# Strategic Turnarounds Through Focus and Complexity Reduction

**Podcast:** LEITWOLF Podcast - Leadership, Führung & Management
**Published:** 2026-06-18

## Transcript

Great comebacks rarely begin with more complexity.
They often begin with more clarity, focus and disciplined leadership.
Profit grows from minus 222 million to more than 1.2 billion euros.
An incredible turnaround.
Hello and welcome to today's Lightwolf podcast.
Your leadership podcast for leading with impact.
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Such as this one from Daniela.
Quote, Hello Stefan, your podcast episodes are easy to understand and highly practical.
I have already taken a lot away from them.
Unquote.
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Today's episode focuses on one of the most impressive business turnarounds in the history of economics.
At least I have witnessed in my last 35-40 years of active awareness of impressive business cases.
Impressive leadership turnaround cases.
It is the history of a brand that many of us grew up with.
A brand associated with play, creativity and building your own world.
What many people don't know is that the Lego brand once faced a severe crisis.
It was not clear whether the company would even survive.
Yet it did survive.
And in a remarkable fashion.
I learned a great deal from the way LEGO handled this existential crisis.
Lessons about strategy, lessons about teams, and lessons about a consistent leadership culture.
The three columns that I'm convinced are at the heart of building strong, sustainable companies.
And these lessons that I've drawn from the case I would like to share with you in today's Lightwolf Podcast episode.
Because this Lego case does three things to me.
It challenges some common leadership misconceptions.
It offers incredibly valuable lessons, particularly on strategy on decision-making.
And it's surprisingly easy and accessible to understand.
Let's start at the beginning.
The Lego story.
Found it.
in 1932, with the Lego brand officially introduced in 1934.
The company enjoyed decades of growth throughout the end of the 1980s, with just a few normal setbacks, as success always is.
But the trend line from all the way from the 40s through the end of the 80s was a strong growth in trajectory.
Brilliant case.
Then things changed.
By 1998, some retailers, such as Toys R Us, were suddenly also becoming competitors for the brand.
Lego experienced three consecutive years of declining revenue and increasing costs.
Profit dropped from 110 million euros to zero.
The brand remained strong yet.
But the business model was getting under increasing pressure.
The question at that time, 1998, was how can we turn around, how can we return to profitable growth?
In response to that question, in 1998, Lego launched numerous new products and new ventures.
Lego theme parks, Lego watches, Lego children's clothing.
Initially, in year one, those initiatives Appear and seemed successful.
Revenue grew 25% in the first year.
Apparently there were some trial purchases.
But already a year later, in 2000, sales fell by 29%.
And by 2003, Lego reported its first major loss in the company's history.
Approximately 200 million euros of loss.
in 900 Millionen Euro of revenue.
The company was close to collapse.
Costs had exploded.
Complexity was out of control.
And Lego had lost focus on what its customers truly valued about the brand.
The question was no longer how to start making money.
The question was how to save the company.
And how, once saved, how to return the company to profitable growth.
A massive challenge.
And a challenge that led the, at the time, I think seventh family generation CEO to step down, just be honest and say, look guys, I'm not sure I can handle this.
And they invited a relatively young at the time, 39 year old Danish management consultant from a top tier management consultancy to take the helmet and become the CEO of Lego.
Er ist Danish, er hat sich die Firma und die Firma bereits gesucht, so er hat vieles Wissen und als ein Danish, definitiv auch hart, blood und passion into this original Danish, now global brand.
Let's talk about the solution.
The core of the solution contains a lot of leadership lessons.
Reduce complexity by 50%, 5-0.
They took down the assortment from 7,200 articles, SKUs, to 3,600.
Cut the number of products in half.
Many people get nervous when you do this because the immediate connotation is, oh gosh, if I cut articles, I will lose sales, I will lose revenue, right?
Maybe, maybe you don't.
And that's what they did.
Cut the assortment by 50%.
They returned to the core brand promise.
With Lego you create your own world.
They expanded into new customer segments.
Lego for girls and Lego for adults, so-called AFOLs, adult fans of Lego.
And they created more attractive products for the core consumer segment, boys.
They did a few more things, but that to me was the core.
They also raised the pricing ceiling.
Beforehand it was inconceivable to have a Lego toy more expensive than 99 euros.
After the strategy changed, they gradually moved pricing up not only to above 100, but even to above 1000 euros for one big Lego toy.
10 years later.
We are now in 2013.
And the results?
are absolutely extraordinary.
In just 10 years, revenue increased from 900 million to 4.4 billion euros, a five-fold increase.
At the same time, profit grows from minus 222 million to more than 1.2 billion euros.
An incredible turnaround.
Chapeau.
zu jemanden, die die Turnaround zu erinnern hat.
Jetzt sprechen wir über die Lehren-Lessons.
Was können wir, Leaders, lernen aus diesem Fall?
Three Lehren-Lessons für Sie und für mich.
Lesson number one.
Focus.
Mehr initiatives do nicht necessarily mean mehr success.
Many leaders respond to challenges by wanting more sales, mehr initiatives.
More projects, more activities.
And that is exactly what Lego did when the decline started in 1998.
New theme parks, new products, clothing for children, watches, new business models, growth ideas everywhere, but limited focus and no coherent thread.
Through the brand equity and the initiatives.
The result?
Complexity grew much faster than value.
The leadership lesson I think we should think about is not everything that's possible is right and worth doing.
Action tip.
For you and for me.
Every single quarter, let's ask ourselves at least once.
Which 20% of last quarter's initiative and activities have generated 80% of the value we created for customers and for our company?
And then let's look at those 80% of the activities that only contributed 20% of the value created.
That's what we should look at.
And then let's be honest.
Let's be consistent.
And let's ask of these 80%.
Lesson number one I draw from the case.
Focus.
More initiatives do not necessarily mean more success.
Lesson number two.
Challenge false trade-offs.
Yes, you can reduce cost and grow revenue at the same time.
Challenge falls trade-offs.
In difficult times, companies sometimes lose confidence in their strength.
Leaders then fall into either-or thinking.
We can either reduce cost or increase sales.
Bullshit.
It may not be easy.
Ich erhebe das.
Ich erhebe das.
Es ist nicht einfach.
Aber es ist möglich.
Es ist möglich.
Die Lego-Case prove es.
Bei der Kaffee der Produktportfolio von 50% in der Kaffee, der Kaffee dramatically reduziert die Komplexität und die Kosten.
In den Jahren und Jahren vorherigen, retailers haben sich getötet mit Lego.
The stocks of so many products that didn't sell off fast enough or that didn't sell off at all, those stocks piled up in the retailers' warehouses and they got pretty unhappy about it and they let the brand know.
So it was helpful to cut those slow turning articles, to get them out of the system, to get back to a healthy frequency and a healthy turn.
In der Logistik-Chain.
So in that way, cutting the assortment, cutting the product portfolio, freed up and unclogged the pipe and helped to increase sales rather than reducing sales.
So they reduced complexity, they reduced cost, and at the same time, revenue increased almost fivefold over the following decade.
So the leadership lesson for us.
The strongest leader's challenge falls trade-offs.
It's not always an either-or.
Sometimes it can be both.
And that leads to my action tip for you.
Whenever you hear, dear boss, I can give you either-or, then ask yourself, ask your team member, is there a way to achieve both objectives simultaneously?
Und das macht mich immer mehr so, dass ich mich an, eine real Erfahrung gemacht habe.
Ich habe mehr als zehn Jahre alt, in der ersten Zeit, in der ersten Zeit, wir haben sechs, fünf Kollegen von mir, all 20-plus Jahre, leadership experience.
Sehr kurz, unfortunately, wir hatten wenig Zeit, wir hatten keine Zeit, wir haben nicht Zeit, die Zeit zu machen, mit der Mittel- oder Junior-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management-Management und dann deliver ein ein-maler Leadership Event mit über 200 Mitgliedern.
Ich habe nervös, wenn ein Tag in advance, ich habe ein call von dem Client gesagt, Hey, Mr.
Holmeister, ich möchte Ihnen sagen, dass unser Top-Management ist nicht zu participar in der Konferenz morgen.
Sie planen einfach zu kommen und sagen, ein Grüß.
Und dann, leave die Konferenz zu einem berühmten Café und einfach ein kopf und warten und warten.
Unquote.
Do you know how I felt in that moment?
I wasn't sure what to answer.
I think I only really understood the full meaning of it at the end of the event itself.
Management did show up, but management was not ready to participate in the workshops.
Six of us.
Wir leden die Workshops, ich leden eine von ihnen, und ich werde nicht vergessen, wenn ein paar Minuten in meinem Workshop, über wie zu implementieren, ein Gentleman rafed seinen Händen und sagte, Herr Hohmeister, ich glaube, es ist einfach ein bisschen strange, you know.
Du kannst du kosten und erhöhen sales an der gleichen Zeit.
Das ist einfach nicht möglich.
Unquote.
Ich habe einfach nur mit dem Lager-Case gesehen.
Ich habe mich einfach nicht einfach gesehen.
Aber sind Sie aware der Lager-Case, wo die Branden in den Karten gekutzt hat und erhöhter Sales fünf-fold in zehn Jahren?
Vielleicht werden wir über das nächste Mal in der nächsten Woche.
I will never forget this paradigm thinking.
So, don't ever allow false trade-offs.
When you and your daily leadership tasks face those false trade-offs, then politely but consistently challenge those false trade-offs.
Yes, it's not easy, but it is possible to reduce costs and increase sales at the same time.
Lesson number three, great leaders.
Do not need to have all the answers.
The new CEO, the young Danishman Jürgen Wig Knutztorp, who at the age of 39 in 2003 took the helmet, did something remarkable.
He listened.
He spoke with customers.
He spoke with retailers.
He spoke with employees.
And he asked...
Ansichtful questions.
And then led with his ears.
Rather than with his mouth.
And he based decisions on facts.
So on those many views.
That he internalized and reflected.
And integrated.
On facts.
Rather than hope.
And assumptions.
To me.
This contains one of the strongest leadership lessons.
I have ever come across.
If you ask me to summarize leadership in just two words, then one way to do it is to combine two seemingly contradictory skills.
The best leaders to me have high willpower and equally high, if not even higher, personal humility.
They have courage and humbleness.
And these two things were demonstrated on a very high level.
by the CEO and his management team that turned around this wonderful company.
Action tip for you.
Every month, have at least three conversations with people who are closer to the operational reality and closer to the customer than you are.
No matter whether you're a first-time leader, a middle manager or a C-suite member, maybe you're even the CEO running a company.
The higher up you get in your organization, the bigger you risk the risk.
You lose sight and touch and feeling for operational reality and for the customer's real needs.
That is not good.
You are not responsible to do the operational work.
You are there to work on the system rather than in the system.
Acknowledged.
But you will be much better at working on the system if you still have a feel for operational reality and for customers' real needs.
So, three times a month.
Talk to people and listen to people who are closer to operations and closer to customers than you yourself.
By the way, if you want to create an environment, if you'd like to create a leadership culture around you, where everyone learns fast from success and failure, where everyone grows and gets stronger, especially in crisis times, then look into the show notes.
Book a free call with me and I look forward to meeting you, listening to your challenge and maybe with just a few minutes maybe I can give you a tip or an advice that helps you accelerate your own journey to the culture you want.
Would be my pleasure.
So go into the show notes, book your call.
And in closing, my challenge for you.
Lego did not become so successful again because it did more and more.
Lego became successful again because it...
Vielleicht ist das wichtigste Frage, die sich selbst fragen, was wir nicht mehr tun müssen, sondern müssen wir mehr consistently machen.
Denn great comebacks rarely beginnen mit mehr complexity.
They often begin with more clarity, focus and disciplined leadership.
I wish you every success in putting your insights from this podcast into your practice and into your own growth.
Thank you for being here today and I look forward to having you again as a guest on the show, maybe already next week.
Thank you and take care.
Your Stefan.