Leadership Strategies and Change Management at the Lego Group

This report examines the leadership and change management strategies employed by the Lego Group, a Danish toy manufacturer, particularly focusing on its turnaround after facing significant financial losses in 2004. The analysis explores the leadership of Jorgen Vig Knudstorp and his implementation of strategic changes, including cost-cutting measures, product innovation, and employee engagement. The report discusses the application of leadership theories, such as strategic leadership and the McKinsey 7S model, to illustrate how the company adapted to market challenges and improved its performance. It highlights the importance of employee involvement, clear direction, and restoring competitiveness. Furthermore, the report provides recommendations for the Lego Group to maintain its success in the market. The report emphasizes the positive impacts of effective leadership while acknowledging potential limitations. The analysis is crucial for understanding how organizations can navigate change and achieve sustainable growth.

Leadership and Change

Table of Contents
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................3
Q1) Changes made in Lego group since 2004 by using theories................................................3
Q2) Jorgen Vig Knudstorp’s leadership of the Lego Group.......................................................6
Q3) Recommendations for the Lego Group................................................................................7
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

Introduction
In order to survive sustainably in the market it is important that the leaders and managers
of an organisation continuously analyse the condition of business in market so that effective
changes can be brought which can help in increasing the productivity and profitability of
company. The employees must be highly empowered and engaged so that they can accept
changes effectively and use their skills and abilities in improving the profits of company (Oreg
and Berson, 2019). Leadership plays an important role in minimising the resistance and
encouraging implementation of change in the company so that the business processes and
operations can be made effective along with enhancing sales. In this report the role of effective
leadership in improving the profits of Lego A/S which is a Danish toy production company
based in Billund will be done. The company is renowned for its Lego-brand toys which are
mostly interlocking plastic bricks and has also built various amusement parks along with having
retail stores. In this report the leadership and change management theories will be discussed
which helped it in improving its position in market. Also recommendations will be given so that
the company can remain successful in the market and accept changes in an efficient manner.
Main Body
Q1) Changes made in Lego group since 2004 by using theories
Lego Group is a company based in Billund, Denmark which manufacture plastic
construction toys which consist of interlocking plastic bricks through which children can
construct various structures which also help in their learning. The company was established by
Ole Kirk Christiansen in the year 1935 and since then the company has become highly renowned
its toys across the world. In the year 2003 and 2004 the company however faced losses of over
$400 million on annual sales of just $1 billion as the company struggled with providing the
customers with the products they desired along with ineffective management of costs of
production (Adserias, Charleston and Jackson, 2017). In order to help in the survival of the
company its CEO Jorgen Vig Knudstrop introduced various changes in the company so that the
operations could be effectively manages and cost of production could be controlled. There were
several steps taken by the CEO like cutting thousands of jobs, cutting the number of bricks
produced in half, developing the products as per the specifications of customers and increasing
innovation, sourcing etc. All these changes helped the company in controlling its costs and

improving its production processes so that the productivity of company can be increased. With
the help of effective leadership skills Knudstrop was able to implement changes in the company
along with improving the efficiency with which the employees accepted change. This also helped
in improving the efficiency and performance of employees so that high value creation in
company can be done so that better customer satisfaction can be achieved.
With the help of strategic leadership style Knudstrop was able to efficiently involve
employees in decision making process so that their ideas and view points can be considered and
innovations can be brought in the company products (Gliddon, and Rothwell, 2018). This
leadership style also helped in improving employee engagement in the company which increased
their commitment towards the company and also helped in increasing their acceptance of
changes. Also this style help the company in achieving its vision on time along with remaining
competitive in the changing economic and technological climate. With the help of this leadership
style Knudstrop was able to encourage the employees in accepting changes in organisation so
that they can enhance their productivity so that waste or errors can be reduced thereby improving
the quality and efficiency of the products manufactured by company. This style helped in
introducing changes effectively in company like making the production processes highly
efficient so that high quality products can be produced along with reducing the cost of
production, rapid innovation, streamlining operations etc. With the help of increased employee
engagement the company was effectively able to implement changes in an efficient manner.
Knudstrop used McKinsey 7S model so as to bring rapid change in the organisation's
culture which can help in bringing transformation in the company in an effective manner along
with increasing the engagement of all the employees in effectively implementing change in
company (Ceil, , 2016). This also help in improving the quality and cost effectiveness of
products which are produced by company so that high value can be created for customers. After
facing huge losses in 2004 it was important for Lego to introduce effective changes in company
so that it can successfully survive in the market and increase its profits. As per this model it is
important that the internal factors of the company are changed effectively so that with the help of
overall changes in the 7S of company effective changes can be brought in the company. The 7S
involved in this model are: Strategy: It is related with changing the strategies of company so that a competitive
advantage can be achieved in market which can help in achieving the company's goals

and mission on time. Knudstrop changed the strategies of Lego so that with the changing
tastes and preferences of customers the toys can be innovated so that competitiveness of
company can be increased (Lazaridou, 2019). Structure: It is the way in which business divisions and units are organised which affects
the way in which work in company takes place along with the workflow. Knudstrop
adopted a functional structure so that all the departments can perform their work
efficiently and interdependence among departments can help in improving the workflow
so that goals can be achieved efficiently. Systems: These are the processes or procedures which affects the way in which activities
are carried out in company along with decision making in the company so tat effective
decisions can be made. The system in Lego was changed in such a manner that all the
departments had to complete their daily activities in an efficient manner so that the
overall targets of company can be achieved on time (Hunt,and Chalmers, 2017). Shared values: These are the core values or beliefs in the organisation which affects
employee behaviour and the way in which they preform their work so that target can be
achieved effectively. In Lego changes in the shared values were made so that the
employees could be encouraged to think innovatively which an help in completing tasks
in an efficient manner. Style: It is the manner in which changes and leadership are implemented in an
organisation so that work can be effectively completed and changes can be accepeted by
employees. Knudstrop adapted strategic leadership style which helped in increasing
employee engagement so that changes can be effectively brought in company along with
encouraging change implementation in company. Staff: This refers to the capabilities of staff of company which was improved in Lego by
involving them in decision making so that their views and opinions can be valued in
company which can help them in feeling valued. This helped in increasing their
commitment towards company which helped them in efficiently accepting changes so
that their productivity can also be enhanced (Dumas and Beinecke, 2018).
 Skills: These are related with the competencies of employees of company which help
them in accepting changes effectively and improving their abilities so that high
productivity can be achieved.

Q2) Jorgen Vig Knudstorp’s leadership of the Lego Group
Lego is a renowned brand known for its plastic toys which help the children in using their
imagination so that they can form structures and can learn while having fun which has helped the
company in growing in market. Effective leadership is important in an organisation as it help in
directing the skills and abilities of employees towards achieving common goals of company
along with accepting changes so that they can be efficiently implemented in company. Lego
faced huge losses in the year 2004 which required the company to bring changes in its processes
and operations so that effective changes can be implemented in company so that it can remain
competitive in market (Kirton,2017). Knudostrop used strategic leadership style which helped in
effectively implementing changes in the company so that competitive advantage can be achieved
by changing the processes and operations in company with changing economic and technological
environment. With the help of this leadership style Knudostrop was able to gain the support of
employees by involving them in decision making so that the employee engagement in company
can be increased which is important in implementing changes efficiently in company. The leader
of Lego followed on following central element so that highly effective growth can take place in
company:
 Setting clear direction so that the employees can be encouraged to work towards
achieving goals set by the leaders in an efficient manner.
 Restoring competitiveness by focusing on customer's likes and dislikes so that they can
be offered with products which can create high value for them.
 Reducing the level of risk by right sizing activities, cost base and assets to a lower
revenue base so that the production costs can be reduced along with lowering the risks
involved in production of toys.
With the help of effective leadership skill, Knudostrop was able to make decisions like
improving the liquidity and financial base of the company by selling off Legoland theme parks,
focusing on its core competencies, reducing cost related with manufacturing of products etc. All
these decisions helped the company in improving its position in the market by reducing the costs
of production so that highly effective results can be achieved. Jorgen Vig Knudstorp’s leadership
helped the company in recovering its losses so that it became 5th largest toy producer in the world
by applying effective leadership style so that employees can be encouraged in accepting and
implementing changes in company effectively. This leadership helped in empowering the

employees so that they could make effective decisions which helped in improving their
productivity and quality of work. Also the loyalty of customers towards company helped it in
serving to multiple generations of families so that the sales of company can increase along with
enhancing their confidence in its products which can help in increasing its profitability.
It can thus be said that the leadership skills of Knudstorp has been highly effective which
helped it in improving its position in market along with reducing its manufacturing cost. Also
with the help of flexible working hours the employee engagement towards company increased
which improved their performance so that the goals and objectives of company can be achieved
on time (Chang, Chen and Chou, 2017). The positive impact of using the strategic leadership
style by Knudstorp is that it helped in implementing changes in Lego Group in an efficient
manner so that the effectiveness of company in the market can be increased. Further this also
increased commitment of employees towards company thereby enhancing innovations in the
company so that the changing needs and wants of customers can be efficiently satisfied.
However the negative impacts of this style is that the framework of decision making in this style
is not flexible which can impact the decision making process in different situations. Also as the
future conditions are unpredictable this can create an impact on the ability of making decisions
by leaders for long term.
Thus with the help of this leadership style the company has also been able to bring agile
transformation in its corporate digital departments in early 2018 which has helped in introducing
new digital operating model in company. This has helped in improving the efficiency of
company operations so that the time taken and the number of errors and wastage has reduced
thereby improving the quality and efficiency of company. Also with the help of this style digital
transformation has been possible in the toys of company helping it ion dealing with the changing
requirements of customers in market (Sterrett and Richardson, 2019). Thus with the effective
implementation of leadership theory a company can improve its position in market by improving
the efficiency and effectiveness of employees along with enhancing their productivity so that
high quality products can be produced and competitive advantage can be achieved.
Q3) Recommendations for the Lego Group
From the above discussion it can be said that leadership plays an important role in
bringing changes in the company along with encouraging the employees to accept the changes so
that thy can be effectively implemented in company. This can help in improving the condition of

company in the market by increasing innovation in its products through increased participation
of employees in making decisions and improving employee engagement. Bringing continuous
change in the company can help it in evolving with the changing economic and technological
changes so that productivity can be improved. It is essential that such leadership style is adopted
in the company so that all the employees can be involved in making decisions so that innovations
can be improved and new ideas can be encouraged in the company. In order to sustainably
survive in the market it is important that change and innovation are continuously brought in the
company which can help it in gaining a competitive edge in market. Following are the
recommendations which can be followed by Lego so that it can survive successfully in the
future: Streamlined product line: It is important that the product line is streamlined so that
certain products can be focused which can help in improving the quality of products so
produced and also in reducing the cost of production of company. The core competencies
of company must be focused so that effective products can be formed along with
improving innovation in them (Haake, Rantatalo and Lindberg, 2017). Innovation within reason: It is important that innovations which are brought in the
products must be in accordance with the needs of customers so that toys which can help
in improving customer satisfaction can be produced. The products which are less risky
must be developed by the way of new ideas so that competitive edge can be gained. Small number of suppliers: Lego can reduce the number of suppliers so that prices can
be stabilised so that effective supply chain management can be produced which can help
in reducing waste and cost of supply so that high profits can be generated in company. Open innovation: It is important that innovative and new ideas are encouraged in the
company which can help in encouraging the employees in coming up with better ideas so
that products of company can be improved and competitiveness of company can be
improved.
 Focus on large retailers: It is important that distribution is cut out to small retailers as
this can help in effectively forecasting the demand in market, managing the inventory
efficiently and customization of products so that the needs of customers can be
effectively fulfilled.

The company can use the above recommendations which can help it in acquiring the
opportunities in market so that innovation can be brought in its products which can help in
improving the market share of company in market. The company can also make use of digital
technology so that improvement can be made in the products which can help in improving the
quality of its products. Also the toys can help the children in finding alternatives to video games
and can also help in their learning through building various structures so that their creativity can
increase. 3D models can also be used in Lego so that deeper insights can be produced regarding
the ways in which work must be completed along with improving the performance of the
employees. Lego can diversify its growth by expanding in various other products through rapid
innovation so that better products can be provided top customers which can help in enhancing
their experience along with improving the brand image of company in market.
Conclusion
From the above report it can be concluded that effective leadership plays an important
role in the sustainability of company as it help in motivating the workers to use their skills and
abilities in an efficient manner. Leaders also encourage implementation of change as it is
important to exist in the rapidly changing market so that innovative products can be made
available to customers thereby enhancing their experience. Also it help in increasing employee
engagement which is important in effective implementation of change in processes of company.

References
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