Markets over the world are growing and becoming more complicated than yesteryears. Businesses face the challenge of expanding internal markets as they flex their muscles outwardly. Wrong decisions can easily lead to the downfall of a company. It is good to recommend that networking should go on in order to experience growth. Fostering partnerships with others and working towards a given goal can revamp any business.
Focus on products and Marketplace
Prior to 2004, Lego was more focused on its products than its marketplace. The company had focused more internally on creativity. They had believed that by being creative they would have stayed ahead of the market.
Its innovation and superior quality toys had created high complexity that was far from market or customer orientation. It did not have the client in mind. They only wanted to create better and new things in the market.
Another reason was that the company believed that if they had new and better products, the customer would automatically choose them over others. That was not the case. As a result, their products ended up, not being market friendly.
The company had 12,500 stock-keeping units, with more than 100 different colors. It had more than 11,000 suppliers. Lego also had one of the largest injection molding operations in the world. It had production sites in Denmark and Switzerland.
They also have packing and other facilities in the Czech Republic, the US and South Korea. Despite all the investment, the company was not making enough sales. It had caused many problems that the company was about to close down.
The company had also lost a sizeable market share because customers were losing confidence in its products. To any company that has existed to for that long it was a great loss.
Jorgen’s Product/Market Expansion Grid for Lego
The company started a planned change by gathering a diverse group of senior executives and outside specialists in a ‘war room’. They analyzed the company’s portfolio, product development, and sourcing, manufacturing, marketing, and logistics process. They decided to make a five-year plan called ‘shared vision.’ The board approved the plan in October 2004.
They started developing and maintaining an active partnership both internally and externally. It was supported by a truly market oriented mission to inspire and develop the builders of tomorrow. Jorgen also decided to work with subordinates by encouraging them to work with him to experience growth. They made elaborate plans for market development and market penetration.
Past approaches were different. Subordinates did not feature anywhere in the company’s goals and major decisions. Previously, also the management had thought that they were market’s best. There was no need for serious planning. Specialists from outside the company were never invited to give advice. They never sought for technocrat’s advice. The company channeled most of its energies on product development and diversification
Jorgen’s Approach for Internal and External Partners
Jorgen trusted that the junior staffs would support his idea of lifting the company. He believed that without them, every idea he would come up with would hit a snag. Internally, he also worked with the board so that they could approve the plans he had for the company.
The senior management was also important because they had to prepare and make decisions together. Externally, he put together specialists from outside.
Implementation of Change
Promotion of Jorgen was in itself a plan for change. Even though many thought it as a gamble, he ended up making the company proud. He managed to encourage subordinates to work with him for their sake. The subordinates had to realize that one of their own had taken up the leadership and that he needed their support.
Immediately Jorgen got the executive seat he together with the management embarked planning to put in place strategies that would see the company regain its market. They set the five-year plan they called ‘shared vision.’ They started developing and maintaining the partnership both within and externally.
The number of product options reduced significantly. The customers were asked to change their ordering habits. They also improved the customer service delivery. The on-time delivery grew from 62% in 2005 to 92% in 2008. Customers rated Lego as the best class supplier by that causing Lego to win the European supply chain excellence award.
If I had a chance to work for Lego, I would have pushed for diversification of products and gaining new markets. A company cannot rely on one product all the years. Competition and market changes will one day cause a shift by the customers.
Many will see Jorgen as a miracle that arrived just on time. He was the son of a teacher and an engineer. He belonged to the middle class Northern European family.
Jorgen had spent his 18 months as a trainee kindergarten teacher before deciding to opt for a career in Lego. His dad encouraged him that it was in the kindergarten that he developed his leadership skills. He learned that if one could lead kindergarten children then he could also make a great leader in life.