Over 70% of homes have at least one stray brick buried deep in a sofa or hiding in the dusty corner of a cupboard. With 33% operating profit on sales of £2710 million LEGO is a serious business.
Alongside bacon and beer, LEGO is one of Denmark’s greatest exports, some might even say ‘Probably the best toy in the world!’ The LEGO phenomena began in 1932 when Danish carpenter Ole Kirk Christiansen, who believed in the value of play, decided that the best kind of toys are those that can be built, and then rebuilt. Stimulating creativity and imagination, whilst developing character.
There’s much we can learn from LEGO as adults. The four letter name LEGO is derived from leg godt, meaning ‘play well’ in Danish, and ‘I study’ or ‘I construct’ in Latin. Underpinning the name is the company slogan ‘Only the best is good enough’ An admiral intention but one that nearly led to the iconic toy’s collapse 10 years ago.
This culture of continuous innovation and excellence blocked cost saving initiatives and meant that despite the popularity of the product, LEGO came close to spending its way into collapse. At one point 10,000 permutations of individually coloured and moulded bricks were in production, requiring stockpiles of costly dyes, chemicals and moulding machines, all supplied by a massive 11,000 different suppliers. Designers continually dreamt up new products without regard for costs of materials, production and distribution. Akin to a chef creating a new signature dish every day for bemused diners, while unused ingredients are left to rot.
In 2004 Kjeld Kirk Kristiansen the founder’s grandson stepped aside and a new 34 year old CEO Jorgen Vig Knudstorp quickly discovered that just 30 products generated 80% of sales whilst over 1500 redundant products were stockpiled. He set about tackling the outdated and inefficient supply chain, geared to distributing to small independent retailers in an era of Wal-Mart and Toys R Us.
Alongside the clinical changes to cost he had to transform the culture of a close-knit family-owned business whilst preserving the loyalty of its workforce. The senior team adopted an approach of complete transparency, starting out by stating the hard to hear realities then continually updating staff on what was being done to effect change. The revolution began by tackling the costly supply of coloured resins. On occasions designers would specify a design requiring a few kilos of a specific resin, not appreciating that a minimum three tonne order would be placed leaving the company with €10,000 of unusable resin. The head of product development and supply chain were commissioned to jointly address the issue. Their solution was to simplify the variety of coloured components and in doing so halve the company’s resin costs and reduce the supplier roster by 80%. Proving that huge efficiencies can be achieved with minimal compromise to the customer experience.
LEGO’s success story is a powerful case study for management development. Coupled with practical exercises using LEGO bricks it can create an amusing and impactful leadership session. Find out more about our LEGO inspired programmes by getting in contact with us on 01920 822 220 or mail@varndev.co.uk.
