Update : LEGO replaces Padda as CEO with Niels B. Christiansen

[KShine]

http://www.wsj.com/articles/lego-restructures-with-eye-to-expansion-1481016526

Lego Restructures With Eye to Expansion

Growth and globalization create need for new Lego Brand Group, owner says

 

ENLARGE

Lego CEO Jørgen Vig Knudstorp will head a new entity, Lego Brand Group, as the company restructures. PHOTO: REUTERS

By 

ELLEN EMMERENTZE JERVELL

Updated Dec. 6, 2016 6:39 a.m. ET

3 COMMENTS

OSLO—The Danish family behind the Lego plastic-brick empire is shaking up the company’s ownership structure, elevating an executive widely credited for rescuing the toy maker from the brink of bankruptcy to manage all-things Lego and explore new business ventures.

The Kirk Kristiansen family said Lego A/S Chief Executive Jørgen Vig Knudstorp, who has transformed the venerable Danish company into a global toys-and-entertainment force, will step aside at the end of the year.

In his new role, Mr. Knudstorp will lead an umbrella entity called the Lego Brand Group, which will oversee the family’s 75% stake in the toy maker, as well as interests in the Legoland theme parks and in an education business promoting the use of Lego toys in schools. Chief Operations Officer Bali Padda, a Briton, is appointed CEO of the toy company—its first non-Dane boss since Lego’s foundation in 1932.

The shake-up comes as Lego faces challenges to maintain the explosive growth it displayed in recent years in Europe and the U.S., while conquering new markets such as China and India.

With 18.500 employees, Lego is in a two-horse race with Mattel Inc. of the U.S. for the number-one seat as the world’s largest toy company.

Lego posted a surprise drop in first-half profit to 3.49 billion Danish kroner ($499 million) in September, saying flattening sales in the U.S. had dented earnings. Still, first-half revenue climbed 11% to 15.7 billion kroner.

Mr. Knudstorp, who has said he planned to stay with Lego for the rest of his professional career, will work at the Lego Brand Group alongside Thomas Kirk Kristiansen, a fourth-generation owner of Lego.

“With our recent growth and globalization come new and exciting opportunities for the brand, and we establish the Lego Brand Group to look into these new opportunities,” Mr. Kirk Kristiansen said Tuesday.

Ahead of his promotion to the Lego Brand Group, Mr. Knudstorp, a former McKinsey & Co. consultant, had earned the reputation of a turnaround king.

When he arrived at Lego in 2004, 35 years old and the first nonfamily member at the helm, the company had been struggling financially for years. Its customers, children, were forsaking its iconic bricks for digital games.

Mr. Knudstorp sold off the Legoland theme parks and reduced the catalog of Lego bricks available to the company’s designers. He also licensed the Lego name to film studios, creating a new revenue stream.

Thomas Kirk Kristiansen, who is set to lead the Lego Brand Group with Mr. Knudstorp, in April succeeded his father, Kjeld Kirk Kristiansen, as vice chairman of Lego A/S and chairman of the family charity Lego foundation.

In 2004, the senior Mr. Kirk Kristiansen was the one handing the company baton to outsider Mr. Knudstorp. He later also acquired other family members’ interests in the company, concentrating the Lego ownership in his hands and those of his three children.

[Shewie]

Jørgen Vig Knudstorp CEO and President of the Lego Group is stepping back as a head of the company to take new responsibilities as a head in newly created

"structure for active family ownership of the LEGO® brand"

Jorgen Vig Knudstorp will be moving on to a new unit, The LEGO Brand Group and will oversee the brand's long term potential.
https://www.lego.com/en-gb/aboutus/news-room/2016/december/new-lego-brand-group-entity/

Lego plans to set up a new entity, to be called the Lego Brand Group, with Jørgen Vig Knudstorp as a head.
Padda, who was born in India in 1956, has been with Lego since 2002. He will be the first non-Dane to run the 84 year-old company.

https://www.lego.com/en-gb/aboutus/news-room/2016/december/bali-padda-new-ceo/

The LEGO Group has announced that Bali Padda, current Chief Operations Officer, is appointed CEO of the company as of January 1, 2017.

Bali Padda takes over from Jørgen Vig Knudstorp who will head up the new entity LEGO Brand Group. 

Bali Padda has been with the LEGO Group for 14 years and is at present heading up Operations while at the same time being overall responsible for people and organisational development. During the past ten years, he has been a member of the LEGO Group’s top management.

CFO John Goodwin will leave the LEGO Group in H1 2017

 

Chief Financial Officer John Goodwin has announced his intention to leave the LEGO Group on 30 June 2017.

John Goodwin joined the LEGO Group in September 2012 as CFO and at the same time took up the responsibility for the Business Enabling area which includes IT, Legal, Procurement, Business Services and Corporate Affairs

Annual finiancial report of the Lego Group for 2016 is expected to be published around 1st of the march this year.

 

 

Edited January 8, 2017 by Shewie

[Phil B]

I believe this was announced several months ago already and discussed here in detail. On mobile so cannot easily track down the thread.

[jaisonline]

2 hours ago, Phil B said:

I believe this was announced several months ago already and discussed here in detail. On mobile so cannot easily track down the thread.

Thanks.  Merge done.

[Shewie]

Jørgen Vig Knudstorp CEO is leaving LEGO for Starbucks.
So initially I was right. Can't wait to see the financial results for 2016.

http://www.brothers-brick.com/2017/01/28/lego-brand-groups-jorgen-vig-knudstorp-joins-starbucks-board-directors-news/ 
 

[Val-E]

Looks like he (was?) moved on at the right time. A lesson for all of us to quit while ahead.

[Clintonjoseph]

I don't see anywhere in the article where it says he is leaving LEGO. Just that's he's joining Starbucks board of directors. Is it possible to do both?

[Phil B]

2 minutes ago, Clintonjoseph said:

I don't see anywhere in the article where it says he is leaving LEGO. Just that's he's joining Starbucks board of directors. Is it possible to do both?

Yes.

[Ed Mack]

It's been obvious for a long time that the financials will underperform in comparison to previous years. Bans have decreased, discounts have increased. Profits can't rise forever. Maybe LEGO will revert back to a more conservative approach and reduce the amounts of sets produced and move away from lazy remakes. Sometimes less is more.

[Guest TabbyBoy]

1 hour ago, Ed Mack said:

It's been obvious for a long time that the financials will underperform in comparison to previous years. Bans have decreased, discounts have increased. Profits can't rise forever. Maybe LEGO will revert back to a more conservative approach and reduce the amounts of sets produced and move away from lazy remakes. Sometimes less is more.

I would love to see a reduction in the current range of sets on offer. It's just got too ridiculous and confusing. As I said before, they are just like Hollywood... running out of ideas and rehashing stuff willynilly.

[fossilrock]

I agree with Ed.. 2016 was one of the more uninspiring years.  It's evident that their main lines like Altra Agents, Chima, and Nexo Knights are only moderately popular, so they need to cut those lines in half.  For Star Wars I think they are producing too much in this realm as well, and would like to see their offerings cut by a 1/3rd, but instead focus on producing cooler sets.  The upcoming quadjumper was unnecessary (as well as that death star), and about 1 out of every 3 sets are a rehash.  I get the "rotating kid" philosophy in that kids that played with legos a few years ago can "outgrow" them and a new crop of kids are ready to take over, but they should stick with producing solid sets for the new films.  

[DadsAFOL]

2 hours ago, Clintonjoseph said:

I don't see anywhere in the article where it says he is leaving LEGO. Just that's he's joining Starbucks board of directors. Is it possible to do both?

Its actually very common to find career Directors that serve on 3, 4, 5, + Boards.  It's a semi-retirement strategy for some C-suite executives.  Build your career, serve as a CEO somewhere for 10-15 years, then join a bunch of Boards.  Directors make $50-$100k per year per Board, plus lavish travel allowances to attend Board meetings.  Typical work is 2 days per month per Board.   So if you play your cards right, you can maintain your executive income and only work 6-8 days a month.

Not suggesting that's what JvK is doing, just sharing my observations about US corporate culture.

[Val-E]

Or he could have been headhunted and they want him to play an active role in the company and take a back seat at Lego. Would be ironic if TLG call him back in ten years to turn stuff around again when they realise that Death Star rehashes and Nexo are not cutting it.

[TigerG]

He is not leaving TLG - he is joining the Starbucks board of directors in addition to his duties at TLG. Completely common practise for most CEO's of big companies...

[DadsAFOL]

9 minutes ago, Val-E said:

Or he could have been headhunted and they want him to play an active role in the company and take a back seat at Lego. Would be ironic if TLG call him back in ten years to turn stuff around again when they realise that Death Star rehashes and Nexo are not cutting it.

I'm sure others have noticed, but there are some striking parallels to the days leading up to their challenges in the 2000's.  If you read Brick By Brick (https://www.amazon.com/Brick-Rewrote-Innovation-Conquered-Industry/dp/0307951618) many of the problems they cited as root causes appear to be reoccurring now.   Too many SKUs.  Too many colors/elements.  Juniorization (POOP - Parts Out of Other Pieces).  Over reliance on licensed IPs.  Getting away from the core building experience.  I think some of these issues are just masked by the current global popularity of the brand based on the movies and expansion into emerging markets.  It's easy to make poor decisions when its raining cash.  What did they blow on Universe?  Something like $200m.  I sure hope someone wakes up and tightens the reins a bit.

[Val-E]

8 minutes ago, DadsAFOL said:

I'm sure others have noticed, but there are some striking parallels to the days leading up to their challenges in the 2000's.  If you read Brick By Brick (https://www.amazon.com/Brick-Rewrote-Innovation-Conquered-Industry/dp/0307951618) many of the problems they cited as root causes appear to be reoccurring now.   Too many SKUs.  Too many colors/elements.  Juniorization (POOP - Parts Out of Other Pieces).  Over reliance on licensed IPs.  Getting away from the core building experience.  I think some of these issues are just masked by the current global popularity of the brand based on the movies and expansion into emerging markets.  It's easy to make poor decisions when its raining cash.  What did they blow on Universe?  Something like $200m.  I sure hope someone wakes up and tightens the reins a bit.

Star Wars buildable figures are all of these ills in one.

[Shewie]

In the end of 2015 after a huge success of Disney Franchise due to Frozen and TFA releases he made a bold promises to Board members and Chairman himself, that he will maintain the growth and will keep sales high to keep skyrocketing indicators on the right place.  You can see this in their financial report for 2015 about predictions for 2016 and final thought at the very end from CEO himself.
And now in 2017 we will be able to see the financial report for last year by the beginning of the march to be able to connect all of the dots (questions with answers) finally. I do think (my subjective opinion) that Sales were plummeting during 2016 due few completely missed releases and lack of the blockbuster line-up which could easily lead sales up.
Plus diversity, too many sets, too many themes, too many realms that lego is covering with their products.

[fossilrock]

You have to wonder why they keep pumping down those buildable figures, and sets like bionocles.  Those things never seem to sell well.  Next we will have "Brickheadz", which are just a terrible attempt to tap into the funko pop craze.  

In the Star Wars realm, i'd say that last years Droid Escape, Hoth Attack, and resistance x-wing were 3 sets that were completely unnecessary along with all the buildable figures.  There were 43 sets when you take in Buildables (9 sets), regular sets (28), UCS (2), and microfighters (6).  I think the microfighters are very popular, but I don't think many of the buildables are. I constantly see those on clearance and few buy them.  Of the buildables that retired, only Grievous seems to be shooting up.

This year, it's the A-wing, revised Desert Skiff, and Landspeeder sets.  The freemaker adventures are also duds, as I never see those sets selling in my local walmarts, and week after week they sit there with the same stock always in place, just like the buildables.  Most of the other sets move, although captain rex's at-te is one that seems to shelfwarm quite a bit.  The Rogue One sets seem popular because they sell out quite a lot and over the holiday season they were gone and hard to come by in December.  Overall, I think they had just the right mix of Rogue One sets, but they over did it with Force Awakens.  

Sometimes less is more, and I hope they trim the Star Wars offerings to where they produce about 20 normal sets per year, with 1 big UCS vehicle set, and 1 UCS playset.  I think that is fair.  They need to cut the human characters from the buildable line and just stick with figures that make more sense for that sort of thing like Vader, Grievous etc.

[Lego Templar]

You have to wonder why they keep pumping down those buildable figures, and sets like bionocles.  Those things never seem to sell well.  Next we will have "Brickheadz", which are just a terrible attempt to tap into the funko pop craze.  

In the Star Wars realm, i'd say that last years Droid Escape, Hoth Attack, and resistance x-wing were 3 sets that were completely unnecessary along with all the buildable figures.  There were 43 sets when you take in Buildables (9 sets), regular sets (28), UCS (2), and microfighters (6).  I think the microfighters are very popular, but I don't think many of the buildables are. I constantly see those on clearance and few buy them.  Of the buildables that retired, only Grievous seems to be shooting up.

This year, it's the A-wing, revised Desert Skiff, and Landspeeder sets.  The freemaker adventures are also duds, as I never see those sets selling in my local walmarts, and week after week they sit there with the same stock always in place, just like the buildables.  Most of the other sets move, although captain rex's at-te is one that seems to shelfwarm quite a bit.  The Rogue One sets seem popular because they sell out quite a lot and over the holiday season they were gone and hard to come by in December.  Overall, I think they had just the right mix of Rogue One sets, but they over did it with Force Awakens.  

Sometimes less is more, and I hope they trim the Star Wars offerings to where they produce about 20 normal sets per year, with 1 big UCS vehicle set, and 1 UCS playset.  I think that is fair.  They need to cut the human characters from the buildable line and just stick with figures that make more sense for that sort of thing like Vader, Grievous etc.

I agree with most of what you said. To many sets to many themes. Less is more and quality over quantity. That being said even if buildables are not "great sellers" they don't need to be to be profitable. If it cost them 2-3 dollars to make and low R&D they can be winners regardless. The new ones coming out look great and I can see them being collectible.

Same can be said for brickheadz. I pulled the trigger and bought the marvel ones from SDCC. When I bought them like a week ago they had a full page on eBay like 40 auctions. Now I see like 2-3 for the SDCC ones. Maybe people got the email about them and quickly bought the SDCC ones. Lego is a powerful brand and can enter a lot of different avenues. I don't own a single pop but I bought the marvel ones because Lego made them. I like the brand and I like the idea (even if it's a copy).

Overall they do need to stay focused and stick to their core. Building experience. I completely agree with that but I won't knock them for trying new things.

[Ed Mack]

My son loves the Mixels and Bionicle/Hero Factory themes.  Unfortunately, these two very unique and collectible, character based themes are history and nothing even remotely similar is replacing them.  More and more tired STAR WARS rehashes.  There is no reason to want to collect all the sets of any theme any more.  They will all be redone next year.   

[Val-E]

Buildables have been great sellers to the shops who bought them but now they can´t sell them. It takes time to work down but I am sure the shops that are now discounting or stuck with stock will not buy as much this year.

[Ed Mack]

7 minutes ago, Val-E said:

Buildables have been great sellers to the shops who bought them but now they can´t sell them. It takes time to work down but I am sure the shops that are now discounting or stuck with stock will not buy as much this year.

Buildables are cool sets, but unlike older Bionicle sets, you cannot combine them to make new, larger sets.  Honestly, that is the one type of STAR WARS theme that I enjoy.

[Val-E]

That´s where Mixels worked so well. Affordable for parents, great value for money, possibility to mix and match, short lives and tribes to make them collectible. They were a great way to get kids into lego.

The buildables are none of these and are not as good as proper playable dolls.

[Ed Mack]

15 minutes ago, Val-E said:

That´s where Mixels worked so well. Affordable for parents, great value for money, possibility to mix and match, short lives and tribes to make them collectible. They were a great way to get kids into lego.

The buildables are none of these and are not as good as proper playable dolls.

Right, MIxels forced a person to buy all three to build a MAX.  Plus, the kids would want an extra three from a tribe to have them all.  Bionicle and Hero Hero Factory sets also were similar.  Buildables are great display sets, but you cannot really do anything with them once built.  What is a person going to do, morph Darth Vader with Luke?  LEGO needs to create themes that drive collectibility.

[Alpinemaps]

Right, MIxels forced a person to buy all three to build a MAX.  Plus, the kids would want an extra three from a tribe to have them all.

And not just that. Mixels tapped into the creativity, buildablility, and playability experience that's at LEGO's core.

You could mix and match tribes. You could build huge mechs from multiple sets. It really was unlimited what you could do.