ITN: For quite some time, Lego has been riding on a huge wave of success. Have you got a clear vision about the future of the company?

Roar Rude Trangbaek: Well, when we look into the future, we see three major opportunities: Digitalization, Globalization and Responsibility. We look digitalization both in terms of the way we operate our business, but also in terms of consumer offerings. Digitalization is going to be an area where we must raise the question of how we can enhance physical play even more with the digital experience – but it is equally important to keep focus on exactly that: The physical experience.

ITN: Can you give us an example?

Roar Rude Trangbaek: In 2013, our major product launch was Lego Legends of Chima based on a story we had developed. It is a fantasy world with a deep story line with several characters. It’s about a planet which is inhabited by animal tribes that are intelligent. They are battling over Chi, which is a source of energy. Around the storyline we created building sets as well as online content such as mini games, a multiplayer online game and a TV series. Thus, we offer a 360° playing experience – but with outset in the physical construction play.

ITN: You are talking about innovation as a part of the Lego success story. But some years ago, the Lego business went very badly. What were the reasons for that?

Roar Rude Trangbaek: I think we lost the focus on who we were as a company and what we were really good at: Creating great LEGO sets based on the LEGO brick. We tried to do a lot of things that were not closely linked to this core ¬– that is to say, creating great experiences based on the Lego brick.

ITN: Can we say you lost the focus on the bricks?

Roar Rude Trangbaek: Yes, that is exactly what we did. And we maybe also lost faith in the brick and in the fact that children like to build with bricks.

ITN: What else went wrong?

Roar Rude Trangbaek: Back in those days, we moved out into franchises where we were not experts – as an example we set up a division to develop video games without being experts. When we develop a video game today, we don’t do it. Instead, we partner with TT Games or with Warner Bros. Entertainment Inc, and deliver input in the process about our values, and what we know about.

ITN: In what year did the crisis occur?

Roar Rude Trangbaek: The crisis became evident in 2003 and 2004, but it was a result of some things that had been wrong for a longer time. We were a little bit complacent, thinking that we knew what we were doing as a company and we knew best. Second, we were not focusing much on our customers. And thirdly, there was a lack of flow of information inside the company. So we had a lot of knowledge silos within the organization. One hand was doing something that the other didn’t know. We lacked a clear insight in which areas were run inefficiently and in which areas where we losing money.

ITN: How did Lego manage to overcome the roller coaster ride?

Lego CEO Jørgen Vig Knudstorp helped to set the company back on the road to success © Lego Group

Roar Rude Trangbaek: This correlates with the CEO Jørgen Vig Knudstorp and the plan that was initiated in 2004. In the beginning, it was a matter of surviving. Stabilizing the company became the order of the day. We had a serious crisis as we were loosing money. So metaphorically spoken, we stopped the bleeding of the company.

ITN: What specific measures were taken?

Roar Rude Trangbaek: Some product lines were not profitable; consequently, we shut them down. We stopped manufacturing toys for babies and infants, for example. Instead, we refocused on the brick. A classic line like the Lego city station and police station were not considered “boring” , but as something that we were really good at. We also abandoned the claim to be experts at everything.

ITN: And then the healing process started ...

Roar Rude Trangbaek: Yes, we were looking at rightsizing the company. We needed to reduce the number of employees to fit the reality. We also began outsourcing the production. We believed that it was a good idea at that time, and it was the right decision to locate the factories closer to our consumer, but we found out that we are actually very good at moulding and manufacturing the Lego products, which is why we own our factories again today.

ITN: What else brought you back on the track to success?

Roar Rude Trangbaek: We sold the Legoland parks in 2005 to Merlin Entertainments. That was a profitable business, but we are not experts at running amusement parks. Our parent company KIRKBI A/S who owns 75% of the LEGO Group today owns 29,9% of the shares of Merlin Entertainments. The LEGOLAND parks are a great exponent for what you can build with bricks so we have a good dialogue, but everything is handled by Merlin Entertainments who are experts within their field.

ITN: Let us talk about the processes that were initiated within the company.

Roar Rude Trangbaek: Internally, there was a lot of openness about how the company was doing. All employees were involved. Also, a clear line of sight was created as well as an alignment in terms of data and information sharing. This is still very important for us. Building on this in 2011, the top management was expanded, but basically this was not the result of our crisis. We wanted to prepare the company for future growth and globalization. The management comprises 25 members now. It grew from six. Thus, we have reduced the silos so that people from all over the company and different departments meet and share their knowledge and insights and make decisions in plenum.

ITN: Is there anything else to be mentioned at this point in the story?

Roar Rude Trangbaek: We have also developed a strong focus on consumers and on our employees. Through a net promoter score, we ask consumers, “Would you recommend this experience to others?” We also measure the commitment of the employees. It is like taking the temperature of the organization: Is it sick or healthy? Do we have committed and enthusiastic employees who look forward to coming to work every day?

ITN: Measuring is one thing, but how do you create high commitment?

Roar Rude Trangbaek: That is a good question. I personally believe it is about creating a career opportunity within the company so that you are able to use your competences and continue to develop. Then there is the so-called smell in the bakery. I am talking about a certain sense of how we work together which is worth preserving – and also a part of being a family owned business.

A line-up of Lego products from 1932 © Lego Group

ITN: Could you explain that a little bit more?

Roar Rude Trangbaek: Even though people have different titles and responsibilities, I feel that there is still huge respect for each individual employee as a person. The way we talk, the way we respect each other is quite unique. ‘Smell in the bakery’ also means that we are aware of our values that trace back to the year 1932 when Lego was founded – and that these live to this day.

ITN: Are many international employees working in Billund?

Roar Rude Trangbaek: Yes, I’ll give you an example. We have approximately 180 designers working in our design department here in Billund. They are from more than 20 different countries. About 50% of them are Danish; 50% are from other countries. On the whole, our company consists of approximately 13,000 employees, of which 4,000 work here in Denmark where we have the HQ. The majority are based at several major sites and offices all over the world.

ITN: Is this part of an overall globalization strategy?

Roar Rude Trangbaek: Well, globalization is, alongside digitalization and the responsibility agenda an important challenge and opportunity for us. We are continually globalizing the company. So in this year, when we launched our annual results for 2013, we also announced the decision to set up five main offices around the world. One of these was opened in Shanghai on 28 April this year. It is established there because we are building our own factory in China, which is going to be located very near to that site. So this makes sense for us and also for our focus on Asia, where we see huge potential.

ITN: Let us stay with globalization. Do Chinese children have different needs from their counterparts in Germany?

Roar Rude Trangbaek: No, they actually don’t – children are remarkably similar everywhere in the world.

ITN: So, you don’t need different product lines then.

Roar Rude Trangbaek: That is the beauty of the Lego system. There may be slight cultural variations, but in essence, the fire station that German and Danish and American children find fun to play with is also appealing to Japanese and Chinese kids.

ITN: Let’s look at the wishes of children. Are they taken into consideration, are they evaluated?

Roar Rude Trangbaek: Part of the development process of any Lego product is intensive consumer research and insight. When we, for instance, launch a new Lego city theme, we go to Germany, and we go to China, and we ask children, “What do you think about this?” And then we will consider that from the early concept stage on until the final product. We are very conscious, and again, that’s one of the lessons from the crisis: We need to listen to the consumers.

ITN: Does Lego have a mission statement?

Roar Rude Trangbaek: We want to inspire and develop the builders of tomorrow. I am talking about children all over the world. We do this by globalizing the Lego system in play and by doing it better and better. Our responsibility agenda is also very important to us. As we grow in size, the expectations of us as a company from the stakeholders, be they consumers or media or legislators and organizations around the world, is increasing. Finally, as I said at the beginning, we are focusing on digitalization. There are some experiences that cannot be transferred entirely to the digital universe – Lego play is a very physical activity and belongs to this category. You put the bricks together, you use your hands. Instead of having a print newspaper that can be transferred to the digital world and augmented by videos or interactive surfaces online, you cannot copy this experience of putting together two bricks using your hands, feeling the brick, and navigating in a 3D space in a digital world because you just don’t get that feeling. That is also why we believe that the physical LEGO brick will be just as relevant in 50 years as it is today.