“Every year we throw away the trophies and start all over again.”

Egon Zehnder in interview with Jørgen Knudstorp

The LEGO Group, the world’s most renowned toy company and arguably the world’s most famous brand, has been providing children with a source of fun and wonder for 83 years now. Founded by a Danish carpenter in the midst of the Great Depression, the company has gone from manufacturing wooden toys to producing a whole array of plastic construction toys, based on the famous interlocking bricks. Jørgen Vig Knudstorp,CEO since 2004, talks with THE FOCUS about the family-owned business, the soul of the company and his own unique personal trajectory.

THE FOCUS: Under your leadership, over the past decade the LEGOGroup has gone from the brink of insolvency to being the world’s most successful toy company, with record sales and profits. Only yesterday, your company announced 15 percent global sales growth year-on-year (DKK 28.6 billion). How do you feel about this?

Jørgen Vig Knudstorp: I feel very proud and also very privileged. I don’t think many CEOs get ten consecutive years of pure organic growth. I also feel extremely humble because this shows us the global strength and appeal of the brand.

What’s the secret x factor?

I think the x factor relates to the fundamental question of “Why do we exist?” Too many companies have a poor answer for that, or, at best, a complex one. The LEGO Group has a very simple answer. We strongly believe that play is vital for a child’s development, just as food, love and good health are. So we exist to make a material that no one else can make so well, something that sticks firmly together but is pliable enough for a two-year-old to take apart. And we’ve transformed this very simple idea into an integrated global business system and optimized it.

How do you resist complacency to keep your corporate culture alive?

Every year we throw away the trophies, we throw away any sense of self-congratulation, and we start all over again. We ask ourselves: “How can we make the LEGO playing material we put in children’s hands even more exciting?” The answer to that is by re-inventing ourselves every year and then executing the system again.

I feel a huge urgency to constantly be raising our game. One way of doing that is to focus less on our financial performance and more on how motivated and creative our employees feel and, of course, how our retail customers feel. To what extent are children putting our products at the top of their wish lists and talking to their friends about playing with LEGO? Which leads us to a broader question: “What kind of reputation do we have? Are we a trusted company?” Because if we are trusted by the public, children recommend our products to other children, and our employees feel engaged, we are sure to succeed. So it’s by thinking in these terms that we remove the complacency and keep our corporate culture alive.

When you assumed the position of CEO in very difficult times, you said that the LEGO Group had lost its soul. What exactly had been lost and how would you describe the soul of the company today?

There are several different elements. One of them I already mentioned – the belief in play as a vital part of a child’s development. Then we have an owner who says: “What I really care about is the product – and children’s development.” So while we need to make money, the LEGO Group has a deeper purpose than that. Our purpose is to make a difference in children’s lives by giving them wonderful play experiences, and bringing this experience to every child on the planet. Money is like oxygen to a body, but none of us sit in this room to breathe the air; we sit in this room to fulfill a purpose with our lives. Making money is the entry ticket to fulfilling that purpose. In the past we had “religious” people, if you like, who believed in the purpose of what we did, but we also had “realists” who saw this purely as a business. I wanted to combine the two in individuals – people who could succeed in the marketplace and also reflect the spirit, purpose and energy of the company. This goes to the soul of our company.

“The job defines my life. I have my family at home and my family here at LEGO, and that’s where I spend all my time.”

So maybe the soul of your company reflects the sense of wonder that comes naturally to children …

We know from neuroscience that children are naturally curious, creative and imaginative, attributes we tend to lose as adults. So we teach children essential skills like executive functioning – how to manage themselves and their resources – and spatial awareness. We help them learn to think systematically, scientifically and with a sense of structure. That’s why Google’s co-founder Larry Page said that LEGO bricks constituted the most important technology he’d ever encountered. By learning to build anything out of a simple material, children can combine rightbrain creativity, storytelling and design thinking with left-brain scientific structure and logical analysis. For me that’s where the soul of the company begins.

How has the identity of the LEGO Group changed over the past ten years?

It has changed a lot. We used to be seen as a bit of a basket case. Our competitors were ten years ahead of us. Now we’ve passed them. We’ve redefined the industry benchmark by learning, in part, from other industries. Globalization and digitization have fundamentally changed the face of business and of the LEGO Group in particular. We have taken a very global approach to branding, product, processes, operations and HR, so that we’re now the most trusted brand in North America and the number two in Europe. Also the issue of responsibility and sustainability has helped shape us, because this is intrinsically related to trust and authenticity. When I look back at those crisis years I think it was actually our failure to globalize and digitize fast enough that held us back. In our own industry we are now leading the way in both digitization and globalization.

How does digitization fit in with your back-to-basics focus on the brick as the LEGO Group’s premium product?

It is still all about the brick. If the LEGO Group defines itself as a purely digital player, then we’re just another fish in the ocean. But if we can combine bricks and digitization in new ways, that’s what we will do – uniquely.

The combination of physical and digital play has been tried in the past without much success. What makes you think it can succeed?

The vital question here is: Do children want to play physically in the future? I’m one hundred percent convinced they do. If human beings don’t move about, their brains simply stop growing. Children can’t sit still in school because their brains are telling them to move. In terms of the purely digital space we know now that the most successful and popular online game ever created is a game where people appear to be building with LEGO bricks. So is there a meaningful combination here? I think there is. Gutenberg helped establish a revolution 600 years ago with the printing press. Today, it’s all about creative coding, which is not unlike building with LEGObricks. And the LEGO Group is helping to pioneer systems that allow people to view coding as putting bricks together on a screen.

How do you ensure that your 14,000 employees on three continents share the same passion for education and play?

As companies like ours continue to penetrate global markets we face a fundamental choice: Either we stay together as an integrated and unified whole or we divisionalize. We wanted to stay together as one company because we think we are one of those brands like Apple or Audi, where the product is much the same in every geography. We’re not trying to be the best local competitor, rather the best global competitor. That’s the fundamental strategic choice and from that choice follows an organizational model of global integration. This requires leaders who can think like CEOs at the top level, because they need to see the full context. They don’t just manage their piece of their world. They see that they’re part of a whole.

What qualities do you look for in your leaders to take you in this direction?

They need to understand that they work in a system with very high interdependency. So, if you as an individual seek to be independent, you’ll struggle in this system because you’re highly dependent and you need to recognize that interdependency and thrive on it. So you need to be a person who values synergy. You need to be able to listen to others and integrate their perspectives, but also to be confident enough to state your own position. You need to be what some people call an integrative thinker. It’s a very tough call for a leader who may be accustomed to a different system.

What are the non-negotiable parts of your organizational culture?

What is non-negotiable is people who are willing to deal with the complexities of globalization and the interdependencies that follow from that. They need to be collaborative. They need to stick together as a group. They need to be willing to scale fast and be adaptable, because that’s how this company survives. And last but not least they must live the LEGO culture and spirit through their everyday working lives.

In building the LEGO Group of the future, how does diversity help deliver on your objectives?

Diversity is extremely important for two reasons: One is seeking globalization while having our roots and culture firmly based in Denmark. Because obviously if you want to succeed in a number of countries where you don’t understand the culture, you don’t speak the language, you can’t read the newspapers or the Internet, then you need more diversity in the workforce. But also when you run a coherent integrated system you need to respect functional diversity where no function is more important than any other. A professor of globalization at IMD once told me that “the most difficult diversity to introduce in any leadership is gender diversity, and if you succeed with gender diversity, it is also easier to handle other types of diversity.” So we’ve worked very hard on that over the last three years and we’ve actually made very good progress. If you want this system of integrative thinking to work, you need to be able to see things differently so you can synergize.

“If you come in as a non-family CEO and you’re not willing to listen, you will get into trouble fast.”

The LEGO Group is still family-owned. Family firms seem to be characterized by a powerful corporate ethos, a “family gravity” that can make life hard for a non-family CEO. How do you deal with that?

Family firms potentially have special advantages that relate to the authenticity of their value statement. Because when you have an owner who is active, everybody knows that what the owner wants is what really matters. You speak with more authenticity as an owner. So when I talk to my staff I often liken our situation to Denmark where we have purportedly the oldest monarchy in the world, but a constitutionally elected government as well. The King and Queen are the owners, whereas governments come and go.

To take up that metaphor, do the monarchy and the people have faith in their elected government?

In my case I think I was chosen for the job because our fundamental values align very well. I’ve become like a spokesperson for the family and sometimes join with the family to articulate where the future of the family ownership lies. So it’s a very symbiotic relationship. And that’s what I think you need to buy into as CEO of a family-owned business, the fact that families are not ordinary shareholders. They are not always primarily concerned with the traditional notion of shareholder value. What really matters might not be a financial question, it might be other less tangible things. So if you come in as a nonfamily CEO and you’re not willing to listen, or you come in saying: “Well, I’ve read the book of good corporate governance and I want to be independent from the dominant shareholder,” you will get into trouble fast. If, on the other hand, you can
enter a dialogue with – or even challenge – the owning family, while at the same time being a good representative for the company, which is what the owners want, then you can have a wonderful interaction and leverage a lot of advantages from family ownership.

You spoke earlier about purpose as a core asset of the LEGOGroup. How much of this is due to being a familyowned company?

I think there’s a unique spirit here thanks to family ownership, not least because of the long-term approach this implies. In our case, the family continues to be willing to take a very long-term view on certain decisions. Their view is: “Well, if we need to invest in something because we believe it’s essential for our long-term future, we will just do it because we think it is the right thing to do.”

What is also important in a family-owned company is to respect the elected management team and in my case, again, I’ve been extremely fortunate that I took over from a family member – Kjeld Kirk Kristiansen – who was secure enough in himself not to spend the next ten years of his life trying to argue why he didn’t do anything wrong. Quite the opposite. He called me only last night, exuberant, saying: “Congratulations on everything you have achieved.” And I’m thinking: “It’s actually of your making. You invented the whole thing.”

So that is also something a family owner needs to think about: How do they give the team that they bring in the room they need to actually run the business in the best possible way? It’s delicate but I think in our case we’ve landed in a very good place.

You’ve been CEO for ten years. How do you stay motivated?

For me the motivation most days is that I’m thinking: “I should pay to be in this job.” There are so many fun moments with fans and children, plus I love the global aspect of the job – meeting people from many different cultures, going deep into China, for example, and visiting a household to see how it plays. That’s just supermotivating. The intellectual, organizational and leadership challenge is huge. But it’s also my relationship with the owner. I don’t waste a second of my day thinking about whether I’m trusted. I don’t feel that people are suspicious of me. I feel like I have a genuine personal relationship with all of my reports. I just brought in some new members in my management team and some younger people who help us function on a daily basis. They’ve come from other big global corporations, and they say: “Wow, I’ve never seen a management team that works together like this. It looks like you’re friends!” And that just makes for a tremendously satisfying daily personal environment.

And how have you changed personally over the past decade?

I think I’ve grown up in this job. There were a lot of things I was naive about and didn’t see when I first arrived. I also realize how much of a life-choice this has been. When I started I was thinking: “I’ll be lucky if I survive here for three years, but I’ll learn a lot; then I’ll work out what to do with the rest of my life.” Now, of course, the job defines my life. This is what I’ll be known for. It has certain consequences in terms of what you can – and what you cannot – do. I have my family at home and my family here at the LEGO Group, and that’s where I spend all my time. So don’t talk to me about soccer results or playing golf because I don’t have any outside hobbies. There’s just no time. And that has changed me, because that is not where I thought I would be at the age of 46.

The next question has to be: Where did you think you would be at the age of 46?

(Laughs) I had many crazy dreams. When I was a child or a young man, I wanted to be an astronaut, and I famously said to my family: “If I can be the first to go to Jupiter and never return, I’ll do it!” Then I wanted to become a movie director because I love movies. And when I finally left university almost at the age of 30, I wanted to pursue an academic career. I loved the learning, the intellectual curiosity, and I loved teaching. Students would crowd my lectures and seek me out. I still hear from many of them and the careers they pursued afterwards. And then I went into management consulting and found out that I was not an analyst, I was a people leader. So I ended up at the LEGO Group – because I loved playing with LEGO as a child – and here I found out I was a business leader. So if you ask me about discovering your purpose in life, I’d say you don’t really know what it is until you’re there.

You’re also known to have recommended the work of the Danish philosopher Søren Kierkegaard to your students. What were the key lessons?

Well, there are many. For example I spoke about his insight that if you think you haven’t chosen a path, you already have chosen a path. I believe that’s one of the big things – that not making a choice is also making a choice and you’d better be very conscious of that.

Kierkegaard also spoke about three stages of human existence: the aesthetic stage, the ethical stage and the religious stage. The aesthetic stage is not about being aesthetic, it’s about pursuing pleasure and avoiding commitment. It’s about being hedonistic, egotistical and fragmented. The aesthetic stage then gives way to the ethical stage, which is about sense of duty, of working for family and society, of making firm commitments and showing a capacity for self-examination. The religious stage is about faith in one’s true purpose and a response to a higher calling, to God if you like. I think when you look at a business, or you look at a person, we can modernize Kierkegaard a little and speak of four dimensions: The physical, the social, the mental, and the spiritual.

How do these dimensions relate to the world of business? What were you trying to tell your students?

For a company the physical is – in Kierkegaard’s terms – the aesthetic: It’s the animal in all of us, the unreflective part, and in a company this is the financial performance. The social dimension in a company is its culture. It’s about the relationships that are fostered within the corporate culture. How we get along with each other? Do we trust each other? Do we speak openly? Do we give each other room? This is very important because this is our family, these are our friends. That’s what Kierkegaard would call your ethical life.

The mental dimension in a company is its capabilities. In a person, it’s your intellectual life: “How do you think about issues?” Finally, the spiritual translates into what Kierkegaard called the religious dimension, which is: “What do you believe in? That’s a company’s purpose. What’s your direction? How do you scrutinize your own actions and take responsibility? What is your higher calling?”

We all have these dimensions inside ourselves and students of business need to see themselves in this multi-dimensional away. If they only see themselves as a finance person they’re not going to be successful in business because they’re not a whole human being.

You talked about making choices that defined you. After ten years as a business leader, what choices will you be making for your own future in the next decade?

I think the journey that the company’s owner and employees are on is so long that the agenda is already set out. Making the LEGO Group a truly global leading player in the business of play, and at the same time integrating and fully digitizing the business system to expand the purpose of the LEGO brick … that’s what I’m going to be doing for the next ten years.

The interview with Jørgen Knudstorp in Billund was conducted by Wan May Ang, Egon Zehnder, Singapore, and Morten Tveit, Egon Zehnder, Oslo.

Jørgen Vig Knudstorp

Born in Frederica, Denmark in 1968, Jørgen Vig Knudstorp studied Economics and East Asian Studies at Aarhus University before gaining an MBA in the UK and his doctorate from MIT in Cambridge, Massachusetts. He began his career in 1998 with McKinsey and, three years later, joined the Strategy Department at the LEGO Group. In 2004, at the age of 35, he was appointed CEO of the company. Known for his modesty and playful nature, Knudstorp learnt early on how to listen to children when he worked part-time in a nursery school. Today he has four children aged between 7 and 12, two boys and two girls, whom he describes as his own “personal market research team.”

The LEGO Group

The LEGO Group was founded in 1932 as a manufacturer of wooden toys by Ole Kirk Christiansen, a carpenter from Billund, Denmark. The LEGO brick was first patented in 1958 and caught the imagination of children and adults alike. After 70 years of virtually uninterrupted success, in 2003 the company began to slide towards bankruptcy after trying to ride the growing wave of computer games. In a bold move, Kjeld Kirk Kristiansen, the grandson of the founder, stepped down in 2004 and appointed Jørgen Vig Knudstorp as the second non-family CEO. Over the ensuing decade, Knudstorp refocused the company on its core business – the colored bricks and the imaginary world they create – resulting in a rapid return to growth. Today the LEGO Group is the world’s second-largest toy company in terms of sales and in 2014 manufactured more than 60 billion LEGO bricks.