We are all drawn to stories of successful turnarounds. A turnaround is basically an abrupt or unexpected change in direction.
I know of many personal turnarounds. Two of my friends have quit drinking alcohol. It has been hard, with relapses, suffering, and lost, but neither gave up. One of my friends is now more than 15 years sober and the other is almost 3 years sober.
I have more stories of friends with different types of turnarounds. Two of them grew up in terrible circumstances; one living in a chicken coop, the other in a tent. Both were cold and hungry until they entered the foster system around the age of 12. They both had generous, wonderful foster parents. These two friends were able to finish school, then work their way through college. Both became successful family men, businessmen, and contributors to their communities.
Another person went to more than 12 different schools in 12 years. He spent his school days in the class designated to the basement for the special needs kids. He was very unruly, hard to teach, and dyslexic. He was also hungry most of the time. His parents were often no-shows. His siblings were a mix of half- brothers/sisters and step-siblings. Somehow he learned to read, finished high school, and also worked his way through college. He became very successful in business and has a wonderful, stable family life.
Personal turnarounds, such as these, are human, interesting, and inspiring. The last three people had lived with nothing, suffered much, but with great personal sacrifice rose above their circumstances to build new and better lives.
But are these examples that much different than corporate turnarounds?
Forbes has a list of the 20 top business turnarounds in 2014. The brief explanation in the short article is based on financial returns, of course. Financial data are the things most people are concerned about and the criteria by which they judge success. The businesses lost X dollars in 2012/13 and a profit of Y dollars in 2014 because they “restructured,” or “opened a new market,” or “sold off something,” or “the market changed.” The article was brief and made no mention of changes in processes, systems, culture, and only brief mention of overall strategy changes. Selling something or having the market change for the better does not solve the problem that got those companies into a weak financial position in the first place. Just as learning to read or going from a neglected family environment to foster care is not enough to ensure a child’s successful future.
Why are the elements of personal turnarounds the same as corporate turnarounds? Because they both require systemic thinking. Each must look at their environment as a whole system. My friends looked at their life and decided they wanted something better. They then chose specific elements to change and proceeded forward:
- One friend turned himself into the foster care program; he changed the system he was living in.
- They all decided actively to gain education.
- They all made huge personal sacrifices and commitments to the changes.
- Each person above actively changed the culture they were in.
- Each strategized knowingly or unknowingly on a plan to move forward.
In 2004 Lego was nearly bankrupt. They had followed tons of big market data, and strategized to follow the new millennial trends, especially focusing on the need for instant gratification. To answer this need, the company devoted its time and resources into theme parks, retail stores, morning cartoons, oversized larger blocks, video games, and specialized complex sets. Lego moved away from its core product. It was going under.
The then new CEO, Jørgen Vig Knudstorp needed to do something different to save this iconic toy company. His plan did not entail a one-answer solution nor was it accomplished by the next fiscal year. Here are the main elements of his systemic redesign that has fueled Lego’s turnaround:
- Strategy – Jørgen established a new direction after looking at the customer: what they wanted and the present results they were getting.
-He cut costs in the areas not aligned with the customers’ needs
-He found out how kids play and what was important to them and their parents.
-He established an educational image.
- Process – Prior to 2003, Lego had retired a number of their designers who had created the play sets during the 70s to mid 90s. They had replaced them with 30 brilliant innovators who had never designed toys. Lego’s total parts doubled during this time and the cost to create the new toys was never calculated. Its fiber-optic toys were selling for under the cost of production and were massive loss leaders. Moreover, the parts were not interchangeable and the toys were not loved.
In 2006 designers were brought in who loved Legos, loved creating with them, and understood the audience. The number of parts was drastically reduced, and once again the parts in the different sets were interchangeable.
- Systems – Previous to 2004 the focus was taken from the basic building blocks and put into the aforementioned “innovations” that resonated with no one and had too many “one-of-a-kind” parts.
After 2004, the extraneous ventures were sold or scrapped and all systems were again directed back to the basic building blocks
- Commitment- This turnaround has taken 12 years of carefully-crafted changes. This was not a quick fix, nor due to one financial adjustment, nor as the result of pursuing the easy, low-hanging fruit.
- Culture –The culture was focused on what the customer really wanted, leading Lego to bring back to life the basic building blocks.
- The marketers visited an 11 year old German boy who loved skateboarding and Legos. The visitors noticed a worn pair of adidas shoes that were his pride and joy. They were worn in just the right places and thus proved his expertise in skateboarding. The shoes were a symbol of who he was and gave him respect. The Lego marketers understood that respect in a peer group was achieved by gaining a high level of mastery at something. Lego’s new culture needed to reflect the new understanding of mastery and respect.
As a result of these turnaround efforts and insights, Lego’s new play sets aim to help children and adults create and imagine. The sets now range from very simple ones to those that are complicated and require a lot of involvement, but no set ever violates the ‘Lego feel.” They can evolve from basic design to magnificent, large, detailed structures involving artistic achievement and precision.
Unsuccessful turnarounds are called change projects and as we all know most of these fail. Successful turnarounds are not borne from changing one element at a time or from moving from one initiative to another.
Successful change projects, whether personal or corporate, must look at the whole system, find those things keeping them from the results they want, and then, with deep commitment, change what needs to be changed. This is hard work, only for the strong and courageous, definitely not the easy road to take.
References:
https://www.fastcompany.com/3042431/meme/the-biggest-business-comebacks-of-the-past-20-years
https://www.linkedin.com/pulse/lego-engineered-remarkable-turnaround-its-business-howd-lindstrom
http://www.businessinsider.com/how-lego-made-a-huge-turnaround-2014-2
http://www.businessinsider.com/legos-turnaround-strategy-2015-5