On this week’s episode of Fortune‘s Leadership Next podcast, co-hosts Alan Murray and Michal Lev-Ram talk with Mattel CEO Ynon Kreiz about turning the toy company into an IP powerhouse, launching Mattel Films with this summer’s first blockbuster, Barbie, and the role that Mattel products play in children’s development.
Listen to the episode or read the full transcript below.
Alan Murray: Leadership Next is powered by the folks at Deloitte, who, like me, are exploring the changing rules of business leadership and how CEOs are navigating this change.
Welcome to Leadership Next, the podcast about the changing rules of business leadership. I’m Alan Murray.
Michal Lev-Ram: And I’m Michal Lev-Ram. Alan, summer is the season of the big cinematic blockbuster. And this summer is no exception or, actually, it kind of is an exception because we’re back to summer blockbusters. Finally. And there’s one blockbuster in particular that has been the topic of a whole lot of gossip and speculation and anticipation.
Audio clip from Barbie movie: [Energetic voices.] Hi, Barbie! Hi, Barbie! Hi, Barbie! Hi, Barbie! Hi, Barbie! Hi, Barbie! [Somber voices.] Hi, Ken. Hi, Ken.
Murray: That of course is the trailer for the new Barbie movie in theaters July 21 and, Michal, we’re going to rush out to see it. It’s highly anticipated for a whole bunch of reasons, some of them nostalgic interest in one of America’s most beloved and sometimes controversial toys. But it’s also the first live action feature produced by Mattel Films, the film production division of toy giant Mattel.
Lev-Ram: So I have no shame in saying that I’m actually very excited about this movie, Alan. As a little girl in Israel where I grew up I played with Barbies. I think they may have been knockoff Barbies. I’m not sure if they were made by Mattel. Sorry. But I’m really curious to see you know how this movie is going to portray Barbie in kind of the the modern era and obviously we’ve seen a lot of evolution with the product itself with the toy. I’m very curious about this.
Murray: Michal, it’s not just a reimagination of the Barbie image but it’s also a reimagination of the company. Mattel Films is one of a few initiatives spearheaded by Mattel CEO Ynon Kreiz, who is our guest in today’s episode of Leadership Next. Ynon took over as CEO of Mattel in 2018, making him the fourth CEO in four years, and he came from the filmmaking business. So I think he had it in mind from the beginning that this is one of the ways he would resurrect the company.
Lev-Ram: Yeah, no, that’s right, Alan. Ynon is another turnaround CEO we’re featuring this season. We’ve had a few. And when he took over, Mattel’s operating income was at $343 million loss. Its internal culture was described as rigid and top down. You know, being the fourth CEO in four years, normally not a great sign of a company’s trajectory. And I, I think really interesting that they brought in someone with his background. He had actually become chairman of the board and then was asked to take over as CEO. I did a story on Mattel quite a few years back, a couple of CEOs ago, and was really struck by, you know, again, the culture and just kind of some of the rigidity of how they approach toy making and how they approach the distribution side.
Murray: Yeah, Ynon knew from the beginning that he had a turnaround on his hands. When he first arrived, he restructured the company, laid off a couple 1000 people. He has worked to win back an important partnership that was key to the company’s financial health, and that was the license to the Disney Princess and Frozen doll lines, which they had last to Hasbro in 2016. But one of his primary focuses has been, as I mentioned before, the development of Mattel’s IP into movies and other forms of media.
Lev-Ram: Yeah, and this totally makes sense as you said before, Ynon was formerly, you know, in the media entertainment world. That’s his background. He helped launch Fox Kids Europe in 1996. He was also the CEO of Maker Studios, where he helped negotiate a sale of Maker to Disney and I’m sure he’s very familiar with the success that you know, entities like Marvel, Hasbro have had in developing their IP and really extending their IP to other platforms. So we talked to Ynon about why this is a priority for him. We should mention there are a lot of movies in the pipeline. It’s not just Barbie, but this obviously is kind of the pinnacle of Mattel products. And he also explained to us more about other turnaround efforts, which you just mentioned, Alan, as well as how those efforts are already paying off financially.
Murray: And by the way, when you see the movie, there is apparently an Ynon Kreiz character in the movie, the CEO of Mattel played by Will Ferrell. So that’s got to be kind of fun for him. And Michal he is also from Israel.
Lev-Ram: He is, although we did not conduct the interview in Hebrew, just for you, Alan and for our listeners. So, you know, everybody will have to tell us what they think of the movie when they actually go and see it. But with that in mind, here is our conversation with Ynon Kreiz of Mattel.
Ynon, thank you for joining us. I’m going to just start with a really kind of basic question. You joined Mattel in 2018, the fourth CEO in four years, I understand. Not usually the, you know, harbinger of things are going swell when there’s that much turnover. So, tell us a little bit about just why you took the job. Clearly, Mattel had been going through some tough times. So I want to start there.
Ynon Kreiz: And actually, Michal, I saw one of your old write-ups on Mattel, when you came here in, I think 2017.
Lev-Ram: Margaret [Georgiadis] had just taken the job.
Kreiz: Yeah, I, I thought of you because I think you need to come back. And if you just came back and you walk around by yourself for five minutes, you’ll get the whole story without talking to anybody. It’s, you know, it’s all the difference in the world. It’s a different, it’s a different company. I joined the board in 2017 and I was curious to be part of a company that is going through a, a transformation. And I was offered to be chairman. And before I was formally appointed the prior CEO resigned and they asked me to, to become CEO and chairman. And by that time, I could, you know, I was very excited about the opportunity to be part of a company that is so iconic. But among all the things that I saw as an opportunity, I took our portfolio of iconic franchises in children and family entertainment to be an incredible opportunity to extend the company outside of the toy aisle. And so the journey was going to be about how do you transform Mattel from being a toy manufacturing company that was making items to become an IP company that is managing franchises. And this is not to say that the idea was to move out of the toy side of the business, which because it’s a great business to be in.
Lev-Ram: Clearly, in order to bring about that transformation, some painful decisions have to be made. Can you talk a little bit about just your assessment early on? And, you know, what did need to be restructured? Organizationally, layoffs that needed to happen? Just how did you go about setting that strategy?
Kreiz: You know, looking back, there were many things that we had to do at the time. We needed to restore profitability and regain top line growth. And we entered a very comprehensive restructuring program whereby my team and our own people were really in the lead in driving those changes. And in the course of those the first three years, in fact, a bit less than three years, we achieved cost savings that exceeded a billion dollars in the company. We reduced the organization by 35% in terms of the workforce, and became much leaner, much more agile in focus on, on, on on performance and productivity. Since then, we achieved another $200 million of savings. So in the last five years, we achieved over $1.2 billion of savings and on our way to achieve another about 100 million in 2023. In addition, we became more capitalized, we exited five factories, we reduced the number of items that we were making by more than a third so that we increase productivity and profitability of the items that we were making. We worked a lot on culture, on internal culture, to align the organization around what is that we are here to to achieve. Making sure that we share the same purpose and mission and the same leadership values and all the key attributes that define our narrative. And you know, another, you know, to kind of share with you some of you know, in the most simplistic way, how you know, what it meant at the time is that, you know, we took a strategy document that was three inch thick and turned it into a one page document that is very easy to understand. It’s not necessarily easy to execute, but it’s easy to understand, and this is half the battle in making sure that the organization shares the same goals and objectives and that we all try to achieve the same thing.
Murray: It’s very impressive. You know, at the time you took over in 2018, a lot of people said, Hey, what the heck is this? A movie guy taking over a toy company? Why does that make sense? And of course, you’ve just argued part of it is just good operations. But part of it was also what you said at the outset, which is how do we use this great IP, the intellectual property that Mattel has built up over the years in other ways. We are on the cusp of seeing, I guess, the first big example of that with the Barbie movie. How important is that movie to Mattel’s future?
Kreiz: Through our toy product is where we establish an emotional connection with our fans. Toys are unique because they’re tactile. Kids and consumers touch them, hug them, go to bed with them. Toys are aspirational and inspirational. And having a healthy toy business allows us to develop and strengthen this emotional relationship we have with our fans. And going back to my point earlier in that these are fans, this is an audience. And once you realize that and it becomes part of your DNA, it opens up a world of opportunities. And so over that period, we also continued to evolve the entertainment side of the company, in bringing in experts. We’re not in the business of funding movies or financing films or investing in areas that are not our core expertise. Our currency are the franchises that we own, that we bring to the relationship we develop with key players in those verticals. But what we do have inside Mattel are people that can have that dialogue. That people that have that organic experience and relationship within the industry. So we’re not you know, as as the IP owner, we’re not just, we’re not handing over the franchises and walk off the field. We are actually in the game. We are on the field. We play a key role on the creative side, on the production side, on how these projects evolve.
Murray: Yeah, and so how is Barbie the movie going to change our perception, the world’s perception, of Barbie the franchise, Barbie the character?
Lev-Ram: And I want to point out Alan is your target demographic here, right?
Murray: I’ll get to the Hot Wheels movie. I want to talk about the Barbie movie first.
Kreiz: Alan, I promise you will enjoy the Barbie movie and you will thank me for recommending it. But but you know the Barbie movie is our first and obviously a very important project for us. The movie will recontextualize what people think of the Barbie brand. And it will be it will be something that is unexpected. The movie has many easter eggs and many surprises that you haven’t seen yet in the trailer. It’s multi dimensional, you know, the movie is fun and funny. It’s smart and innovative, it’s light-hearted and happy, as well as very emotional and inspirational. So you do have different levels of of engagement and experiences that will appeal to broad audiences and will be very special, very unique. And this is what Greta [Gerwig] really as a visionary, as a creative leader did such an amazing job in creating something, you know, there isn’t another movie like it that you can point and say it’s like this movie or it’s like that movie. It’s its own unique expression.
Lev-Ram: Alan and I are going to go see it and we’ll let you know if it changes our perception of Barbie afterwards.
Murray: But now you’re going to now you’re going to ask about the Hot Wheels.
Lev-Ram: Well, I want first I want to ask one more question on the Barbie movie. We understand that Will Ferrell is playing the role of Mattel CEO. Did you have a say in that? How do you feel about him portraying you?
Kreiz: Well, I’ve been a Will Ferrell fan for many, many years, going back to Zoolander. He’s hilarious. He can definitely get away with things I will never be able to. And I just thought when I saw it. I was on the floor laughing. He is hilarious.
Murray: Jason Girzadas, the CEO-elect of Deloitte US, is the sponsor of this podcast and joins me today. Welcome, Jason.
Jason Girzadas: Thank you, Alan. It’s great to be here.
Murray: Jason, we live in an era of disruption, technology disruption, geopolitical disruption, workplace disruption, and it makes accurate predictions about what’s going to happen in the future more difficult than it has ever been. Yet the polls that we do together with you show that most business leaders largely remain optimistic. Why do you think that is?
Girzadas: I think optimism is a result of the fact that we’ve been through an incredibly tumultuous three years. And so I think business leaders realize that they’ve built resiliency into their organizations. The prospect of even more disruption isn’t as foreign of a concept, and I think there’s more confidence in their ability to adapt and to be agile. Secondarily, there’s been tremendous investment in technology and new capabilities that client organizations and executives broadly are optimistic about those creating more value and more opportunities. So, it’s a function of what we’ve been through, as well as the investments that have been made that give a sense of optimism despite some of the headwinds.
Murray: And what’s your advice to companies that are struggling with the potential disruption in the future?
Girzadas: Well, disruption is the new normal. I don’t think there’s any placid water on the horizon or calmness that we can predict. So it’s a function of getting accustomed to the discontinuities that are ahead of us. Whether it’s around technology, or geopolitical change, or workplace changes associated with the future of work, or the demands of the talent workforce, change is the new normal, and as a result, it is requiring executive teams to actually look holistically at those challenges, be [inaudible] with doing scenario planning, and being on the lookout for where and how to capitalize on disruption—versus being concerned by it or seen as a barrier to their success.
Murray: Jason, thanks for your perspective. And thanks for sponsoring Leadership Next.
Lev-Ram: One thing I wanted to ask, and this seems pretty core to Mattel’s financial health as as well, is you won back the license to the Disney Princess and Frozen doll line from Hasbro just pretty recently. So curious, why and how did Mattel lose it? How did you get it back? We should probably point out that speaking of Disney, you also have a history of Disney not just on the content side. But you sold a company in the past, a media entity to Disney. Bob Iger is back. Like there’s there’s a lot of different thread lines here. But tell us a little bit about what happened, you know, back aways when Mattel lost the license, and how did you get it back?
Kreiz: Yeah, we did lose the franchise in 2014. It was an important franchise back in the day, of course. So losing it had had a real impact on the company. But, you know, fast forward to today as it was a moment, another, an important win, and an important part of our journey to position Mattel as a partner of choice in collaborating with the major entertainment partners. We won it on merit. Needless to say, you know, trust played a key role here. And Mattel has evolved over those years to become an incredible, incredible platform, both in terms of design and development, with a very strong supply chain that is, we call now, a competitive advantage, and a very large scale commercial platform as we sell product in more than 500,000 stores globally, which represent about 70% of the business and another 30% as we work with all the leading omni channel players or the online retailers. So and when you add that together with what we did on the business side, in terms of strengthening our balance sheet and becoming investment grade, which happened a few short weeks ago, that was another key moment. When we started the transformation, our leverage ratio was 25 times that to adjusted EBITDA and it feels a long way away relative to where we are today with investment grade, a strong balance sheet and and you know as we continue to gain market share and position the company for long term growth.
Lev-Ram: Okay, another another question since I brought up Disney Princesses is I did a story, we talked about this earlier, I did a story on Mattel a few years back before you became CEO, and I was really struck by how kind of old school, a bit archaic, the the sort of gender delineation felt with the toy franchises. Obviously on the retail side as well and that’s something that’s evolved a bit at least with some retailers. So I’m just wondering you know as things evolve in our society, cultural norms evolve, how do you keep Mattel evolving with the times while holding on to these incredibly iconic franchises, whether it’s Hot Wheels or Barbie? How do you look at that?
Kreiz: Our mission is to create innovative products and experiences that inspire, entertain and develop children through play. And our purpose is to empower the next generation to explore the wonder of childhood and reach the full potential. These are the overarching parts of the framework. We also position Mattel, you know, define our aim to contribute to a more equitable, sustainable, inclusive and sustainable future in terms of how we contribute in our way to a better tomorrow for future generations. And this has been a key part of what we do. It’s in our, and this is not done for marketing purposes, it is in our product. It’s in our internal communication. It’s how we think about the role that we play with consumers. We take what we do very seriously. We understand that we have real impact on society. We aim to partner with parents and support them partner with families and and instill important values in the in future generations.
Murray: I salute you for that. I saw Mattel recently released a a Barbie with Down syndrome, so that young girls with Down syndrome could see themselves in the Barbie doll. And that’s so important. But I also know, I mean, you talk about keeping up with cultural norms. Cultural norms are also political norms and have become a very hotly contested, as you know, probably better than I do, your your fellow colleagues at Disney are in the midst of a mess in Florida right now. How do you serve those different cultural norms without getting caught in the political crossfire? And are you concerned about that?
Kreiz: Look we’re very conscious of cultural trends. What what we do is organic and authentic. We haven’t changed posture. We haven’t, you know, we’re not being responsive. And in fact, one of our core strengths is making what we do very culturally relevant. And this is where you bring together the art and science of narrating our own story, where you work on, you know, we realize that our brands, our franchises, are timeless, but they also have to be timely. And this is this is now one of our core strength core capabilities. And in that regard, the Barbie movie will be a great representation of that. In taking a 64-year-old brand, and making it so relevant and current to today’s consumers. You know, Barbie itself is today the flag carrier for diversity and inclusivity. And, and again, this is not for marketing purposes. It’s it’s in the product.
Murray: And it’s evident, it’s evident in the product, but you must have to struggle with how do we embrace cultural trends and cultural norms and avoid political crossfire. Because it’s not always clear that you can do both.
Kreiz: We do what we do in a thoughtful way, we stay true to our purpose and mission and this is our North Star. This is how we narrate and navigate those situations. And our voice is important. We really express it, for the most part, through our own product. And this is really the best way to showcase what we think and how we feel about things. And being thoughtful and truthful to what is that we’re trying to achieve.
Lev-Ram: Alan really wants to talk politics, but I’m going to save you a little bit here. Do you have another political question, Alan?
Murray: No, no, no, no, no, no. Ynon has managed to answer both my questions without even using the word politics. So I think I’ll carry on.
Lev-Ram: I’m going to just assume that you and Bob Iger have some interesting conversations. But we’ll leave it at that. I did want to ask just real quick, you know, on the kind of evolution side culturally but also going back getting back to growth as a business, are acquisitions part of the strategy? I know Mattel has made acquisitions in the past. Is that something that you’re looking at? I don’t think you’ve done any that I know of at least or any big ones. But what’s your thinking on that front going forward?
Kreiz: No, our priority was to become investment grade, retain that, you know, that credit rating. And now that we are investment grade, as part of our capital allocation priorities, we will also look at M&A situations. Our goal is to create long-term shareholder value and having a strong balance sheet and investment grade gives us that flexibility and optionality to look at different ways to to benefit from a strong balance, you know, balance sheets, creating long-term shareholder value.
Murray: Ynon, I’d like to ask you about what you do when you’re not creating Barbie movies. How you relax. How you unwind. I understand you’re a kite surfer.
Lev-Ram: He plays with Barbies. What are you talking about?
Murray: Are you still, maybe you kite surf with Barbies, but you’re still a kite surfer?
Kreiz: Yeah, kite surfing is my main, my main sport. I still do it whenever I can. You know, I’m also a father of four children. And that that is a whole you know, whole…
Murray: That’s a sport.
Kreiz: …thing in itself. Fortunately, I can share some of that time with my kids who also kitesurf so it is a family sport. But you know, the work at Mattel is very fulfilling and always fun. Yes, it’s challenging and of course, it never ends. But it’s not a job where you need, it’s not a sense where I need to come home and unwind. You know, I relish the challenge and the excitement that this company creates and this is ongoing. And we like it that way.
Lev-Ram: Well, next time you agree to take a chairman of the board position, you should probably be careful because you may be asked to be CEO, I guess. Lesson learned. Thank you so much, Ynon. I really appreciate you being on with us today. And Alan and I will go watch the movie. We will give you our unsolicited feedback and looking forward to it.
Kreiz: Great, thank you. I can’t wait to hear.
Murray: Thanks so much and congratulations on everything you’ve done at Mattel.
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