Founded in 1932 by Ole Kirk Christiansen, Lego started life in the wooden toy business. Derived from the Danish words ‘leg’ (play) and ‘godt’ (well), the company’s play-well concept has turned Lego into one of the most recognised premium toy brands in the world, and one of Denmark’s most iconic companies. But an assault from the electronic gaming industry and evaporating play time in Lego’s key age groups means that both Lego and its competitors are having a tough time on shop shelves.
Billund is one of those names that jumps off in-flight magazine maps, but you’re not quite sure why. In a country that doesn’t boast many cities with populations that top 100,000, it could be it’s just a big-ish town near the west coast of Denmark. Or maybe there’s something else? Is there perhaps a mental snapshot from your childhood that’s framed this name?
For the moment it doesn’t really matter, because I’ve just strolled up the ramp and into what has to be one of the cosiest, sleekest airports in Europe. An orderly mix of stone, steel, wood and glass, it looks like the municipality spared no expense – or perhaps a generous sugar daddy cut the local government a fat cheque to build an airport that gives Copenhagen’s a run for its money. In the back seat of the taxi from Billund’s airport to the city centre, I venture. “So how big is the city – 100,000 or so?” There’s a chuckle from behind the steering-wheel.
“You might try a tenth of that,” says the driver. “Anyway, we’re here at the hotel.”
Billund is the original European company town – of the modernist variety, at least. It’s built around a single global brand, is small and perfectly formed and punches well above its weight. Walking into the lobby of its leading hotel, that childhood snapshot comes back in an instant. Confronted by a Mona Lisa made of plastic bricks, wall-mounted plastic tubes of plastic bricks, a lobby gift shop crammed with combo sets of plastic bricks fused to Hollywood licensing deals and a junior suite complete with a bucket of bricks in case I get a late-night urge to sit up in bed and play – I realise I have arrived at the Lego Hotel 31 years too late. Or perhaps not.
Billund is built of interlocking plastic bricks, and it’s difficult to determine if the iconic toy building system informed the town’s architecture, or vice-versa. After a short drive between hotel and Lego HQ, it’s clear the two grew up together. Lego and Billund have recently been through a rough patch, however. After decades of global play supremacy, Lego made a series of missteps in the late 1990s that bruised profits and left the privately held company rudderless. Three years ago the founding family took the unprecedented step of relinquishing day-to-day control to someone outside the clan.
Today President and CEO Jørgen Vig Knudstorp is part-way through a restructuring process that has seen him pull the brand out of non-core activities (operating its Legoland theme parks) and move manufacturing to lower-cost production centres (from Switzerland to the Czech Republic), while also trying to push both innovation and margins. Appropriately, I sat down with him in the company’s innovation centre to talk about Hollywood, outsourcing and his core audience.
Monocle: How was Christmas?
Jørgen Vig Knudstorp: Christmas was very good for the Lego group. We managed to get some confidence back into the company. What we have aimed for the last two or three years has actually been the right track, and the market rewarded that.
M: What have you been aiming towards for the past three years?
JVK: We have been trying to bring the company back to its essence – really come out with what is genuine Lego.
M: When you came on board, what was going wrong with the business?
JVK: When I joined and took over, there were a lot of things going on, global competition and so on, and of course I blamed it all on external factors. But the company’s identity was very unclear. If you had asked me three years ago, “Why does the Lego group exist?”, I would not have had a clear answer.
M: I don’t want to turn this into a McKinsey consultancy how-to session, but what did you have to implement?
JVK: Basically there were three things. We have become a very open-sourced company, so we really involve our users to an extreme degree: they even design their own products. Second, we have reset our focus on being entirely driven by those who love the brand. We want to be something for those who really feel that Lego is something unique, rather than trying to convince those who would never love Lego anyway that they should really buy Lego. And the third thing was that doing all that, you need to adjust your business dramatically. We had quite dramatic cost cuts – we have sold off a lot of assets.
M: Did you cull from the actual range?
JVK: There were a number of lines that were too far away from what Lego is all about. Like cars. All boys love cars, so we thought, “Let’s make cars that don’t take a lot of construction, because then we might get those who don’t like construction to buy the Lego cars.” And no – the point is that you have to make it highly constructive, because then those who really love Lego say, “Wow, this is the product I love.”
M: What performed and what underperformed for you this Christmas?
JVK: What performed very well for us was the classic Lego. What didn’t do so well was some of the lines that have been running for some years, things like Knights and Castles.
M: You clearly do a lot of deals with major Hollywood brands…
JVK: Last year we had a very successful movie coming out called Cars from Pixar – if you like movies, it’s a great movie. But we felt that that was just too close to what we are all about. We actually decided not to go with that one. We did a deal with Harry Potter because we felt that it was something that would last, but it didn’t last as long as we had hoped for. We are working with George Lucas on Star Wars – we’ve done so now for seven years and it’s still working out phenomenally. We believe Lego Star Wars is becoming a brand in its own right. George Lucas is a huge Lego fan – he came here last summer with all his kids, and he brought home I don’t know how many bags of Lego on his private jet.
M: Have electronic games changed the way that kids play?
JVK: That’s a good question. But the fact is, play is not changing. Kid’s still compete, they fight, role-play. They play the world you and I live in because they aspire to be in it. They love running after a football and they’ll do that 20 years from now.
M: Let’s look forward. What excites you within these walls?
JVK: We are working on some projects in virtual space, including Lego factory, which have the potential to be as important to the Lego world as Second Life is to the rest of the world.
M: On a lighter note, your dream car? Do you have it?
JVK: No I don’t, unfortunately. My dream car is the SAAB 9X, which is not on the market yet.
M: Favourite airline?
JVK: Lufthansa. It’s always very effective and friendly.
M: Business hotel?
JVK: I use a hotel in New York called the Library. It’s not a very good business hotel but I like to stay there because it makes me feel relaxed.
M: If you didn’t live in Billund, where would you live?
JVK: I’d love to live in British Columbia. Frankly where I go most on holiday is Norway. I love Norway.
M: Favourite newspaper?
JVK: The Financial Times.
M: Favourite magazine?
JVK: Every Saturday afternoon I read The Economist.
M: If you weren’t doing this job, what would you be doing?
JVK: I would probably be a teacher or a professor somewhere. I would also really enjoy being – although I hate to admit it – a gardener. The idea of growing something is very fundamental to me.
You can see a film of the full interview on the business section of monocle.com