#springrefreshseries

Business is what you do. It’s what you’ve always done. You have dedicated clients and customers. Your brand is known. You are satisfied with your progress. It is all good. But, you know what separates good companies from great companies?

Great companies constantly look for ways to be better.

This month, we profile 4 companies we know. We look at how revamping their business models – new dedication to customer service, expanding internet presence, new leadership and updating processes -- took them from good to great! This week, we close our #SpringRefresh series, exploring Four Reasons to Consider a Business Revamp, with a look at world renowned toy manufacturer, Lego.

Earlier this year, Lego reported the highest revenues of its 85-year history.

The company has been on a steady revenue increase in recent years. In 2004, they were nearly $1 billion in debt, and saw a 40% decline in sales in the short span of only two years. It appeared the company had no future at all. They were on the verge of bankruptcy, and working with an outdated mission and foundation – unable to compete with the rise in competition from video games and the internet. They were “old-fashioned" and "out-dated.”

Then came new leadership, new thinking and updated processes. 

Enter Jorgen Vig Knudstorp. Knudstorp was promoted to CEO of the company in 2004, and began modifying the course of the company with key changes. Among the first set of changes was to focus on managing cash flow, selling off extraneous businesses (theme parks, video games, etc.), and cutting production costs, by slashing the number of parts produced. Faced with a significant decrease in sales, the company began to reinvest in customer service and branding. They addressed customer-level issues, such as dissatisfaction with deliveries and customer service. They also began to extend the brand by developing multimedia content and through meaningful collaborations. They revamped their Research & Development teams, to include fans and adult fans of the Lego blocks, to better understand and serve their audience.

Lego devotes more attention now, than ever, to understanding both the people that buy and use their products.

Lego’s turnaround from bankruptcy is a case study on how a company can reinvent its business model, while retaining its core values. By committing to strategies that would make Lego a premium brand in the eyes of consumers, the company and brand was able to bounce back. Today, the Lego Group is reportedly the most valuable toy company in the world and estimated to be worth more than $14.6 billion. The multiple strategies employed by Lego, supported by the company’s knowledge of its customers’ wants and needs, has catapulted the brand to new heights and long-term success.

Their business revamp has since hailed them as “the Apple of toys”: Profit-generating. Design-driven.

Picture it -- 2004. Lego, one of the biggest names in Toy Manufacturing,  is almost $1 billion dollars in debt with a 40% decline in sales over 2 years.  By revamping strategies and introducing new processes, Lego significantly boosted sales and brand loyalty. By 2013, Lego had become the most valuable toy company in the world, valued at more than $14 billion.

Business is what you do. It’s what you’ve always done. You have dedicated clients and customers. Your brand is known. You are satisfied with your progress. It is all good. But, would you like to know what separates good companies from great companies?

Great companies constantly look for ways to be better.

This month, we profile 4 companies we all know. We will look at how revamping their business models – new dedication to customer service, expanding internet presence, new leadership and updating processes-- took them from good to great!

This week, we continue our #SpringRefresh series, exploring Four Reasons to Consider a Business Revamp, with a look at Ford Motor Company.

It's been hailed one of the greatest business revamps in history. Iconic, even.

I remember reading headlines about Alan Mulally, now retired CEO of Ford Motor Company, a few years back.

“Engineering a Comeback”

“Ford’s Turnaround: How Mulally Saved The Company”

And, my personal favorite, “How Ford CEO Alan Mulally turned a broken company into the industry’s comeback kid."

To anyone who hadn't been paying attention, it would seem preposterous. How could Ford, name we all know, commercial we see every 10 minutes, obvious industry veteran, be anyone's idea of a "comeback kid?"

Harry Kraemer, Professor of Management & Strategy at Kellogg School of Management (Northwestern University) once perfectly described a tale we see all too often with companies – large and small – who see levels of success: “An organization achieves a comfortable lead on the competition. It's media coverage is highly favorable, and shareholders are very satisfied. Believing that everything is and will continue to be great, leaders start reading their own press clippings. Complacency sets in. In the worse cases, the company completely loses sight of its vision. The most talented people leave first. When panic sets in on how to “fix” things (slashing costs, compromising quality), brokenness soon abounds.”

This had become Ford’s reality.

In 2006, while heading into a 12.6 billion dollar loss, at risk of losing their number 2 sales spot in the US and housing a less than stellar vehicle lineup, Bill Ford made a choice. He decided Ford needed change and needed it now. He recruited Alan Mulally, who had recently been passed over for CEO of Boeing, a company who was (at the time) experiencing it's own share of disappointment. One industry veteran called the move to pass over Mulally as CEO, “the final step in downgrading Boeing’s innovative engineering culture.”

Mulally's new leadership came with big changes to Ford, starting improving from within.

One of the most significant changes Mulally introduced was “Admitting to problems that did no have immediate fixes.” Changing from a culture that saw problems as weaknesses, Mulally instilled in the idea that problems were "growth opportunities". Using a color-code system, he helped leaders assess, identify and address real problems plaguing their departments. Meeting on a weekly basis, executives would use this system for their business plan charts -- to be shared with the entire group. If developments were going well, they'd be highlighted on the charts in green, while new issues would be yellow and problems with no immediately known solution would be red. Admittedly this was hard for “the Ford people” because “they just didn’t do red.” In the initial meetings after the color-coding system was implemented, all of the charts were green. But Mulally knew better. He knew there were problems somewhere, with the company facing a $17 billion loss. Reportedly, the first admission, in red, came from Mark Fields, Mulally’s eventual successor as CEO, who was, at the time, Business Unit Chief for Ford America’s operations. Experiencing an issue in Canada, with the launch of the Ford Edge, he had to halt production. In the following weekly business plan review, he presented a launch chart with three columns in red. Fields explained that he didn't know what the issue was, but they were working on it, and Mulally began “top clap”. Next, someone else at the meeting said he had a similar issue with another product. And then, another in attendance noted a possible solution. The collaboration got the issue solved quickly and introduced a culture of collaborative teamwork, which improved the overall culture at Ford. Accountability and collaboration in leadership changed the culture at Ford, for the better.

Another innovation, from Mulally, was the concept of "One Ford." A unifying force, “One Ford” successfully reined in the company’s global operations and got them all working on the same agenda. Before Mulally, subsidiaries were semi-independent kingdoms. The “One Ford” platform conquered four main points: 1) bring all Ford employees together as a global team; 2) leverage Ford’s unique automotive knowledge and assets; 3) build cars and trucks that people wanted and valued; and 4) arrange the significant financing necessary to pay for it all.

Four years after Mulally’s arrival at Ford, they reported a $6.6 billion profit, the largest in the sector that year. Ford eventually avoided bankruptcy, and the government bailout that sent it’s competitors into the “ignominy of government ownership.”

The Ford Motor Company revamp has been rightfully named one of the greatest turnarounds in business history, bringing the company to it's most profitable since it's humble beginnings.