On the top floor of a high-rise office building on Shanghai's landmark Huaihai Road, Jørgen Vig Knudstorp, global president and CEO of the LEGO Group, sits in an office overlooking this bustling metropolis. Occasionally glanced at the scenery outside the window, the face passed a trace of satisfaction. One day ago, Lego held a groundbreaking ceremony attended by the Queen of Denmark in a Chinese factory in Jiaxing, Zhejiang, which is about 100 kilometers away from Shanghai.
“Come here (Shanghai) is my dream.†Knud Stoop said that “dream†is not always swayed by this low-key and modest CEO. The 46-year-old is the only external CEO in the history of the 82-year-old Danish family business and has served for 10 years.
In contrast to the style of professional managers in most multinational companies, he wears Harry Potter-style round glasses, and his beard looks almost as thick as his hair. Strangers are likely to treat him as a university professor or IT engineer. Not the helm of a global toy giant. Soon, he returned to the usual rationality and prudence, emphasizing: "Of course, we know how big the challenge in the Chinese market is. At present, North America and Europe will remain our core markets."
As early as the 1990s, Knudstöpp, who was still in college, traveled to China as a traveler. Two years after becoming CEO of LEGO in 2004, he began frequent visits to China. In January 2010, he quietly brought the group's senior management team to Shanghai and announced the preparation of the “Lego China†program, including production, marketing and logistics teams. "Look at Shanghai, isn't this the next New York? Only when we are here, we won't miss the opportunity here." He told the management team that LEGO launched a series of market research.
The LEGO brand has become a household name in the Western countries and is the world's largest building toy company. It is estimated that there are 94 LEGO bricks per capita in the world, and Germany has an average of 8 boxes per LEGO in 2013. In 2013, Lego produced more than 55 billion components globally, and there are 915 million building blocks for every 6 blocks of the same color. . Google co-founder Larry Page used Lego bricks to build a printable full-featured inkjet printer, and now Google’s managers will still use the Men’s (MENSA, top IQ club) level of recruitment testing. Lego blocks.
In 2013, the LEGO Group achieved a revenue of 25.4 billion Danish kroner, which is already the world's second largest toy giant; its net profit is over 6.1 billion DKK and its net profit margin is 24%. Last year, in the global toy market, where North America experienced a decline and Europe experienced almost stagnant growth, Lego’s annual revenue and net profit growth still reached a considerable 11% and 9%, and this market-leading high-speed growth in Lego Has been going on for many years. In contrast, the two other giants in the toy industry, Mattel and Hasbro, have been weak and even lost due to the global economic crisis in recent years.
Today, the actual owner of the LEGO Group is the third and fourth generation of the Christensen family: Kjeld Kirk Kristiansen and his three children. In 2014, Kyle ranked 109th in the Forbes Global Rich List with $10.9 billion in assets.
However, today's animated Lego was another scene 10 years ago – the Lego Group in 2003 was almost on the verge of bankruptcy. In the highly competitive children's toy industry, Lego has always been regarded as a synonym for “inspiring innovationâ€, and it was precisely “innovation out of control†that led Lego to the quagmire more than 10 years ago.
In the mid-1990s, the LEGO Group, which experienced rapid growth for more than 10 years, began to decline. At that time, the patent for the self-locking building blocks of the building block kingdom had expired, which means that any company can produce plastic building blocks compatible with LEGO bricks, as long as the Lego brand is not used; the bigger challenge comes from the ever-changing toy world, individuals The popularity of computers has allowed computer games to develop rapidly, and digital games that are easily addictive have robbed the core consumer groups of large blocks.
Kyle, who was then CEO, tried his best to pull the tide. Between 1994 and 1998, Lego did not hesitate to introduce expensive new production lines, and the number of new toys increased by three times. However, a series of reforms have had little effect, and the company's sales have only increased by 4% in four years. In 1998, LEGO experienced the first loss in history. In 2001, Kyle once admitted to the media: "We are a huge institution, we are losing vitality and happiness."
Perhaps I feel that I can't catch up with this fast-changing world. In 1998, Kyle hired a manager, Poul Plougmann, who was then called the “miracle creator†by the Danish media. At the same time, Pragueman embarked on Lego's “slimming plan†and launched an earth-shattering innovation revolution around the “Innovation 7 Ruleâ€.
Even today, the “Innovation 7 Rule†is still “fashionable truthâ€: attracting innovative talents from different cultural backgrounds, sailing to the blue ocean market, customer-centered, practicing disruptive innovation, promoting open innovation, and exploring all-round innovation. And build an innovative corporate culture. These rules have made innovation giants such as P&G, Canon, and Apple, and it sounds like they can be copied to any company that wants to innovate.
Around the rules of innovation, Lego launched a series of actions: recruiting the top talents from around the world, forming a new team of toy designers in Milan, Italy; in order to cater to the needs of consumers, enter the digital entertainment field of movies, games, etc., hope in the digital world Build a fan group of LEGO; invest heavily in Lego theme parks around the world and vigorously develop LEGO education. The core concept of Prague Manor is to make "Lego" the favorite brand and forget the "outdated" LEGO bricks.
However, the results of these innovative actions have not caused Lego to return to the path of healthy growth, but have instead plunged into a whirlpool of huge losses. In 2003, Lego's sales plummeted from DKK 10.1 billion in the previous year to DKK 7.2 billion, a loss of DKK 900 million; in 2004, LEGO's losses continued to expand to DKK 1.9 billion. What is more serious is that despite the dilemma, the management of Lego was unaware of it, because in 2002 Lego still achieved stable profits.
In June 2003, Knord Stop, the young Lego's vice president of strategic development, used his research report to show that LEGO is already in a precarious situation. Many board members even sneered at it: Where does the data come from? Is it so bad? After finishing the report, Knud Stoop even felt that his "last time" at Lego had arrived.
Knud Stoop, who holds a doctorate in economics, was born into an intellectual family. In childhood, parents strictly restricted him to play electric toys in order to cultivate his innovative and practical ability. Therefore, he has a strong interest in building LEGO and often builds his own Legoland on the table tennis table. Knudstöp later recalled the establishment of Lego's cultivation of his innovative thinking. "I have benefited a lot from studying mathematics, computer programming, or language since then," he said.
After obtaining his Ph.D., Knud Stopp worked as a trainee teacher for one and a half years in kindergarten. He then turned to the consulting industry as a management consultant at McKinsey. In 2001, he joined the LEGO Group, which he is very familiar with and aspires to as a strategic director. During his time at Lego, he studied every department of the LEGO organization and personally interviewed executives, front-line employees and large retailers to analyze successful experiences and find problems that could lead to failure.
“The decline of big companies is often not because of hunger, but because of indigestion.†Knud Stoop concluded that it is natural for large companies to produce a disruptive innovation every 3-5 years. But at that time, LEGO promoted several innovative changes in a year or two. David Robertson, author of The Book of Lego·The World of Innovators, also believes that the “law of innovation 7†itself has no problems. The problem is that “innovation is out of controlâ€.
Undoubtedly, when the company concentrates its attention on “infinite innovation†at the cost and cost, the normal operation of a company as a commercial organization will inevitably be affected. Lego’s “radical innovation†culture has made the company even forget to test the innovations. They don’t know which products are making money and which products are losing money.
Knudstöpp was not "evicted" from Lego, and the visionary Kyle entrusted him with a heavy responsibility. In 2003, Knud Stoop, who was on the verge of 35, was later called “Lego Saver†by the media – he led a bankrupt family business, Lego, back on track for more than 10 years, not only quadrupling its size, but also Become the most profitable toy company in the world. And Lego’s rebirth secrets don’t sound mysterious – in short, returning and focusing on core business. In the first two years of Knutdtop's succession, he even asked the company to "forget innovation" and "forget strategy."
Today, the story of saving Lego has become a classic case of business school. Backed by the core business strategy, LEGO once again entered the golden age of development. In the latest research report of the global toy industry by Euromonitor International, a third-party consulting firm, the analysis of the world's three major toy giants Mattel, Lego and Hasbro shows that Lego was between 2012 and 2017. Performance will still surpass its two major rivals, and it will be the leader in building toys.
However, the question that LEGO raised in the era of electronics and the Internet still exists: How big is the market that relies on selling traditional LEGO bricks? Should Lego set foot on the road to diversity? To what extent does the virtual entertainment world built in the information age challenge the traditional toy world that LEGO is currently living on?
“There is no doubt that the market for selling traditional toys has limited space, which is why companies like Disney will derive their brand image into other areas to create value.†Director of Business Strategy Consulting, PricewaterhouseCoopers Liu Weiwei said, "If Lego chooses to diversify, the key is how to diversify the values ​​of innovation into other fields - this is not a simple matter."
According to the analysis of Eurofin's 2013 global toy industry report, Hasbro, which owns Barbie's Mattel and Transformers, has been fully diversified in terms of products, but the results of the diversification did not meet their growth expectations. At the same time, however, LEGO’s strategy of focusing on “building blocks†is seen by third-party consultants as the “risk†of the future.
“We don’t put the company’s future strategic focus on product diversification and brand creation. We don’t have that ambition,†Knutdtop said in an unquestionable tone, “in a strategic choice of diversity and globalization. We will not hesitate to choose the latter.†It is clear from LEGO’s 2013 financial statements that sales blocks are almost all sources of LEGO’s revenue, while brand licensing costs account for less than 2% of LEGO’s sales. Because of this, the expansion of China and its Asian markets seems to be the key to Lego's continued growth strategy.
Globally, the United States is currently Lego's largest single-country market in the world, with European markets and North American markets having similar positions, while Asia, including the Chinese market, still has a small proportion of LEGO's global share. “Our development in North America and Europe has not encountered bottlenecks, but we also believe that it is now the time to fully enter the Asian market. Globalization is our most important strategy at the moment.†LEGO Global Chief Financial Officer John Goodwin ) said.
In 2013, LEGO maintained a “stable single-digit growth†in the North American and European markets that was better than the overall market level. In contrast, the Chinese market, which relies entirely on imports, has maintained a 40%-50% increase in sales in recent years. In the market segment of branded toys, Lego's share has even reached 80% to 90%. “In Korea, we are also growing at a high rate and have a high market share,†Goodwin added. In fact, Lego is already the third-best selling toy brand in the Asian market.
However, compared to the mature European and American toy market, the emerging Asian market represented by China is not a cake that can be easily obtained. As Knudstöp recognizes, the challenges in the Chinese market are great, and previous successful experiences in Europe and the United States are difficult to replicate in China. China is a big toy manufacturing country, but it is not a big toy consumer. According to the latest data released by the Guangdong Toy Association, about 70% of the world's toys were produced in China in 2013, but the per capita consumption of toys in China is only 1/10 of that of the United States and 1/12 of that of Japan.
"For most Chinese families, toys are not currently a necessity for children's growth, which is very different from the concept of European and American families," said Cao Lin, general manager of LEGO China and marketing manager of Guangzhou Zhile Commercial Co., Ltd. It is the first group of university promoters who sold Lego toys to China in the early 1990s. When Lego first entered Beijing's high-end shopping malls, some wealthy Chinese customers were willing to spend thousands of dollars to buy a piece of clothing, but it was difficult to understand why. It costs a hundred dollars to buy a toy for the child."
Although the international toy giants have long been ignorant of the Chinese market, the toy giants including Mattel and Hasbro have not acted rashly. In addition to the psychological cognition of Chinese families affecting the development of the toy market, the lack of mature toy distribution channels and the proliferation of pirated toys have become obstacles to the development of toy giants in China.
“The development of the Chinese toy market is very different,†concludes Cao Lin. Guangzhou Zhile, which has many years of experience in international toy brand agency, currently has about 1,500 toy distribution points in China including specialty stores and department store counters. It is also a global partner of LEGO in China (such as Toys R Us, Amazon). ) Distribution agent. “In the first- and second-tier cities, branded toys have developed rapidly, but some large department stores in the capital cities of the central and western regions have not even established the awareness of toy counters,†said Cao Lin.
In addition, the Chinese toy market is highly fragmented, and the brand awareness of consumers is also in fact. According to Euromonitor's information, in 2012, China's largest toy company, Aofei Animation (002292), also had a 4% share in the traditional toy market. The market share of other manufacturers and brands was negligible. Although Lego has an absolute share advantage in branded building toys, the non-brand type of plug-in toys in the Chinese market is still the main component of the market. “At the same time, a large number of counterfeit Lego has mixed the market, and it is difficult for unexperienced consumers to judge.†Cao Lin pointed out.
However, for Lego, which has abandoned the road to diversification, entering the emerging market is an inevitable choice. “The Chinese toy market is undergoing a transformation process,†said Chen Yizhi, general manager of LEGO China. “Especially after the 80s, their concept of combining children’s learning and entertainment has changed dramatically. They began to pay attention to toys. Safety, focus on toy brands. For example, when they pick toys for their children, they will pick it up and check if there is a bad taste."
Compared with other toy giants, another advantage of LEGO's development in China is to firmly grasp the "Lego Manufacturing". Unlike rivals, 85% of LEGO's products are controlled by themselves – which sounds incredible, as most toy giants have already outsourced production to China. However, it is this that invisibly allows them to look forward to entering the Chinese market – toy piracy is hard to defend.
“We have not tried manufacturing outsourcing, but it turns out that no outsourcing factory can truly meet the product quality and environmental requirements of our complex system.†Michael McNulty, senior vice president and general manager of Asian manufacturing at LEGO Global He said that he is in charge of Lego's fifth production base in the world and is expected to be the construction of the Jiaxing base, the largest manufacturing base of LEGO. In his view, Lego bricks are as complex as cars and airplanes. “Lego has produced hundreds of billions of blocks – the blocks we produce today can be perfectly spliced ​​with the blocks 50 years ago, and the requirements for consistency are extremely high,†McNulty said.
LEGO Manufacturing
Indeed, Lego manufacturing is by no means as simple as “injection molding†and is the synergy of the entire value chain. On average, each box of Lego blocks consists of dozens and hundreds of different parts. The lack of one component may mean the failure of the entire work. And 60% of Lego's annual sales are new toys, which requires a high degree of synergy from design to procurement, production and packaging. “Our Jiaxing factory, except for the food provided in the dining hall, may be different, and the other aspects are exactly the same as other factories.â€
“The Jiaxing factory will be a modern, intelligent manufacturing plant,†Knutdtop emphasized. “We came here to set up a production base not because of China’s low labor costs. We value skilled workers here and better. To meet the growing market and service demand.†By 2017, the Jiaxing plant will be put into production, and the supply cycle in the Asian market will be shortened from a few weeks to a few days.
The driving effect on the local and surrounding markets after the Jiaxing base is put into production will also be expected. At present, even for consumers in first- and second-tier cities in China, Lego toys are still “luxury goods in toysâ€, and the use of gifts as a gift may be the main driving force for consumers. Comparing the prices of Lego toys in Shanghai and Boston, China's prices are generally more than double that of the US market. “We hope that LEGO will become a classic toy that most Chinese consumers can consume.†Knud Stoop said that although he stressed that the purpose of setting up a factory in China is not to cut prices, local production will inevitably reduce Lego’s taxes and Logistics costs, which make Lego toys sold in Asia more civilian.
For LEGO, full access to Asia and China is an important step in its globalization strategy. However, whether LEGO has been sustaining rapid growth in this market depends on another important factor: the understanding and integration of Eastern culture. Previously, LEGO's successful experience focused on the Western world.
"The toy industry is a rapidly changing industry. It is very important to understand and keep up with children's interests. The cultural characteristics of Western toys and the preferences of Eastern culture are still different." Liu Weiwei said. In LEGO, in addition to the blocks that can be freely built, the main thing is the building block set of the theme class. The LEGO theme building blocks can be broadly divided into two categories: classic themes and popular story themes. The Duplo series and the urban series belong to the classic theme set, which are not sensitive to time and popular topics; while the theme sets based on the story of Star Wars and Qigong Legend are highly dependent on third-party media such as movies and games.
“In China, Lego’s classic theme series currently account for a larger proportion of sales, while in Europe and the United States, the opposite is true.†Cao Lin, who holds the first-hand data on LEGO China’s sales, revealed. Liu Weiwei, who used to be the consultant of Aofei Animation, believes that one of the secrets of Aofei's success is to firmly grasp the content and communication channels of children's media. “Generally speaking, customers choose classic themes when they first purchase LEGO, and story-themed products mainly stimulate customers' desire to buy again.†Cao Lin said. From this point of view, but Lego hopes to deepen the Chinese market, should consider the combination of local culture, communication and channel cooperation.
But in fact, Lego is not currently ready to move towards localization. “We design products with a focus on their appeal to children around the world, whether they are children in the US, Europe or China. Our products will absorb some regional elements – such as the LEGO NINJAGO series. The Oriental element, but will not develop a certain product for a specific cultural market," said Marko Ilincic, senior vice president of LEGO Asia and Emerging Markets. “Lego is very cautious when selecting partners or working with partners, in order to prevent Lego’s brand value from being diluted,†said Lego spokesman Roar Rude Trangbaek.
It is not known whether Lego’s relatively closed market development will affect its development in the Asian market. However, the challenge of this approach in China is there. For example, the "Lego Movies" that are being broadcast around the world have been rejected because of China's restrictions on film and television management. For example, the cartoon "Qigong Legend" with Lego blocks currently relies mainly on Internet video sites. The route is broadcast, not the TV station. "From the perspective of LEGO, they have been considering how to balance Lego's international image and the contradiction of local needs." Cao Lin said.
The ultra-fast development of digital games may be another serious challenge for LEGO in the Chinese market. In fact, no matter what kind of strategy LEGO chooses, it cannot escape the game of entertainment in the information age and traditional entertainment. “Our previous survey of Chinese children showed that 8-10 years old is usually a watershed for children to choose entertainment. Children before 8 years old are mainly traditional toys and entertainment, and 8-10 years old are in a state of mixed traditional toys and digital games. Children over the age of 10 are more inclined to digital games - because these games are more complicated and more exciting." Liu Weiwei said.
“We think that digital games and physical toys are what kids need,†Knutdtop said. “First of all, there is no doubt that children like physical toys, just like they like to play, and our job is Make these toys more fun; secondly, physical toys can coexist with digital games, just like when I was a child, I liked watching TV and playing games. A few years ago, kids liked computer games, now playing tablet games, Mobile games, but they never dislike physical toys."
Knud Stoop insists that LEGO must be “innovative in focusâ€. In fact, in the practice of combining with the digital world, Lego has been trying. LEGO CHIMA (Lego CHIMA) is also in addition to building blocks, and also launched cartoon and tablet games. But Lego only focused on building blocks and handed over animations, movies, and games to third-party partners.
“A person can't be good at everything, we just want to do the best in the field we are good at. Just like Lego's philosophy – only the best is good enough, Lego will not deliberately pursue the scale of the industry first.†Knu Destopp said with enthusiasm. In his view, Lego's current biggest challenge is how to form an efficient global team. "To be the best, you can't rely on machines, you can't rely on IT systems, you have to rely on people."
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