Swedish furniture tycoon Thomas Lundgren took the Middle East by storm with his unique brand of retailing, but THE One stores were hit hard by the downturn, with sales declining 18 percent. In his most revealing interview ever, the company's founder tells Anil Bhoyrul what went wrong, and how it's changed him as a person, manager and leader.
Thomas Lundgren calls the latest phase of his company and career 3.0. But it might as well be 10.0, so different is it from the last time we met. Gone are the plans for world domination. Gone are the plans to shift all the company's staff to India for a month of school building. Even Marco, who I remember used to offer Lundgren's guests a shoulder massage, is nowhere to be seen. Over 100 of his staff have also gone.
Instead, the man who founded the retailing sensation THE One 14 years ago - becoming a celebrity tycoon in the process - has been overdosing on reality. Now is the time for introspection, and Lundgren has plenty of it on offer.
Click here to see Arabian Business TV's video interview with Thomas Lundgren
"It's simple. We did well, and then we screwed up. I got bored. Before the financial crisis, the world was going at 200 km/h and it didn't matter what you bought because everything was selling. Everyone could open a furniture store and everyone did because it worked. I became lazy, I became complacent. And the worst part of it was that I took the easiest way. I am angry about the compromises I made," says Lundgren.
How times have changed. Four years ago, Lundgren was on a roller coaster ride of success. The company he founded with borrowed cash had grown to 11 stores across the Middle East, with sales topping $85m. Over 800 staff were on the payroll, and his former bosses at the $30bn IKEA franchise were starting to get nervous. Lundgren had brought the world a new style of retailing, explaining at the time: "Other stores have mission statements. How boring is that? We put on a drama, a show. You want to come back."
And come back they did, over and over again, making THE One the most talked about and fastest growing furniture store in the region. The punters loved the service, the furniture and it's owner.
Then came September 15, 2008, and the collapse of Lehman Brothers. The world changed overnight, and so did Lundgren. "My oldest daughter called me in September 2008 because she saw first-hand what was happening in the US. She said ‘Daddy how are you going to survive the crisis?' So I spoke to someone at McKinsey who came over at the end of September 2008 to meet me and my senior managers to brief the company on the likely crisis ahead.
"He had just met Alan Greenspan. He was so negative, he scared the s**t out of us. We walked out of that meeting and my whole team was in shock. I could have never got everyone to realise that myself. I felt nervous at that stage. Yeah, I was scared," he says, adding: "The good thing is we all got on the same boat that day and yeah, we felt nervous at that stage."
For Lundgren though, it took a while for the full force of the downturn to strike. That November saw the company deliver its highest ever monthly revenues. December was "great" and even January 2009 was "one of the best Januaries I remember."
"I was certainly thinking, hmm, maybe we will be lucky. Then on February 15, 2009, the Dubai Shopping Festival ended. We went into free fall. We dropped 40 percent revenues in one month."
In the 12 months to March 2010, THE One's revenues dropped 18 percent to $96m and over 100 staff were shown the door. It might have been better than the average 30 percent fall across the region's retail sector, but for Lundgren, the figures don't seem as significant as the reasons.
His two stores in Sweden (the only ones outside the Middle East) were shut down, but Lundgren says that was the least of his troubles. "Yes, we opened stores in Sweden and I tried to run them from here and it unfortunately didn't work. That was a genuine mistake that I have written off in my mind. I am not angry about that, I am angry about the other things that happened."
Such as? "Basically I took the easiest way, I was a good boss and allowed my team to make decisions and let them do things that my gut instinct said was absolutely wrong. They were really convinced, I wasn't. Instead of taking a fight to them and say ‘convince me', I didn't.
"Sometimes groups can be really bad. Everybody had their own problems. It just became easy to be complacent. People just said ‘yes' to things. I did not put up a fight. I should have said ‘let's discuss this'. I think that made the company weaker financially. My stores started to become small kingdoms," he says.
Before the crisis set in, Lundgren had a policy - which he thought worked - of only hiring the best people. He dreamt of a company with only the ‘A' people in each position. "Okay, we had some Bs and B minus. But we agreed not one single C person would ever work in our company. Then when the crisis came and we looked closely, we had 120 ‘C' people."
"When things are going well, you don't want to fire people, you want to fix things," he continues. "We were too caught up in believing that the world was just amazing. Our costs are down 35 percent; that's much more than I thought we could... It's harder to live with all these stupid things that crept into the company. Why did we do some of those things? Now when we do anything, I ask the same questions: ‘Does it really matter? Does anyone really care? Or are we just filling time?'"
Lundgren isn't shy about his mistakes. He freely admits his advertising "didn't work" and the UAE campaigns in particular were "one of my big mistakes." He recalls how he copied the Tiffany model of trying to appeal to a wider range of customers, with the same negative result. "I did the same thing when the world was just spinning, and my biggest fans started to get annoyed. I was not as unique as I should have been. My gut feeling is I kept products in the range too long because they were selling," he says.
So what next? Lundgren may have had a tough couple of years, but it hasn't changed his obsession with different styles of management. He talks enthusiastically about looking at both the "performance and health" of the company, its employees, and finding ways to measure their "soft values."
Next year, Lundgren forecasts sales will rise around 18 percent, coincidentally the same figure as last year's drop. Beyond that, THE One is still on track to have 99 stores by the year 2020, though if and when it does, Lundgren adds there will be exactly and only 99 staff working in his headquarters to run the whole empire.
The Swede may have taken a few knocks lately, and by his own admission, had a much needed wake-up call but Thomas Lundgren Part Three (or 3.0 as he calls it) is only just beginning, and it would be unwise to bet against Lundgren succeeding.
You really do get the feeling that Lundgren is itching to bring back the glory days. "You remember the time we sponsored Robbie Williams' concert in Dubai? That was fun yes? I think we'll have fun again soon."