say execution. Don't say culture. Don't say performing. Just say, here are the six things we're going to do. We have an action plan to bring this company away from the brink to establish its freedom to decide its own destiny in the future. And so we launched an action plan. And what was in it? Well, it's in it a couple of things. One was to really make sure the retail customer of Lego again felt that Lego had the right product and the right service to them. The retailers were fed up with the Lego company and brand. Number two was to what we call right size the company to lower risk. So we basically reduced all the activities, reduced the cost of the company, brought it back to that inner core that we hope we could make profitable. You got rid of certain things? We stopped doing movies and TV and apparel and books and so on. You just cut those. We cut it away. I tried to sell it. We sold our video games division which became a separate company, highly successful company up to this day. We sold eventually after 18 months the resort theme parks. How are you able to convince the family to do that? Well, I think by this time there was a quick realization in the family that the company was on the brink and actually what happened in January which was in a way good for trying to create a burning platform so everybody could understand it was Citibank arrived and a big Scandinavian bank as well that was on two main banks and they said sorry guys, you broken all the covenants. Now what that means is you made certain promises to the bank under which premise they have been lending you a lot of money. And they basically said sorry, you have to pay us tomorrow because you're no longer living up to what you promised us. So we were quickly in a need to establish new bank connections, new loans and sell a lot of assets so we sold all the buildings we owned if we could. So in a way you can say oh terrible state to be in another way you could say it does make things abundantly clear. It's now all about positive cash. You've got to restore your liquidity. And so in that way, the road ahead, the first six to 12 months was pretty clear. And there were no, let's say, sacred cows. There was nothing that could no longer be touched because this was due at all. You had to essentially sell off all these properties because you were deeply in debt and you needed cash fast. Yes. So, so how quickly, I mean, you take over the company, it was losing between $100 and $200 million a year. Presumably, your first year, you were also losing money and probably your second year. The second year of last year, so four, so '03 was really bad. Sales kept dropping in '04 and we lost even more money because then by the end of '04, we were sort of, you know, cleaning the carpets. We basically said, okay, now we need transparency. We spend a lot of time in '04 getting the data we didn't have and really establishing. We also consolidated the company from these separate legal entities into just one global corporation called Lego, called Lego Groups. So now everything came together and we had transparency. We also started sharing with the organization on a daily basis, how were we doing? What were sales like? We would communicate, I would write a letter every Friday to all people leaders in the company at that time, a cohort of about 500 people and in pretty basic terms described how we were doing, what issues we were facing, what we needed to do about it. So there was a radical shift in transparency and then we just stopped showing PowerPoint slides as management teams likes to do about here's what we're going to do. The lesson learned for me and that and this was coinciding with becoming a father over those years of lovely children was it's not what you say you do, it's actually what you do. So the good old phrase of you don't think yourself into a new way of acting but you act yourself into a new way of thinking held so much truth for me during those years. It's going through a financial turnaround in a company it's not unlike having a heart attack, coming through under intensive care and the doctors say to you my friend this year's your lifestyle you ended up here because you smoked too much or you didn't get enough exercise or eating too fat food and we all know that it's easy to go through intensive care and get your life saved but how do you come back to becoming more healthy change your lifestyle a lot of companies are full of new years resolutions oh next year we'll grow yeah oh next year who has ever made a plan for a company that says oh by the way next year is going to be horrible we're going to see less sales and you knew that more and that was the reality so we actually made a very pastimonious plan a very prudent plan that said the next three years this company is not going to grow and how did you communicate that to your employees who if I'm working for Lego I'm thinking I got to start looking for a job yes people were very worried and I got a good pushback also from the organization I remember I had a dialogue with our many employees here in the US about this and I said guys we need to be a little bit less optimistic we need to be more realistic about where we are and and I think what we need is a little bit of a darker side and maybe you know a rainy optimism you know not being naive about how well we can do and I remember an American saying to me how about sunny pessimism that's great because people do need a hope and I think I failed a lot in the first couple of years of not really providing enough of a purpose and a hope because I was I was really talking ourselves down because I say from an identity point of view we were arrogant I mean we probably didn't feel arrogant but we thought too much of ourselves and that's where I think it's very similar to somebody who struggles to address poor the poor health they're in you keep telling yourself small lies and so I felt we need to come to terms with how bad we are so we started that journey of rebuilding our confidence but from effect base and getting that identity that that was a tough period I mean your six point plan did it was there an end of the road did it did it project that you could actually get back to profitability well it had the following three stages one was let's restore our freedom so get rid of the debt so at that period we called manage for cash just get some money in the bank so we can decide our own future the second phase was about building our productivity so if you were patient in a hospital the first phase is being an intensive care stop the accident stop the bleeding recover get out of the hospital second phase is now you want to get fit again so you can compete in the Olympics so we spent three years according to that plan fixing ourselves and of course there were a number of initiatives under that heading and then the third phase was now that we are productive and we have saved ourselves we can start thinking about really competing on a global stage again so that was a seven year plan taking us all the way up to 2010 and did it take seven years to get back to profitability it took it took a couple of years to get back to some profitability it took five years to get back to an acceptable level and being ready to start growing again by the end of 2007 a year earlier than projected we started really hitting us tried again what was a turning point for for the company and what was the thing that were you you started to see the light at the end of the tunnel well I think again there's something almost philosophical and then there's a lot of you know you need to fix the how you manufacture and how you sell and so on the philosophical was this other question I was asked by by the person I met once a quarter which was why do you exist and what I realized was I was very unclear on that question and when you answer that question very succinctly and the answer in ten seconds is we make a material like no other material in the world that acts as if it was glued yet it's easy to take a part and there is nothing that you cannot build with this material now that's so unique that when you go out of our home rural town you're still competitive and when you come down to Berlin in Germany you're still very unique when you come over to Boston Massachusetts you're still very unique when you go to Beijing China you're unique that's how banal but how basic and essential that question is yeah why do you exist and it took me two years to refine my answer to that question but once we had that it was all about how do we become the best in the world at that one thing we can do better than anybody else and that shaped you know what you'd call the business model so what we sell and how we make money on that and we built the whole system around that I guess around 2006 2007 you launched this idea called the designer recruitment workshops yes what what was that and how important was that as part of the bigger strategy they're super important so because I was very young and super inexperienced CEO I knew I just had to listen I mentioned I had a great CFO but I also established a very open canal cost to all of our employees I started blogging which of course was sort of the new thing back then and they gave me a lot of feedback and I went out of my way to do what they told me to do so even when I thought ah is this really the right thing to do I did it because it showed them that their input mattered I did the same thing with our customers and our end users the children the fans of Lego so they they taught me a lot about this and I met a wonderful guy this guy made had built with Lego since he was three years old and he did some really extraordinary things and so he really showed to me what you can make with Lego when you have a true design mind a real creative and I asked him how do we find more people like you and I realized it was all about this passion he had for the brand and for the product and so instead of hiring people who were professional designers or professional market tiers we wanted to find people who had always loved Lego and had some really novel ideas and the best way to find those people is not to look at their resume but to invite them in for a workshop and see what they could contribute so that started a whole new generation of designers who made products that people loved because they loved Lego. I remember watching a documentary on Lego where you know people Lego mega fans are invited to try to become designers is that is that the designer recruitment workshop? Yes yeah so it's really trying to bring people who have that almost art of using the brick in completely new ways. And you find them all over the world because they have perhaps done that for years. A great example is wonderful man, Colladen Rittocker, met in one of his legal fan conventions back. I think it must have been in Washington in '06. And he told me, one day he'd gone into Toys for Us to buy something for his nephew. And he'd come across Lego and he just reminded himself how much he loved that. Now being an adult and architect, he could afford much more. So he said, "I literally filled the shopping cart with all this Lego I went home and started building." And I asked myself, "Why is there no Lego architecture?" So at the convention he put me aside into a separate room and he said, "I looked at the Lego building system. I discovered there's some floors in it. You miss some elements." I said, "Excuse me." So he had made new Lego pieces and drilled holes in other ones and he said, "Wow." "You got to change the system." And I said, "You got to come work for us." And so that gave birth to what's now a very popular Lego series that's called Lego Architecture. Sure. So 2008, financial crisis, 2009, global financial crisis ripples out. By that point, you guys had sort of stabilized. We were actually growing 30 percent during those years. Now we had done our homework. The pencils were sharpened. The company was productive. It was super fit. It was clear on its purpose in life. The culture was aligned. The people were significantly lifted in their capabilities and skills. We were a super productive, super competitive company that had not grown for five years because we had been holding it back. Now we opened the gates and we came racing out and grew even in a time of financial crisis. And in your view, it was all about returning to the core product, the direct. Absolutely. Absolutely. This company is lucky to be founded on a fantastic idea and on that idea, it has a killer application, the Lego break and its building system. We now made products that really served that idea with that product and demand was high. People were craving for it. They were missing it. There's this wonderful poem that was offered to me as a gift by, written by T.S. Eliot, where he talks about, "And the end of our exploring shall be to return to the place where it all began and know it for the first time." And that's where I found myself. I knew the place I felt for the first time, but I had come back to where it all began. And did you also have like a new marketing push at that time? Absolutely. To reintroduce the product to people? Absolutely. We were exploring various ways. I mean, at this time, the legal impacts were thriving again. We had brand stores which was a major marketing element. This is a new thing to have brand stores. Brand stores were really struggling and we brought it back and expanded it. We had great success with our education product. We had a product called Mindstorms, which hit the front page of Forbes magazine when we launched it. Wonderful product that came out by the end of 2006. We had plans to introduce more product. There was more, felt more relevant to girls which brought us the front page of Bloomberg Business Week. There were a lot of things in the pipeline that we had worked on for a couple of years that were now ready. And we were pushing hard on the marketing of that. We did TV series now of course in the age of streaming. Everybody is doing TV series. It's very hard to get you on serious known because there's so much content being produced now for streaming platforms. But at the time, we produced shows that went on places like Cartoon Network and Disney Networks and so on. And they became very successful. So all of this added an extraordinary dimension to the demand that the legal group could create. I mean, just a few years before that, you kind of shed all of those ancillary things, movies, the videos and so you started to come back to those things. We came back to those things. Not all of them, some of them weren't a good idea but a lot of it was a wonderful idea. But what was different now was we weren't doing it. We were working through partnerships. We might put some money into it and definitely be participating in the design process. But we kept doing what we only could do, which was the legal break. And then all the other things we did through partnerships with people who had done that for ages. Think about Warner Brothers. It's existed for decades and produces maybe 10 movies a year. When you asked them to do the legal movie, which eventually came out by 2014, it was just another movie for them and they did a spectacular job. And of course, if we had done it, it would have been our first movie ever and we would probably have failed miserably. That movie, I read that it grossed almost half a billion dollars. That's right. I mean, amazing. It was amazing. I think the second strongest animated movie launched at the time. It came out and it was extraordinary in how it performed and it came out in February. Nobody wants to launch a movie in February. It really hit something which I think had been accumulating over those six prior years in terms of the world's increasing interest for the legal brand. But it also did something else which dates way back to my soul searching about what was this company all about. When I met those adult fans of legal, they said, never used glue. And so there were some fundamental rules. And the storyline of the whole movie is about the evil person who wants to glue the world. So you know, this story was so real. It was what legal was always all about. Now I just never told anybody, oh, you must make a movie which is all about using glue. I told them about my encounter with fans and I took the script writers and directors to places where they would experience that legal spirit asked, can we share this? In my team, I sure they read the letters we would be getting, the emails they would go to the fans today embodied the spirit of legal by immersing themselves in that community of builders. After that movie came out, did you see a growth in sales? Absolutely. Big? Yes, it had a very big impact. I mean, I think I'm right that around 2015, so a year after that movie came out, Lego became the biggest toy maker in the world, passing Mattel. That's I think is correct, yes. I mean, that's seven years, really, since you were almost at the brink. It occurs to me that the people who run Lego didn't necessarily have world domination ambitions to be the biggest toy manufacturer in the world. No, no. But that happened. It happened. And we don't attribute a lot of value to measuring that. I think the whole definition of what is a toy industry and so on is broken. And our owners have always said, we don't want to be the biggest, we just want to be the best. So we're not about acquiring other companies and getting bigger. We're just focused on trying to do our own thing really well. And if that means we buy a certain set of currency rates and calculations are bigger, fine, but it's not an objective. We want our competitors to do well. I mean, we hope everybody can have a good business, but we'll just try and do what we're all about. So we've been very reluctant to talk about this status because it's not what we're all about. As you not just turn, you know, not just turn around, but actually started to get huge again and really huge, did you, how did you prevent the company from falling into the traps that it fell into earlier, the growth above everything else and the growth growth growth and the expansion, the scaling and the hiring because I have to assume that some of that started to creep back in. Oh, it did. It did. And we have struggled with that. Well, what I did was I said, I refused to have a sort of a growth number. We must hit or profitability target. So very much held by the private ownership in the family, we measured instead how many children we could reach. And so rather than talking about, oh, we must double sales. We talked about how can we make sure we reach every child in the world. We focused a lot on keeping things simple, avoiding too much complexity. I think we did a respectable job on that and keeping a very collaborative organization. One, there was still very focused on this idea. But after 12 years of, I think an average of 17% growth per year, we did find that things that now become so big, we needed to do something different. We needed to start looking at the brand in a new way and really take a step away from the core business and think about the other things we were doing and really start running the company in a different way. Otherwise, we'd be overwhelmed with all the growth we had seen. What were the sort of the warning signs you started to see? The warning signs started to see was actually that despite the tremendous success of the company employee engagement was starting to wave off. How were you made aware of that? So what we do is we ask all our users to say whether they felt the legal experience was so spectacular they would talk about it to other people. And, you know, so we think legal when it's doing well is one of those brains that people will talk about to their friends. So we started doing the same thing about the work experience. Because, you know, when we came out of the terrible times where I did a really poor job of building employee morale and we then got back and we gained our confidence. Employee morale was extremely high and people were so excited to be part of this company and having made the turn around and now it's growth. But what we started seeing is it was plateauing and when we really asked people how, you know, were you likely to really say to other people it should come work at legal, they stopped saying that. And they said, I love it here but I'm not sure it would recommend it to other people. It's really hard. It's getting more complicated. We're getting a bit more alienated from what we've always been about. We started having what a company calls compliance issues. So some people unfortunately were stealing, you know, not a big group of people. But there were some, you know, malpractices here and there. And all those are signs of there's something wrong here in how things are progressing. But what explains that? I mean, I mean, you had this turn around, you're growing. What do you think? What do you think happened? I think one of the elements was that we were now expanding very much very fast geographically. So we hired in a short space of time, thousands of new colleagues, people who came in from very, very different companies. So in our business we don't say, oh, we're in the twine street. So we must hire somebody from another toy company. We hired from many different backgrounds. Now when you do that in a short space of time, you also get a hundred different opinions about who we are and what we're all about and how we should run our company. So we lost that sense of being together. Also, myself personally, I had been almost like an entrepreneur and founder and being very hands on, you know, writing a letter to all the leaders, meeting with all the customers. I knew pretty much all the 400 highest ranking leaders I've been involved in the recruitment or how they were evaluated. I participated in big reviews of them. I no longer did that. I was a step away from them and everybody was encouraging me, oh, you must take a more elevated position and let people below you grow because the company cannot rely only on you. And I think in that, I left a lot of things open to interpretation. And so people filled that with their own interpretation, but what resulted was more confusion about what we're all about. And so by late 2016, I asked the senior leaders about a group of 100 people and said, what makes this company successful? And I got almost 100 different answers. Well, and what did you think? So at the time, again, I discussed a lot with the owner and the owner was also in a process of handing over to the fourth generation and the family. And we faced a fundamental choice. At the time, the company was still growing relatively strongly and we basically said, either I go into more of an owner position, helping the family, being an owner of legal group, the toy company, looking after also the legal lands, which had now become much bigger. The other things like the games, the movies, or I stepped out of all of that and I became 100% focused on running the company. And we decided after, at that time, 12 years as the company's leader, I should probably step up. And we should find a new person who would be 100% looking after the toy company. And it was difficult for me. It was difficult for the management. You know, when you've been with a company for so many years and you so much personified, the company to a degree where I was even singing and dancing when we were announcing our results. You know, you become the brand to some extent. You've at least become the company, especially to its employees, obviously. So the moment you take one step away and into a new role, although you're there every day, it is a difficult transition. So you stepped down, end of 2016 or 2017, a successor arrives and he's there for eight months. Yes. He was a very senior leader in the company who had been running the business together with me. And we worked very closely together on establishing him as a new leader and me in my new role. The words we used was we said the captain has left the bridge, there's a new captain on the bridge. But there's now an admiral of the fleet and yarn is that admiral looking after several ships and sometimes he will be on the ship but he will no longer be, you know, the captain. And as that evolved, I think both the organization did not really accept that there wasn't a new captain on the bridge. There was an element of, but what does yarn really think? So it's a difficult period at the same time the company actually hit a really rough patch. I mean, at a luxury level still making a very healthy business but growth stopped and even reversed into a decline for twenty-seven years in in in 13 years. So it was traumatic. And through this period of time, I just realized that I had given my friend and successor a job that was not the right job for him. And so I did my very best to to help things being stood through but I was also lucky to be contacted by a person I knew remotely about someone who could be the the new leader of the company. And so during that, you know, a few months into that year I started seriously engaging in dialogues with actually finding a new CEO from the outside who is also a person very different than me. So brings a real complimentary skill set to the skill set I had that is fitting to the new situation where I'm the admiral of the fleet and I look after the broader portfolio and then someone who's really focused on running the company in many ways what I did back in 2004. And we found that person Nils Christianston and he's now stepped in and been running the company very successfully. And not related to the family. Not not related to the family similar family. I read yarn that you have this habit of this thing that you do consciously you sort of told yourself you want to do this to thank people for things that they didn't do. That's right. Can you explain that? Yeah. So this is something that also grew out of the notion of I was an inexperienced CEO I didn't know what we should do I needed people to come up and suggest to me how we should resolve this situation. And of course through that I learned something that's kind of so obvious. But many leaders unfortunately forget which is rather than you having the answer what if you can have a thousand people figuring it out. And so I tried to build a culture and this was very much my driving theme also when the company became quite big. Don't do what I tell you to do. So I said to people thank you for all the things you've done that I never asked you to do. So a lot of wonderful things happened the Lego movie, the introduction of Lego Ninjago. These were things that fitted into I would say I provide a frame or a box within we exist and operate and I'm very clear on why we exist. But I'm not clear on what you should be doing. You should surprise me if you only do what I told you to do. That's going to be pretty boring. And you only have my thoughts on that. But in many corporate hierarchies this is a very very surprising thing because you wait for the dear leader to step on the stage and tell everybody exactly what they should be doing. So your approach was more like I'm going to give you space. Yeah you guys go for it. I'm going to I'm right behind you cheering you on. I'll challenge you on why you're doing it. I'll challenge you when you bring it forward. I'll really test your assumptions. I'll push you hard on does this really make sense? Is it a good business? Have you thought about this risk? Have you considered this opportunity? So it's not like I leave people alone but I don't tell them what the answer is. And in some sense this is really about the culture of Lego because what is the Lego brick? The Lego brick says to you make a car. It doesn't tell you what the car looks like. And when you give children a question they will answer it in many many different ways. And that's the world Lego wants to be a proponent of is a world of there are many answers to the same question rather than there's only one answer to one question. Do you think that you were born a leader or did you become a leader? I think there's something I've come to believe genetics play a big part in who we are and I say that because I've tried to coach many leaders to rectify certain things or other people didn't like. that they did or I thought they should change to become better. And I found changing personality is hard. So I think there's something in my genetic composition that allows me to bring together the so-called soft and hard skills. And I think in a leader that's something that's quite unusual and really important, that you can hold more than one hypothesis in your mind at the same time, that you can integrate things. And I think my grandfather, my mother's father, and my parents made me that leader. One of the first things I did when I left high school was I worked in a kindergarten. My mother was a kindergarten teacher. My father used to say, "All you know about leadership you learned in kindergarten." And I'd say to him, "Why do you say that?" He said, "Because the way you were in kindergarten is the kids followed you. You never shouted at them." They wanted, because I was the only man in the kindergarten. In a woman's world, I was the only male employee. And all the boys in that kindergarten wanted to spend time with a 21-year-old. They didn't want to hang out with a 35 or 50-year-old woman who had been working in a kindergarten. They wanted this new guy who did fun things with them. We were pirates, we'd bury a treasure in the forest and let somebody else find it. We'd do all these things. And I just loved it. And I became a leader on the basis of that that was my father's intuition. That's your big newt store. He's still the executive chairman of the LEGO Group. And by the way, the company is today one of the biggest toy makers in the world. Thanks for listening to the show this week. Our music was composed and performed by Drop Electric. I'm Guy Rise and you've been listening to Wisdom from the Top, for Built It Productions and Illuminary Media. [BLANK_AUDIO]