The vigorous growth enjoyed by the LEGO Group from the late 1970s onward calls for new management strategies. Strategies are launched with the aim of giving all new managers and employees an understanding of the company’s basic values. A major crisis puts an abrupt halt to this work. The emphasis now is on survival – consolidation and growth can come later.
The company grows dramatically in the 1980s, and as the number of employees increases the need arises to give the new faces a sense of the company’s values and culture. CEO and owner Kjeld Kirk Kristiansen introduces LUP (LEGO Universe Partners) management seminars, designed to give new managers an introduction to the LEGO culture. The principal architect behind the LUP seminars is the then HR manager, Per Sørensen.
“We are a yin/yang organization” said Kjeld Kirk in 1986. The special paradox thinking is themed as 11 management paradoxes at the first LUP development meeting in 1985 – at which managers receive a grounding in company values. Later there is The IMD Experience, a leadership training course which focus on strategy, organization, market situation and mission.
Senior management develops new structures, processes and forms of management designed to ensure more efficiency, dynamism and job satisfaction – at the same time boosting the company’s competitiveness. From spring 1995, the LEGO Group introduces a new management strategy entitled: Compass Management. The aim is to gear the organization to respond more rapidly to changes in the toy market. The strategy is defined as follows: “In a fast-moving and changing world our commitment and willingness to make rapid and effective decisions on relevant means, initiatives and corrective action are important keys to our success. This commitment must be underpinned by a shared mindset, shared values, shared goals and shared principles. Compass management focuses on strengthening our ability to react to market dynamics through dialogue and freedom of action within the framework of clear cut and agreed goals.”
Forty Compass pilots are trained in the test phase in 1995. The transitional period continues over the next few years; from November 1997 to March 1998 a total of 350 managers attend a five day seminar in compass management, and all employees are informed of the project.
Transparency, dialogue and fitness
After decades of almost continuous growth, the company suddenly finds itself being in the red. The organization needs to be slimmed down. Dialogue meetings with Kjeld Kirk Kristiansen and Poul Plougmann, who joined the company first as chief financial officer, advancing to chief operating officer (COO), are held in early 1999 following the announcement of a likely deficit for 1998. Kjeld Kirk Kristiansen emphasizes that management prioritizes transparency and dialogue. And Poul Plougmann says: “We must get closer to our real customers. We have to bring our rising costs under control – that’s important. It’s urgent that we set up a new, simplified and effective business system – cutting out duplicate functions.” A number of working groups are appointed in March 1999 to scrutinize the global business system.
In 1999, Poul Plougmann introduces what will be known as the Fitness Programme. Development and growth are not enough. What is needed is a more dynamic and effective business system. The Fitness Programme is a conscious attempt to inject vigor into the company’s basic values; to stimulate the entrepreneurial spirit, the belief that “we can do it by setting our objectives”, commitment, simplicity, common sense, the will to change, and respect for the skills of the individual. In addition, the organization must be trimmed, which involves cutting the workforce by approx. 1,000 people during 1999.
Announcing a billion DKK deficit in 2003, management launches an action plan, later to be known as Shared Vision. The aim of the plan is to reverse the deficit in three phases, each with specific goals before moving to the next phase. Corporate Management leads the implementation of Shared Vision from 2004 to 2010. The three phases are: survival, establishment (of a healthy core business) and growth. Each phase has a clear mission and a programme of action and three must win battles. The LEGO Group aims to create a sustainable business with satisfied employees, users, customers, shareholders and business partners.
The Shared Vision objective is to make the LEGO Group the most profitable business in the industry, while at the same time observing a high ethical standard in relation to the outside world. Shared Vision has three overarching goals: 1. Be the best at creating value for our customers and sales channels. 2. Refocus on the value we offer our consumers. 3. Increase operational excellence.
Contact with consumers
In March 2006, comprehensive organizational changes are introduced in support of phase two of the company’s Shared Vision strategy: securing of a healthy core business. New business areas are set up signaling that the company is moving closer to its consumers. One of the new areas in particular will be cultivating relations with users and fans. The LEGO Group views the inclusion of its users as a key driving force in preparing the company’s future growth.
With the arrival of the new business area, the LEGO Group opens the door consciously to fans of all ages; they are a vital element in the company’s Shared Vision Strategy. Firstly, they are fine ambassadors for the company and secondly, they can channel their network inspiration and essential impulses back to the LEGO organization. Adult fans are successfully involved in the actual process of product development – for example, with LEGO® MINDSTORMS® NXT from 2006.
By 2011, the LEGO Group has become three times the size it was in 2004, and management launches Step Up. Step Up is a tool to organize a globalization and digitalization of the business. It emphasizes working in ways that are coherent, collaborative and simple. Ultimately, the aim is to secure the LEGO Group’s continued growth by being adaptable. In the words of Jørgen Vig: “The present organization has enabled us to do amazingly well in many respects – but the time has come to adapt to developments. It must happen through a simpler structure and by changing the way we work together across the company.”
The initiative helps the company triple in size once again over the next four years.
New Asia strategy
In 2012, a new strategy is drawn up for the Asian markets. A Corporate Management meeting in Shenzhen, China, in 2012 decides to increase company activities in the Asian markets. Existing organizations will be expanded and new markets opened. There will also be significant investment in both marketing and in depth consumer analyses. China is a high priority market.
LEGO Group strategy towards 2032
Four strategic priorities, each ensuring that the long-term ambition of the LEGO Group can be achieved, are set in 2014. The ambition is to deliver ongoing momentum while gradually expanding core activities through a high-performing operation that never loses sight of its ultimate purpose. The four priorities are:
- Sustain core commercial and operational momentum
Delivering annual growth
- Create the organization of the future
Securing strong organizational health
- Expand global presence
Pursuing global stronghold through three regions of equal proportions
- Leverage digitalization
Utilizing potential in e-commerce, digital communication, one reality and digital infrastructure.
LEAP into the future
A couple of years into realizing the LEGO Strategy towards 2032, management underlines how urgent the LEGO Group need to reinvent the way of working. This is illustrated by the fact that a continued expansion at the pace realized from 2005-15 (about 20 percent per year) will lead the LEGO Group to reach 300 million children with playful experiences by 2032 (from reaching around 100 million in 2015). One major step into the future is the launch of a brand new programme: LEAP, designed to build the capabilities and capacity needed to reach the LEGO Group’s potential.
“The program LEAP is about developing leaders who can drive bigger teams with more complex agendas, adopt a global mindset, take collective ownership of the LEGO Group´s goals and thus go beyond their own areas.” Jørgen Vig, 2015