| |
Egon Zehnder in interview with LEGO CEO Jørgen Knudstorp
The LEGO Group, the world’s most renowned toy company and arguably the world’s
most famous brand, has been providing children with a source of fun and wonder
for 83 years now. Founded by a Danish carpenter in the midst of the Great
Depression, the company has gone from manufacturing wooden toys to producing a
whole array of plastic construction toys, based on the famous interlocking
bricks. Jørgen Vig Knudstorp, CEO since 2004, talks with THE FOCUS about the
family-owned business, the soul of the company and his own unique personal
trajectory.
THE FOCUS: Under your leadership, over the past decade the LEGO Group has gone
from the brink of insolvency to being the world’s most successful toy company,
with record sales and profits. Only yesterday, your company announced 15 percent
global sales growth year-on-year (DKK 28.6 billion). How do you feel about
this?
Jørgen Vig Knudstorp: I feel very proud and also very privileged. I don’t think
many CEOs get ten consecutive years of pure organic growth. I also feel
extremely humble because this shows us the global strength and appeal of the
brand.
What’s the secret x factor?
I think the x factor relates to the fundamental question of “Why do we exist?”
Too many companies have a poor answer for that, or, at best, a complex one. The
LEGO Group has a very simple answer. We strongly believe that play is vital for
a child’s development, just as food, love and good health are. So we exist to
make a material that no one else can make so well, something that sticks firmly
together but is pliable enough for a two-year-old to take apart. And we’ve
transformed this very simple idea into an integrated global business system and
optimized it.
How do you resist complacency to keep your corporate culture alive?
Every year we throw away the trophies, we throw away any sense of
self-congratulation, and we start all over again. We ask ourselves: “How can we
make the LEGO playing material we put in children’s hands even more exciting?”
The answer to that is by re-inventing ourselves every year and then executing
the system again.
I feel a huge urgency to constantly be raising our game. One way of doing that
is to focus less on our financial performance and more on how motivated and
creative our employees feel and, of course, how our retail customers feel. To
what extent are children putting our products at the top of their wish lists and
talking to their friends about playing with LEGO? Which leads us to a broader
question: “What kind of reputation do we have? Are we a trusted company?”
Because if we are trusted by the public, children recommend our products to
other children, and our employees feel engaged, we are sure to succeed. So it’s
by thinking in these terms that we remove the complacency and keep our corporate
culture alive.
When you assumed the position of CEO in very difficult times, you said that the
LEGO Group had lost its soul. What exactly had been lost and how would you
describe the soul of the company today?
There are several different elements. One of them I already mentioned – the
belief in play as a vital part of a child’s development. Then we have an owner
who says: “What I really care about is the product – and children’s
development.” So while we need to make money, the LEGO Group has a deeper
purpose than that. Our purpose is to make a difference in children’s lives by
giving them wonderful play experiences, and bringing this experience to every
child on the planet. Money is like oxygen to a body, but none of us sit in this
room to breathe the air; we sit in this room to fulfill a purpose with our
lives. Making money is the entry ticket to fulfilling that purpose. In the past
we had “religious” people, if you like, who believed in the purpose of what we
did, but we also had “realists” who saw this purely as a business. I wanted to
combine the two in individuals – people who could succeed in the marketplace and
also reflect the spirit, purpose and energy of the company. This goes to the
soul of our company.
“The job defines my life. I have my family at home and my family here at LEGO,
and that’s where I spend all my time.”
So maybe the soul of your company reflects the sense of wonder that comes
naturally to children …
We know from neuroscience that children are naturally curious, creative and
imaginative, attributes we tend to lose as adults. So we teach children
essential skills like executive functioning – how to manage themselves and their
resources – and spatial awareness. We help them learn to think systematically,
scientifically and with a sense of structure. That’s why Google’s co-founder
Larry Page said that LEGO bricks constituted the most important technology he’d
ever encountered. By learning to build anything out of a simple material,
children can combine rightbrain creativity, storytelling and design thinking
with left-brain scientific structure and logical analysis. For me that’s where
the soul of the company begins.
How has the identity of the LEGO Group changed over the past ten years?
It has changed a lot. We used to be seen as a bit of a basket case. Our
competitors were ten years ahead of us. Now we’ve passed them. We’ve redefined
the industry benchmark by learning, in part, from other industries.
Globalization and digitization have fundamentally changed the face of business
and of the LEGO Group in particular. We have taken a very global approach to
branding, product, processes, operations and HR, so that we’re now the most
trusted brand in North America and the number two in Europe. Also the issue of
responsibility and sustainability has helped shape us, because this is
intrinsically related to trust and authenticity. When I look back at those
crisis years I think it was actually our failure to globalize and digitize fast
enough that held us back. In our own industry we are now leading the way in both
digitization and globalization.
How does digitization fit in with your back-to-basics focus on the brick as the
LEGO Group’s premium product?
It is still all about the brick. If the LEGO Group defines itself as a purely
digital player, then we’re just another fish in the ocean. But if we can combine
bricks and digitization in new ways, that’s what we will do – uniquely.
The combination of physical and digital play has been tried in the past without
much success. What makes you think it can succeed?
The vital question here is: Do children want to play physically in the future?
I’m one hundred percent convinced they do. If human beings don’t move about,
their brains simply stop growing. Children can’t sit still in school because
their brains are telling them to move. In terms of the purely digital space we
know now that the most successful and popular online game ever created is a game
where people appear to be building with LEGO bricks. So is there a meaningful
combination here? I think there is. Gutenberg helped establish a revolution 600
years ago with the printing press. Today, it’s all about creative coding, which
is not unlike building with LEGO bricks. And the LEGO Group is helping to
pioneer systems that allow people to view coding as putting bricks together on a
screen.
How do you ensure that your 14,000 employees on three continents share the same
passion for education and play?
As companies like ours continue to penetrate global markets we face a
fundamental choice: Either we stay together as an integrated and unified whole
or we divisionalize. We wanted to stay together as one company because we think
we are one of those brands like Apple or Audi, where the product is much the
same in every geography. We’re not trying to be the best local competitor,
rather the best global competitor. That’s the fundamental strategic choice and
from that choice follows an organizational model of global integration. This
requires leaders who can think like CEOs at the top level, because they need to
see the full context. They don’t just manage their piece of their world. They
see that they’re part of a whole.
What qualities do you look for in your leaders to take you in this direction?
They need to understand that they work in a system with very high
interdependency. So, if you as an individual seek to be independent, you’ll
struggle in this system because you’re highly dependent and you need to
recognize that interdependency and thrive on it. So you need to be a person who
values synergy. You need to be able to listen to others and integrate their
perspectives, but also to be confident enough to state your own position. You
need to be what some people call an integrative thinker. It’s a very tough call
for a leader who may be accustomed to a different system.
What are the non-negotiable parts of your organizational culture?
What is non-negotiable is people who are willing to deal with the complexities
of globalization and the interdependencies that follow from that. They need to
be collaborative. They need to stick together as a group. They need to be
willing to scale fast and be adaptable, because that’s how this company
survives. And last but not least they must live the LEGO culture and spirit
through their everyday working lives.
In building the LEGO Group of the future, how does diversity help deliver on
your objectives?
Diversity is extremely important for two reasons: One is seeking globalization
while having our roots and culture firmly based in Denmark. Because obviously if
you want to succeed in a number of countries where you don’t understand the
culture, you don’t speak the language, you can’t read the newspapers or the
Internet, then you need more diversity in the workforce. But also when you run a
coherent integrated system you need to respect functional diversity where no
function is more important than any other. A professor of globalization at IMD
once told me that “the most difficult diversity to introduce in any leadership
is gender diversity, and if you succeed with gender diversity, it is also easier
to handle other types of diversity.” So we’ve worked very hard on that over the
last three years and we’ve actually made very good progress. If you want this
system of integrative thinking to work, you need to be able to see things
differently so you can synergize.
“If you come in as a non-family CEO and you’re not willing to listen, you will
get into trouble fast.”
The LEGO Group is still family-owned. Family firms seem to be characterized by
a powerful corporate ethos, a “family gravity” that can make life hard for a
non-family CEO. How do you deal with that?
Family firms potentially have special advantages that relate to the authenticity
of their value statement. Because when you have an owner who is active,
everybody knows that what the owner wants is what really matters. You speak with
more authenticity as an owner. So when I talk to my staff I often liken our
situation to Denmark where we have purportedly the oldest monarchy in the world,
but a constitutionally elected government as well. The King and Queen are the
owners, whereas governments come and go.
To take up that metaphor, do the monarchy and the people have faith in their
elected government?
In my case I think I was chosen for the job because our fundamental values align
very well. I’ve become like a spokesperson for the family and sometimes join
with the family to articulate where the future of the family ownership lies. So
it’s a very symbiotic relationship. And that’s what I think you need to buy into
as CEO of a family-owned business, the fact that families are not ordinary
shareholders. They are not always primarily concerned with the traditional
notion of shareholder value. What really matters might not be a financial
question, it might be other less tangible things. So if you come in as a
nonfamily CEO and you’re not willing to listen, or you come in saying: “Well,
I’ve read the book of good corporate governance and I want to be independent
from the dominant shareholder,” you will get into trouble fast. If, on the other
hand, you can enter a dialogue with – or even challenge – the owning family,
while at the same time being a good representative for the company, which is
what the owners want, then you can have a wonderful interaction and leverage a
lot of advantages from family ownership.
You spoke earlier about purpose as a core asset of the LEGO Group. How much of
this is due to being a familyowned company?
I think there’s a unique spirit here thanks to family ownership, not least
because of the long-term approach this implies. In our case, the family
continues to be willing to take a very long-term view on certain decisions.
Their view is: “Well, if we need to invest in something because we believe it’s
essential for our long-term future, we will just do it because we think it is
the right thing to do.”
What is also important in a family-owned company is to respect the elected
management team and in my case, again, I’ve been extremely fortunate that I took
over from a family member – Kjeld Kirk Kristiansen – who was secure enough in
himself not to spend the next ten years of his life trying to argue why he
didn’t do anything wrong. Quite the opposite. He called me only last night,
exuberant, saying: “Congratulations on everything you have achieved.” And I’m
thinking: “It’s actually of your making. You invented the whole thing.”
So that is also something a family owner needs to think about: How do they give
the team that they bring in the room they need to actually run the business in
the best possible way? It’s delicate but I think in our case we’ve landed in a
very good place.
You’ve been CEO for ten years. How do you stay motivated?
For me the motivation most days is that I’m thinking: “I should pay to be in
this job.” There are so many fun moments with fans and children, plus I love the
global aspect of the job – meeting people from many different cultures, going
deep into China, for example, and visiting a household to see how it plays.
That’s just supermotivating. The intellectual, organizational and leadership
challenge is huge. But it’s also my relationship with the owner. I don’t waste a
second of my day thinking about whether I’m trusted. I don’t feel that people
are suspicious of me. I feel like I have a genuine personal relationship with
all of my reports. I just brought in some new members in my management team and
some younger people who help us function on a daily basis. They’ve come from
other big global corporations, and they say: “Wow, I’ve never seen a management
team that works together like this. It looks like you’re friends!” And that just
makes for a tremendously satisfying daily personal environment.
And how have you changed personally over the past decade?
I think I’ve grown up in this job. There were a lot of things I was naive about
and didn’t see when I first arrived. I also realize how much of a life-choice
this has been. When I started I was thinking: “I’ll be lucky if I survive here
for three years, but I’ll learn a lot; then I’ll work out what to do with the
rest of my life.” Now, of course, the job defines my life. This is what I’ll be
known for. It has certain consequences in terms of what you can – and what you
cannot – do. I have my family at home and my family here at the LEGO Group, and
that’s where I spend all my time. So don’t talk to me about soccer results or
playing golf because I don’t have any outside hobbies. There’s just no time. And
that has changed me, because that is not where I thought I would be at the age
of 46.
The next question has to be: Where did you think you would be at the age of
46?
(Laughs) I had many crazy dreams. When I was a child or a young man, I wanted to
be an astronaut, and I famously said to my family: “If I can be the first to go
to Jupiter and never return, I’ll do it!” Then I wanted to become a movie
director because I love movies. And when I finally left university almost at the
age of 30, I wanted to pursue an academic career. I loved the learning, the
intellectual curiosity, and I loved teaching. Students would crowd my lectures
and seek me out. I still hear from many of them and the careers they pursued
afterwards. And then I went into management consulting and found out that I was
not an analyst, I was a people leader. So I ended up at the LEGO Group – because
I loved playing with LEGO as a child – and here I found out I was a business
leader. So if you ask me about discovering your purpose in life, I’d say you
don’t really know what it is until you’re there.
You’re also known to have recommended the work of the Danish philosopher Søren
Kierkegaard to your students. What were the key lessons?
Well, there are many. For example I spoke about his insight that if you think
you haven’t chosen a path, you already have chosen a path. I believe that’s one
of the big things – that not making a choice is also making a choice and you’d
better be very conscious of that.
Kierkegaard also spoke about three stages of human existence: the aesthetic
stage, the ethical stage and the religious stage. The aesthetic stage is not
about being aesthetic, it’s about pursuing pleasure and avoiding commitment.
It’s about being hedonistic, egotistical and fragmented. The aesthetic stage
then gives way to the ethical stage, which is about sense of duty, of working
for family and society, of making firm commitments and showing a capacity for
self-examination. The religious stage is about faith in one’s true purpose and a
response to a higher calling, to God if you like. I think when you look at a
business, or you look at a person, we can modernize Kierkegaard a little and
speak of four dimensions: The physical, the social, the mental, and the
spiritual.
How do these dimensions relate to the world of business? What were you trying
to tell your students?
For a company the physical is – in Kierkegaard’s terms – the aesthetic: It’s the
animal in all of us, the unreflective part, and in a company this is the
financial performance. The social dimension in a company is its culture. It’s
about the relationships that are fostered within the corporate culture. How we
get along with each other? Do we trust each other? Do we speak openly? Do we
give each other room? This is very important because this is our family, these
are our friends. That’s what Kierkegaard would call your ethical life.
The mental dimension in a company is its capabilities. In a person, it’s your
intellectual life: “How do you think about issues?” Finally, the spiritual
translates into what Kierkegaard called the religious dimension, which is: “What
do you believe in? That’s a company’s purpose. What’s your direction? How do you
scrutinize your own actions and take responsibility? What is your higher
calling?”
We all have these dimensions inside ourselves and students of business need to
see themselves in this multi-dimensional away. If they only see themselves as a
finance person they’re not going to be successful in business because they’re
not a whole human being.
You talked about making choices that defined you. After ten years as a business
leader, what choices will you be making for your own future in the next decade?
I think the journey that the company’s owner and employees are on is so long
that the agenda is already set out. Making the LEGO Group a truly global leading
player in the business of play, and at the same time integrating and fully
digitizing the business system to expand the purpose of the LEGO brick … that’s
what I’m going to be doing for the next ten years.
Jørgen Vig Knudstorp
Born in Frederica, Denmark in 1968, Jørgen Vig Knudstorp studied Economics and
East Asian Studies at Aarhus University before gaining an MBA in the UK and his
doctorate from MIT in Cambridge, Massachusetts. He began his career in 1998 with
McKinsey and, three years later, joined the Strategy Department at the LEGO
Group. In 2004, at the age of 35, he was appointed CEO of the company. Known for
his modesty and playful nature, Knudstorp learnt early on how to listen to
children when he worked part-time in a nursery school. Today he has four
children aged between 7 and 12, two boys and two girls, whom he describes as his
own “personal market research team.”
The LEGO Group
The LEGO Group was founded in 1932 as a manufacturer of wooden toys by Ole Kirk
Christiansen, a carpenter from Billund, Denmark. The LEGO brick was first
patented in 1958 and caught the imagination of children and adults alike. After
70 years of virtually uninterrupted success, in 2003 the company began to slide
towards bankruptcy after trying to ride the growing wave of computer games. In a
bold move, Kjeld Kirk Kristiansen, the grandson of the founder, stepped down in
2004 and appointed Jørgen Vig Knudstorp as the second non-family CEO. Over the
ensuing decade, Knudstorp refocused the company on its core business – the
colored bricks and the imaginary world they create – resulting in a rapid return
to growth. Today the LEGO Group is the world’s second-largest toy company in
terms of sales and in 2014 manufactured more than 60 billion LEGO bricks.
Source:
Egonzehnder.com 2016 Egon Zehnder International, Inc.
Interview was done in 2015.
-end of report-
|
|
1 Message in This Thread:
- Entire Thread on One Page:
- Nested:
All | Brief | Compact | Dots
Linear:
All | Brief | Compact
|
|
|
|
