Hes a one trick pony
One trick is all that horse can do
He does one trick only
Its the principal source of his revenue
I believe Paul Simon was really singing about a horse when he wrote that, but he may well have been looking into his crystal ball and describing Jorgen Vig Knudstorp, boy wonder, former McKinsey wizard at the helm of Lego. The only trick the ponies from McKinsey know is outsourcing, which is exactly what Jorgen did. The work in the U.S. plant in Connecticut is being sent off to Mexico. The Danish town of Billund where Lego is headquartered and the factory has long been the biggest employer in town, is being decimated as most of the work is being farmed out to Flextronics to do in the Czech Republic.
There are a couple of curious aspects of the deal, however. Lego already owns the plant in Kladno in the Czech Republic where the work from Denmark is being sent. The plant, the employees and the equipment are merely being turned over to Flextronics to run. If McKinsey folks know any other tricks besides outsourcing, manufacturing management apparently is not one of them. The only change is who is going to manage the plant. The McKinsey management expert obviously thinks that Flextronics is the better manager than himself. In fact, he must really have reservations about his managerial skills since Flextronics has only been in the Czech Republic once before, and that effort failed. Flextronics even had to repay the incentive money given to them bu the Czech Republic.
Even more curious is that Jorgen has outsourced the plastics and packaging work to Flextronics, but has retained the little bit of electronic work Lego does for their Technic and Bionicle product lines. The 'tronics' part of Flextronics denotes that they have long been primarily an electronics contract manufacturer. Yet Jorgen's insight led him to keep that work in house, and have an electronics company with a track record of failure in the Czech Republic take over management of an injection molded plastics plant. I guess all that really mattered to our one trick pony is that the manufacturing be done by someone else - anyone else - and that it be done by cheap labor.
That the Lego company had some problems cannot be disputed. The company was as much a social organization as a business. The name Lego is a distortion of the Danish "leg godt", which means 'play well'. The focus has been on the toys and the kids who play with them, as well as on providing employment for the town of Billund. A number of ventures into things from clothes to theme parks did not pan out, and the company was losing money. Obviously all of the good intentions in the world at Lego are worthless if the company cannot survive.
The tragedy of Lego is that, "Lego's first leader to come from outside the founding family, Knudstorp has also upended Lego's corporate culture, replacing 'nurturing the child' as the top priority in Lego's employee mission statement with 'I am here to make money for the company'." It has gone from one extreme to another. The man from McKinsey took the nuclear approach to the necessary cultural change. But of course, that is what you can expect from a one trick pony from McKinsey.
I imagine the family owners and the rest of the stockholders knew exactly what they were getting. That McKinsey has become the outsourcing company, rather than a management consulting company, is no secret. As Sunil Mehta, vice-president of NASSCOM, India's software industry association.said, "Every time we have an outsourcing forum, it's like a GE and McKinsey alumni association meeting,"
The tragedy of the whole thing is that the alternate solution - lean manufacturing - was never given a chance, and Lego was a perfect environment for it. A family controlled business in a small town, with a built in culture of concern for the product and the customer ... a lean manufacturers dream.
Everyone lost on this deal, except of course Flextronics and the employees in the Czech Republic and Mexico, and I hope they become very lean, perform very well and prosper. In the long haul, however, don't bet much on Lego prospering with this strategy, and replacing the 74 year old devotion to 'playing well' with "I am here to make money for the company" didn't do millions of Lego customers much good either.
See how he prances
The way his hooves just seem to glide
Hes just a one trick pony (thats all he is)
But he turns that trick with pride