Jørgen Vig Knudstorp
Well I think first off for me it was given to me by a good friend of our own who said, “I’ll talk to your new CEO”, and he asked me two very simple questions for two years. He said, “Just explain to me what went wrong with Lego, and secondly, why do you actually exist?” In the beginning I was like, oh, what is this silly company strategy conversation about? But I realized of course it’s about the two most fundamental aspects of leadership. Do you take responsibility for your company strategy, or do you blame it on some external factor like currency or financial crisis or poor weather? Because if that’s your major reason for how your business develops, what the hell are you doing in the job, right?
I mean if you’re not at least 50-60 percent responsible for whatever outcome, I mean I think we all recognize the role of luck and bad weather and so on, but if you don’t take the major responsibility for adapting the business to any changing circumstances that faces it, somebody else should be in the job, right? So great question. The other one, “Why do you exist?” If you produce pizza here in the local town where Lego was born, you are not having a business model that’s globally applicable because when you move over to the next town somebody else already built a pizzeria and you have no reason to exist there. You are not unique anymore.
When we talk about rediscovering Lego and coming back home and establishing the core business of Lego, that’s what it was about is what really makes Lego unique, and what makes Lego really unique is that there is no building system like the Lego building system in the world. It makes children able to put two pieces together and there are thousands of different available pieces, but they all fit together, and it is as if they’re glued and you can play and build with them, and yet you only have to be one and a half years old to take them apart again. We had forgotten that. It’s so obvious. It’s so in your face, but nobody in the company or in the company strategy was talking about that. They were talking about how we do things that were not that because then we could get new growth. So that question, getting back to the simple thing that makes you really unique, and then everything else, including the company strategy, evolves from that question.
So if that’s what we’re doing then we need of course to really be world masters of molding techniques because it’s all in the quality of the molding whether you get the power of two plastic pieces to fit but not fit harder than you can actually take them apart again. That takes millimeters of precision, and since we do 30,000 pieces every minute, 24 hours a day, 365 days a year, 25 billion pieces a year, it’s quite important that that quality is not occasionally right but consistently right in every print. It’s also important since you do about 10,000 different pieces of those 25 billion prints that you know exactly where they are, that they’re ready for Wal-Mart on Tuesday at 5:00 at their dock.
What does that mean in terms of when they should be warehoused in Mexico or U.S., being molded in Denmark, Hungary, Czech Republic, China, or the U.S., and also it’s quite important not that they are available, but somebody has figured out how they’re optimally produced without having too much inventory, the right procurement cost, and all that stuff. Then you start getting to, oh my god, managing that business system and that business model is where the competitive advantage of this business really lies. Then you say, okay, I need the enterprise architects, I need the engineers, and then you start getting this sense of what is in the core, where are my strategic capabilities, and you realize of course well the continuing operation – and it’s a trivial example – the continuing operation is not a core activity so somebody else might do that, and so you outsource that if that makes sense and so on.
So you actually drive the design of your business model and business system around this notion of why do we exist. I wish I’d come up with it myself. Somebody else gave it to me, thank god, but I thought it was a really crucial question, and one that is worthwhile to really penetrate over several years and keep asking yourself, why are we doing this? Do we do this better than anybody else? What does it mean for how we set up shop here?