There are forty days until the end of the year. We all thought last year would be tough, but this year has been harder. Many of us have been ill, some of us had existential struggles for physical survival under the onslaught of illness. Others of us have struggled for financial survival as revenues and incomes have declined. All of us know people who have passed on, not just from Covid but undoubtedly there has been far greater loss than in an average year.
In the context of this toughness and, in what is becoming an annual ritual for me, I am closing the year by offering free coaching to two people who would like it but aren’t able to afford my fees. You can read more about the offer here. Please do share it with your friends and colleagues.
In this context, I thought that looking at how to rebuild would be useful and so that’s where we’re going today. Although this is a company’s story, the principles also apply to our lives. So, if you’re rebuilding your life, pause and ask yourself how they might apply to you. Listen to your answers. You’ll learn something new.
Strategy
You’ll remember that in A Strategy, Soul, & Self Toolbox I told you that Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry was one of my favourite business histories, and that Guy Raz is one of my go-to podcasters, so you can imagine my excitement when I found this Guy Raz interview with Jørgen Vig Knudstorp, the Lego CEO who had led the company back from the brink of bankruptcy. I had an amazing morning learning from their conversation. By the end of it I had filled eleven pages with notes, often pausing to replay a section. If you’re responsible for leading a business, or want to be, I suggest that you take the time to listen to it.
When Knudstorp joined Lego as VP for New Business Development, it was a company that lost its way. He reflects that growth had become an objective in its own right, causing the business to disconnect from its purpose, and ultimately lose customers.
He draws a beautiful analogy between profit and oxygen. He says that we need oxygen to live, but if we make breathing our primary purpose, we’re very quickly going to become ineffectual and unhappy. The same applies to companies. Breathing has to happen, but to have impact and to be sustainable you need to be connected to something more. Rebuilding requires connecting to purpose.
Knudstorp has a PhD in Economics (& an MBA) and he brought an academic’s curiosity to the business. He tells Raz how he met with countless people inside Lego piecing together disparate bits of information to create a picture – at that point the business was secretive, intelligence was closely held and very few people had a clear and coherent picture of the business’s status.
This process eventually took him three years. As he went along, he became convinced that the business was in trouble, that obscured by the growth was a vulnerability driven by increasing disconnect with customers and too many unprofitable activities. He shared this with the people he met with. Few believed him as they hadn’t developed the full picture he had, but he was sure he was right. Rebuilding requires looking clearly at the facts of the situation without trying to spin them. Know what you’re dealing with.
Eventually, news of his concerns reached the Board. Simultaneously the vulnerabilities that he was intuiting hit home and in one-year sales plummeted by 30%. The Board asked him to prepare and present a paper outlining his insights. He laughingly says that he did it in quintessential academic style – he presented them with a dense thirty-page analysis. His views were strongly contested in the Board meeting, and then, silence. No one said anything to him for around 5 months. He thought he was about to be fired.
Then, a new CFO was appointed, he took him through the paper. The CFO concurred with his analysis. They went to the Board and this time they agreed action was needed. The CEO was asked to step aside, and Knudstorp was tasked with developing a recovery plan with the CFO.
He again went for the dense option – generating a 50-page slide-deck, complete with a series of consulting-catchy titles. The CFO looked at him and said, “You really don’t know what you’re doing, do you?” He went on “Don’t say execution, don’t say culture, don’t say performance, just say the six things we are going to do.” So often our language gets hijacked by labels. We end up saying fancy-sounding things that mean nothing. Rebuilding requires intentional action.
Knudstorp captures it by saying “You don’t think yourself into a new way of acting, you act yourself into a new way of thinking.”
Both in the analytical phase and in the action phase, Knudstorp demonstrates an acute sense of the power of time. He says he knew that first, they needed to stabilize. He told the Board that for three years they would not grow. He needed to focus all their attention on stabilization, they were in ICU. He sold assets to inject cash back into the balance sheet. He gave them oxygen. He focused energy and attention back to the core, stopping peripheral projects and activities. Rebuilding takes intent, time, and focus.
It is worth pausing here and thinking about the counterfactual. Often in businesses in crisis, the pressure comes on for quick results. The insistence is on performance that doesn’t match the reality. The result is that recovery never happens. Instead, what is triggered is a spiral into insignificance.
He actively communicated with the leadership team. Each week he would send an email to the approximately 500 people leaders in the business sharing success, challenges, threats – the full status of the business. In that way, he ensured that he received many more ideas and insights than he could ever get on his own.
Ultimately the rebuild took five years. Raz asks him what he thinks made it possible. He reflects that it was both philosophical – reconnecting to purpose – and practical, ensuring that they fixed how they sold, manufactured, and distributed. Rebuilding requires purposeful intent and excellent execution.
Self
Knudstorp’s journey is instructive. He didn’t start out as the superstar CEO. In fact, he didn’t even want the job. He thought he’d be an academic. His initial appearances before the Board did not fit the corporate cookie-cutter, but he persisted and learned. He tailored his message. He evolved his leadership style.
He reflects that he was so determined that Lego confront the reality of the situation that they were in, that he was unduly pessimistic and did a poor job of building morale. He was trying to break a culture in which it was okay to ‘keep telling yourself small lies’ that it wasn’t too bad, but in doing that he felt he went too far. In retrospect he feels like he could’ve projected more of either a ‘rainy optimism’ or a ‘sunny pessimism’.
Leadership, like life, is an evolving practice. It is never done. We never get it right for all times. The best that we can do is to keep learning and keep adjusting, rebuilding requires it.
Soul
In reflecting on Lego’s recovery, he quotes T.S. Eliot
“We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time.”
Knudstorp was the son of a kindergarten teacher and an engineer. In a sense, he was made for Lego. In the business’s recovery process, he looked for people passionate about Lego. They were the soul of the business.
He recruited people into the design department who were passionate Lego makers, and commented that despite their lack of professional training ‘they made products that people loved because they themselves loved the product.’
When the Lego Movie was in production, he ensured that the scriptwriters and the producers immersed themselves in the community of passionate Lego builders. He ensured that the company kept going back to its soul – to the joy of children’s play.
Sometimes, to rebuild, we need to reconnect to where we’ve come from and who we are.
Happy Sunday everyone. I hope that today’s letter has inspired you in some way. Drop me an email, I’d love to know what your next actions are.
Karl
PS: If this is the first time you’re reading strategy, soul, & self you can subscribe here and you can find me on LinkedIn and Instagram.
(This letter was first published on 21 November 2021)