What's going on?
A billionaire Danish family owns about 75% of toymaker Lego (i.e. the operations) and fully owns the Lego brand (e.g. the license to use the Lego name) – yep, they are separate entities. The family has hired the toymaker’s CEO to run the family business that owns the Lego brand (a new CEO will take over the toy-making operations).
What does this mean?
Jørgen Vig Knudstorp took over as Lego’s CEO twelve years ago when it was losing nearly $1 million per day. He implemented a turnaround strategy that initially brought Lego back to its roots, firing expensive divisions, like Lego’s in-house computer games developers, and instead optimizing the brick-building toy business that made it famous.
Since then, Lego’s revenue has quintupled and it has become one of the world’s biggest toy companies. Part of its success has been due to Knudstorp’s partnerships with movie studios (e.g. arranging for the brand to be licensed for the Lego movie). Apparently, the family is hoping he will be able to further leverage the Lego brand (e.g. expanding in China) now that he is working directly for them.
Why should I care?
The bigger picture: Brands are valuable -– and Lego wants to better monetize theirs.
Clearly, building toys is just one way a well-known brand like Lego can bring in more revenue. Lego plans to push deeply into other products and other countries. It’s a good reminder that brands have value beyond the products they currently produce (Virgin is another good example…).
For markets: Family businesses sometimes need outsiders to run them.
Knudstorp was a McKinsey consultant advising Lego before he was hired as its CEO in 2004. That was big news for the family-owned company: he was the first non-family member to run the toymaker in its then 72-year history. Sometimes it takes an outsider to turn around a struggling family-run business, especially as lots of hard decisions regarding cost-cutting tend to have to be made. A fresh perspective can ultimately lead to a strong turnaround, as in Lego’s case.