The LEGO family business from the woodshop to the world of miniature bricks

“If you want to own a family business for 150 years, this crisis definitely won't be the last.”
– Kjeld Kirk Kristiansen (G3)[1]

          Many people who grew up with Lego, the tiny bricks that have inspired children all over the world, still remember the tiny pieces. Many are made from brightly colored plastic. various parts Can connect closely But it can be disassembled easily. You can build it according to the design Lego has given you, or you can think of it yourself and design it yourself. You can build it into a car, a robot, or a little house. It depends on each child's imagination.

          One of my friends said “If we weighed and sold Lego, it would cost about 10,000 baht per kilogram. But the parents agreed to pay. Because they think they are buying a future for their children.” Today we will talk about Lego from another perspective, that is, “Lego” as one of the most well-known family businesses in the world.

Gen 1 Formation: Obstacles that lead to opportunities

          Ole Kirk Kristiansen (1891-1958) was a carpenter who built houses in Billund. Denmark The economic downturn during the Great Depression greatly reduced his business's income. Ole adapted by using his carpentry skills to make wooden toys from leftover wood to supplement his income. But it cannot save a business that is about to go bankrupt. business shut down He founded the company in 1932 and this is how Lego began. In the beginning, the toys that Lego produced They are all made from wood, which is a material that Ole has expertise in, such as yo-yos, wooden trucks, wooden ducks, as well as household items made from wood, etc.

          In 1947, Lego began producing toys made from plastic. After World War II, production materials were scarce and expensive, so Ole turned to plastic as a material for making toys. Even though he had no knowledge about it before. And even though at that time Consumers view plastic as a low quality material. It will never be compared to wood. But that didn't stop Ole from trying.

          Great ideas can come from anywhere.

          The idea for Lego bricks was influenced by Self-Locking Building Bricks by the Kiddicraft Toy Company, founded by Englishman Hilary Fisher Page (1904-1957). Hilary Page believed in the properties of plastic as well as Ole He believes it is safe and ideal for making children's toys. and with injection mold which was new technology at that time Kiddicraft's Plastic Self-Locking Building Bricks were born. and released on the market in 1947

          A sample of Kiddicraft's "building block" was delivered to Ole and his son Godtfred by an injection molding vendor. Just the first second I saw it. Ole and his son saw the potential of Kiddicraft's plastic bricks and were quick to develop their own version of the bricks. LEGO launched The Automatic Binding Bricks, "Lego-style bricks," in 1949. and was continuously developed until it became the “Lego Brick” that we are familiar with today [2]

Hilary Fisher Page's Plastic Blocks

Proto Cr.: Chas Saunter (hilarypagetoys.com), CC BY-SA 2.0, https://commons.wikimedia.org

          “Only the best is good enough.”

          “Only the best is good enough” has been Lego's motto since 1936, and the company still lives up to it today. This motto was created by Ole to emphasize the importance of product “quality” and functionality. The story behind the motto came about when Godtfred (G2) boasted to his father, Ole, “I used just two coats of varnish on a toy wooden duck. It's extremely beautiful and shiny. Plus you save money!” As a result, Ole ordered Godtfred to go back and varnish for a third time to complete the job as specified. Because in Ole's eyes, a wooden duck with two layers of varnish is a low-grade product!

Gen 2 continues: adding more from the original base

          LEGO undergoes a major change when the second generation joins the family business. Ole's son, Godtfred Kirk Kristiansen (G2), joined the family business as Deputy Managing Director of The LEGO Group[2] in 3 and rose to the position. Became Managing Director in 1954, his work during his 1957 years in office raised the level of “Lego bricks” from Good Toy to Great Toy.

          Perfect LEGO Bricks

          Godtfred pushes the concept “Toy System” or “Toy System” which he got this idea from talking with foreign customers at trade shows. The heart of the “Toy System” is each box of Lego. or each set sold It must be able to be put together perfectly with other LEGO sets. It creates a puzzle system that can be expanded endlessly. By the only restriction of The “toy system” that Lego creates is the imagination of the person who builds it.

          The obstacle in creating this toy system is Lego bricks at that time were not yet able to hold together well enough. And still couldn't modify it to be built in many different ways enough. Godtfred and his team spent the next 4 years designing and developing the bricks to stick together better. and can be modified to continue in various formats completely which is the result of a new brick design This included the use of ABS plastic as a new material.[4] These changes led to Modern Lego Bricks being introduced in 1958[5]. Can be fully integrated with current Lego bricks. Building on the original foundation laid by our father's generation is an advantage that other businesses must envy. But even though we already have a solid base, Continuing with Lego, it still took a lot of time and determination to get the perfect "building blocks" as they are today.

Models and sizes of Modern Lego Bricks

Proto Cr.: Wikimedia Commons

          But even though there are products Even though it's "perfect," the trend of change continues to hit Lego. Times in the 90s when patents “Plastic bricks” expire and children turn to video game consoles. and computer games Lego is in trouble again. Lego is trying to pull the business out of the black hole through various strategies. Since expanding the clothing line Leaping into the computer game market to the creation of theme parks in both the United States and Europe, but it still hasn't stopped its profits from plummeting.

          In 1998, Lego reported its first operating loss since its inception.

Gen 3 Cure: Crisis with the entry of "outsider" executives

          Lego's crisis lasted until late 2004, when the company made major changes to its top management. After a succession of family members taking over as CEO, from Ole Kirk Kristiansen, the first generation, to Godtfred Kirk Kristiansen, the second generation, and Kjeld Kirk Kristiansen, the third generation, Kjeld, the third generation Lego heir, has decided to step down as CEO and appoint former Jørgen Vig Knudstorp. A business consultant from McKinsey took over as CEO of Lego. Jørgen's arrival turned Lego's business from negative to positive within one year. Lego's net profit in 1 was approximately 2 million baht from Loss of more than 3 million baht in 3

          "Outside" executives with new ideas in business management

          Jørgen is the second person outside the family to take on the role of CEO of Lego in the 2 years since the company's founding. Jørgen has transformed the organization's goals, methods, and culture almost 6 degrees, with a clear goal of: Lego must be a great toy company for kids. But you also have to make a profit. “Before the global economic crisis of 72-180, performance was never a concern for employees or executives,” says play expert Niels Sandal. and employees who have worked for Lego for more than 2000 years told Fortune magazine, but Jørgen doesn't see it that way. and a policy of staff reduction was immediately implemented.

          Marketing based on popular films such as Star Wars was also used, which was initially met with strong opposition from internal employees and executives. This is because the word “Wars” is under the LEGO brand, which is a toy created for children. The development time for new products to market has also been cut in half to just 12 months.

The variety of Lego bricks that create unnecessary costs has also been reduced, such as from two types of chefs: chefs with moustaches; With a chef who doesn't have a mustache After a long battle Only chefs with moustaches have survived until now. The sale of several theme parks and the reduction of production costs by building new factories in Eastern European countries are other cost-cutting strategies that have been adopted. Come use it too. “Family businesses allow you to think long-term. And I can make decisions quickly.” Jørgen shares the perspective of an “outsider” who has worked in the family business for a long time. “I can talk to shareholders in the morning. and reach a conclusion in the evening.” This is the advantage of a family business.

          Brave insiders + smart outsiders

          Acknowledging that the family “insider” could not lead the business through further crisis was an act of bravery for the Kirk Kristiansen family to admire, and they had the foresight to select the right Jørgen “the right guy” for the job. This was important, and Jørgen did it. In 13 years, he transformed Lego from a company on the verge of bankruptcy into one of the most profitable toy companies in the world. (Revenue more than quadrupled during his time as CEO.) Lego is currently run by Niels B. Jacobsen, another outsider who took over as Lego's CEO in 4, succeeding Jørgen at the nudge. Up to the position of Executive Chairman of The LEGO Group

Jørgen Vig Knudstorp served as CEO of LEGO from 2004-2017.

Photo Cr.: https://medarbejdere.au.dk

Gen 4 Enjoy (Carefully!) : A good structure won't be tiring...and won't be too far apart.

          If you structure your business well Family members do not need to be tired of managing the business themselves. But must keep a good "distance". Currently (2021) Kirkbi A/S[7], a family holding company that handles various investments. The family owns 75% of Lego A/S[8], while The Lego Foundation, the Kirk Kristiansen family foundation that aims to improve children's play and learning, holds the remaining shares. another 25%

Kirk Krishtiansen Family Shareholding Structure

NOTE: The LEGO Group or The LEGO Brand Group is a central entity established to manage the legal entities LEGO A/S (the LEGO operating company), Kirkbi A/S (the family holding company) and the Le Foundation. spruce

          A shareholding structure through a holding company and foundation, where family members do not directly own shares in LEGO A/S (the operating company), is an effective way to separate family from business. Family interests are discussed in the holding company (Kirkbi A/S). Company interests are discussed in Lego A/S, creating The LEGO (Brand) Group as the administrative entity that oversees Kirkbi. A/S, Lego A/S and Lego Foundation at the same time, but this type of structure still has the weakness that the family may be too “distanced” from the business. That is, they do not know the nature of the business that is being carried out.

          The Kirk Kristiansen family resolved this weakness by sending Thomas Kirk Kristiansen, the 4th generation heir, to take the position of Deputy Chairman of The Lego (Brand) Group to be the eyes and ears of the family to take care of the business at a level that is not too "distant". And it's not too "tired" and certainly the Kirk Kristiansen family still has full power to "choose" who will be on the board of directors of Lego A/S, which is the family's main business.

          Active Owners Every shareholder has duties.

          “Shareholders” are not just responsible for receiving dividends. The Kirk Kristiansen family values ​​active and engaged ownership by requiring each generation to have one member receive the title of “The Most Active Owner.” ” (MAO), which will act as a family representative to follow up. Closely overseeing the operations of Lego A/S (business), Lego Foundation (foundation) and Kirkbi (family holding company), current family member MAO Thomas Kirk Kristiansen (G1) will carry out the mission. Active Owners join MAO of the 4rd generation, while other shareholders Everyone has a virtual role. “Family ambassador” in spreading values and the Lego family culture to the public This is in addition to the normal duties of being a director on various boards.

          Lego's Family Business Succession is not the transfer of management positions to Lego A/S, but rather the transfer of board positions to The LEGO Group, Kirkbi A/S and The Lego Foundation. 2016 Kjeld (G3) relegated himself to being a referee. While pushing for Thomas (G4) to take the position of Deputy Chairman of The LEGO Group, while on the board of the Kjeld Foundation (G3) withdrew himself to be only Deputy Chairman and had Thomas (G4) take the position of Chairman. instead of him

          However, Kjeld remains Chairman of Kirkbi A/S, the family holding company. The chairman of the board of Kirkbi A/S must be an “insider” and the chairman of the board of Lego A/S must be an “outsider”.

Four generations of the Kirk Kristiansen family

Source: Author from information on Wikipedia

“Dare to change” is the spirit of an entrepreneur.

          John L. Ward, American family business guru Admire the concept of “We're in the business of business” as the true entrepreneurial spirit. Entrepreneurs who believe in this idea will not consider changes such as closing the company's first factory. Or canceling the production of the original products that made the company famous, etc., will cause them to lose their identity. or the essence of the business in any way

          Lego may not exist today. If that day, Ole still stuck to being a carpenter who built houses without seeing that his carpentry skills could be used in other areas of livelihood. A business started by his parents' generation. Or those grandparents It has done its job well in creating a foundation for further expansion or new business sprouts. It depends on how the new generation that is about to take over the business will see and be able to take advantage of that foundation.

          The entrepreneurial spirit is often in full force in pioneering generations of business founders. But it often disappears in the generations that follow. Sometimes the loss of entrepreneurialism in the next generation can be a result of the attachment of the pioneer generation itself.

          “Why would you change? The products are still selling well.” “That's how they do it. How has the business grown like this?” These words ring loudly in the conference rooms of many family businesses. But the world doesn't stand still. Preparing for the inheritance of a family business therefore means being prepared to change whether it be in the matter of the product. new technology Administrative structure change Business guidelines Including finding and accepting "outsiders" who have the ability to help during the situation. and the needs of the organization change

Get to know the LEGO Group

The LEGO Group is a family business that manufactures and sells “Plastic building system” pictured under the LEGO brand, toys sold in more than 130 countries around the world. The Lego family business was founded by Ole Kirk Kristiansen (1891-1958) and is headquartered in Billund. Denmark LEGO comes from the Danish word 'Leg Godt' which means 'Play Well'.

The LEGO Group is currently led by Niels B. Christiansen (CEO), a professional executive who joined LEGO in 2017, and Jørgen Vig Knudstorp (Executive Chairman), former CEO of LEGO. Since 2004 (following the resignation of Kjeld Kirk Kristiansen, the third generation heir to the family as CEO), Lego is now owned by the Kirk Kristiansen family, headed by Kjeld Kirk Kristiansen (G3) and his children (G3). Major shareholder (via KIRKBI A/S and The Lego Foundation)

LEGO has been the world's number one selling toy manufacturer since 2015, with sales of more than $6.1 billion (2019). It employs more than 18,800 people (2019) in its toy business. LEGO stores in 20 Countries, Theme Park businesses under the name Legoland, movies, TV shows, video games and books, etc. Lego has been praised by Fortune magazine and the British Toy Retailers Association as being “Toy of the Century” in 1999

References

• Family Capital, “Lego's restructuring: Three lessons for family businesses,” https://www.famcap.com, December 2016
• Godtfred Kirk Christiansen, https://en.wikipedia.org/wiki/Godtfred_Kirk_Christiansen, March 2021
• Hilary Page, https://en.wikipedia.org/wiki/Hilary_Page, March 2021
• John L. Ward, “Perpetuating the Family Business,” Palgrave Macmillan UK, 2004.
• KIRKBI A/S, https://www.kirkbi.com, March 2021
• Kjeld Kirk Kristiansen, https://en.wikipedia.org, March 2021
• Lego, https://en.wikipedia.org/wiki/Lego, March 2021
• Lego Group, https://en.wikipedia.org/wiki/The_Lego_Group, March 2021
• Niels Christiansen, https://en.wikipedia.org, March 2021
• Ole Kirk Christiansen, https://en.wikipedia.org/wiki/Ole_Kirk_Christiansen, March 2021
• Sarah Reid, “Life at the world's largest toymaker,” https://cmgpartners.ca, April 2020

[1] “As a family owner, if you want to own something for 150 years, there will always be another crisis.” – Kjeld Kirk Kristiansen

[2] The “Lego Brick” was introduced in 1953. In its early days, Lego did not purchase patents for the “brick” design from Hilary Page and Kiddicraft until it expanded. and began reselling them in Western Europe. (including in England) leading to patent payments to Hilary Page and Kiddicraft being paid in full in 1981. However, Hilary Page did not live to receive compensation for his invention. Hilary Page committed suicide from... Business pressures in 1957

[3] The LEGO Group or The LEGO Brand Group is the central entity established to manage the legal entity LEGO A/S, the operating company of LEGO (Operating Company). Kirkbi A/S, a family holding company. and the Lego Foundation

[4] The new material used was ABS (acrylonitrile butadiene styrene) polymer, and Lego patented the new brick on January 28, 1958.

[5] 1958 was the same year that Ole, the founder of Lego, died.

[6] The first outsider to arrive was Vagn Holck Andersen, who served as Lego's CEO for six years during the transition from Godtfred (G6) to his son Kjeld (G2), who was set to become Lego's CEO. Next CEO Kjeld became CEO of Lego in 3, when he was 1979 years old, and remained in the position for 31 years.

[7] Kirkbi A/S was founded in 1983. The company invests in various businesses. In many industries Including holding 30% of shares in Merlin Entertainment which also owns Legoland Theme Parks

[8] A company that manufactures and sells Lego toys.