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A new CEO saves an old, beloved toy

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in Leaders & Managers,Leadership Skills

In 2004, Lego was losing roughly $1 million a day. The once-legendary Danish toy maker was on the brink of collapse.

It hired a new CEO, Jorgen Vig Knud­­storp, who quickly drew two conclusions: the company needed to cut costs dramatically and start delivering products that customers actually wanted.

To boost sales, he decided to recruit a team of Lego lovers to propose a better strategy. These core fans grew up playing with Legos, understood the firm’s storied history and cared about rescuing it. They even had their own acronym: AFOL (adult fans of Legos).

Knudstorp heeded their recommendations to redesign the product and introduce new action figures. He also cut the cord with dozens of longtime employees who had championed a variety of complicated Lego kits that involved much assembly.

Conferring with his AFOLs, Knudstorp realized that the company needed to streamline its product line and stop manufacturing its unprofitable kits. He slashed the number of Lego parts sold in stores from over 12,000 to 6,000.

Reducing the range of products led to productivity gains. Better production and logistics enabled Lego to prune costs and boost profits.

To build on early momentum, Knudstorp convened a “designer recruitment workshop” in 2006. Eleven newcomers, including Mark Stafford, brainstormed about Lego’s designs.

“These guys had been restrained for years,” Stafford recalls.

To cap off the firm’s turnaround, “The Lego Movie” proved a box-office hit in early 2014. A sequel is planned for 2017.

— Adapted from “How Lego Came Back From the Brink of Bankruptcy,” Richard Feloni, www.businessinsider.com.

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