December 21st, 2011
01:49 PM GMT
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Billund, Denmark (CNN) - How many chief executives can put “working at a pre-school” on their resumes? Jorgen Vig Knudstorp, boss of toy giant Lego, can.

What’s more, he credits his time spent at a kindergarten with leadership lessons that later helped him bring the well-loved brand back to profitability.

“There are two things about working in a kindergarten: One is you are dealing with children and, at least in this country, they don’t care what you are telling them,” Knudstorp says. They care about what kind of role model you are and how you can influence them.”

The fluid leadership structure - often reflected in institutions like nursery schools, kindergartens and pre-schools - was also beneficial. At Lego, he says, “you need to manage the informal organization as much as the formal authority structure.”

That informality starts when you walk through the doors of Lego headquarters in Billund, Denmark. We felt as if we had stepped into a world of imagination, with Lego everywhere you look. It starts with Knudstorp's business card, a bespectacled Lego figure that looks like him

In the foyer, the seating looks like part of a giant yellow Lego brick, the Christmas tree is decked out with snowflakes and angels constructed out of Lego, the light-fittings - futuristic spheres dangling from the ceiling - are made out of Lego.

There are goldfish bowls of Lego pieces on what appear to be desks - but it’s hard to tell, as they are buried under spaceships, battleships, Ninja sets, a two-foot tall Winnie the Pooh and an even bigger Harry Potter, resplendent in a Lego wizard’s cape.

Knudstorp considers it business basics to encourage fun and play in the workplace, as it in turn increases productivity. After all, that is how the team gets most of their ideas.

“This is a business that is entirely based on its ability to innovate. We are basically working on the Lego brick as a technology which hasn’t changed for fifty years, so our ability to constantly reinvent that core business is essential for our success,” he says.

 Lego does this, in part, by linking up with film franchises such as Star Wars, Harry Potter, Toy Story and Indiana Jones. But making the building blocks that feature in so many childhoods profitable needs some financial nous.

In the 1990s, Lego tried expanding, pushing into areas including computer games, theme-parks and clothing, an experiment which contributed to losses of more than $300 million in 2004.

But the company changed tactics, and last year pre-tax profits rose nearly 70% to $915 million, with the group capturing market share from its rivals.

Knudstorp - the first boss to come from outside the founding family - led the shift in strategy. He cut jobs, including 1000 in Billund, sold off the theme parks, cut down new toys’ development time, streamlined the products portfolio and outsourced to cheaper production centers in Eastern Europe.

“We are not diversifying,” he says. “I would not recommend that to anyone. We are a company that has never really done an acquisition. We have something that is unique, from Beijing to Washington.”

In short, he is keeping Lego simple. With 10,000 employees across the globe, it is a challenge to remain uncomplicated. But, says Knudstorp, “you need to challenge your organization all of the time to stay coherent, and not make things too complicated. A lot of productivity is lost when things get too complicated.”

Knudstorp prioritizes direct feedback from retailers and consumers. The week we met Knudstorp, he had meetings scheduled with fan-groups from Spain and the Nordics.

His interest in listening to everyone, from factory floor staffers to focus groups, from the executive board to the design team, harks back to those months spent working in a kindergarten.

Lego, Knudstorp notes, is a technology anyone can copy. As such, the company’s creativity and innovation is crucial. “When I make my annual Christmas speech to employees, I say, guys, it is up to us, because anybody can compete with us, anyone can beat us, unless we are the best,” Knudstorp says.

And with that he headed off to his Lego lair, his pockets jangling not with coins, but with little pieces of Lego.

soundoff (10 Responses)
  1. Su5

    I have a friend who likes Lego very much. She corrects a lot of Lego because she enjoys making and watching it. Theseday, I'm interested it, so the article was very fun for me.

    December 22, 2011 at 6:25 am |
  2. MaryAnn

    Great advertising CNN with an absolutely nothing story.
    Bootleg versions sell like hotcakes because quite frankly, LEGO'S are too expensive.
    As a mater of fact the only thing I like about LEGO's have been some of the video games.
    I never liked them as a kid and I don't buy them for my kids.

    December 22, 2011 at 9:36 am |
  3. Roy

    LEGOs were benchmark toys 20 years ago when I played with them, and they've lost a lot of their luster with the lower class because their price flew through the roof... I would love to goto the store and be able to buy the big red buckets of random lego's again but you can't. You either buy pre-packaged kits to build specific things (for $100 a kit), or your out of luck... I'll buy my kids computers and game consoles, sure they might get a LEGO branded game now and then but they'll never experience LEGO the way my friends and I did, and that's sad. Drop your prices and you'll start selling again. Idiots.

    December 22, 2011 at 2:42 pm |
  4. KayJBee

    @Roy, they have actually improved the big red buckets. Now, you can go in the store, grab a big cup, and fill it with the pieces YOU want. The entire back wall usually has built-in bins to fill your cup with. Just saying.

    December 25, 2011 at 4:08 am |
  5. Ryan

    Clearly, If you're complaining about the red random boxes you haven't been out off late. Theyre BETTER! as KayJBee said! and in relation to the pricing. Id rather spent the extra 40 dollars and getting my (hypothetical) kids a lego kit rather than have their brains melted out by computer games. Dont get me wrong i love computer games. But even now i'd rather get a Lego kit to boost my creativity rather than a computer game.

    December 25, 2011 at 2:10 pm |
  6. kvp

    For those who are looking for not so expensive lego, I would recommend creator and basic building sets (the ones that come with 1 or 2 minifigures). They are reasonably priced, because they don't have any franchise on them and each set can be built at least 3 different way (instructions included), but because they contain a bunch of various parts they can be used to build many things. Extra models can usually be found online and printed out for the kids. These sets are the closest to the original idea of lego because they leave space for creativity. Also these basic sets are the cheaper, commercial versions of lego educational kits so they are better for the development of useful skills than pricy themed sets. The idea is to get children to keep rebuild their lego into various creations of their own, not just play with a single model. Also it is important to let children assemble everything with only a little help, because this is how they learn.

    December 25, 2011 at 2:12 pm |
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