Profile of the IESE International Advisory Board’s Newest Member

Straight From the Herat

Running a prestigious doll-making company is certainly not child’s play, as Andrea Christenson discovered when she took over Käthe Kruse Puppen in 1989. Yet, having successfully grown the business – extending both the product range and market reach beyond its traditional German borders – Christenson makes it all seem like good fun.

Käthe Kruse dolls have always been important to Andrea Christenson. As a child growing up in Vienna, she owned four of the handmade, finely crafted German dolls. She recalls going to the mountains on a family ski trip when she was around five years old, and she made her father turn the car around and drive 500 kilometers back home to get one of her precious dolls that she had forgotten to bring with her.

So when the Käthe Kruse company came up for sale in 1989, it was clear that no obstacles were going to stand in the way of Andrea Christenson acquiring it. “Of course I was very excited at the prospect of buying the company,” she says.

Once Upon a Time

At the time, the company was being run by Heinz Adler, the son-in-law of Käthe Kruse, an East German mother of seven who started making her own dolls in 1905 and ran the business until Adler took over from her in 1952. After 37 years at the helm of the family business, Adler was looking for a successor – preferably a couple – who would faithfully maintain his mother-in-law’s product philosophy: “I make my dolls by hand.” That is a principle I have never abandoned and never will. The hand follows the heart, and only the hand can create something that goes from the hand straight to the heart. There is no better example of this than a doll.”

Adler found what he was looking for in Christenson and her husband, Steve. The entrepreneurial couple bought a 70 percent stake in the company, with a banker friend owning the remaining 30 percent. Ninety percent of their stake was financed through loans amounting to millions, and as the enormity of what she had just done began to sink in, Christenson says, “I didn’t sleep for two nights!”

A Dream Come True

Fifteen years later, Christenson doesn’t have many sleepless nights. With Steve in charge of production and finance, and Andrea responsible for marketing and product development, Käthe Kruse has successfully diversified its business to include play dolls, cloth dolls, toys made of eco-friendly materials, children’s fashion and accessories for children’s rooms. Christenson also propelled the company’s international expansion, increasing export sales substantially.

Both of these moves managed to overcome the company’s dependence on collectible dolls and helped to reduce the seasonability of sales, while at the same time maintaining the prestige of the high-quality collectible dolls for which the company was best known. A special edition Käthe Kruse doll can still fetch $35,000 at auction, and at least two museums have been set up devoted to Käthe Kruse dolls – one in Donauwörth, near Munich, where the company is based, and another in the growing Asian market of Japan.

Christenson’s childhood-inspired fantasy of running Käthe Kruse has turned into adult-sized realities. The brand is stronger than ever, and the company was recently valued at more than five times what the Christensons paid for it.
Christenson’s journey from playing with dolls to owning the company was not a straightforward path. As a teenager in the ’70s, when she thought about what she would end up doing with her life, she knew it would have to be something that took her away from Vienna, a society that she found very closed. She liked the idea of becoming a consultant, perhaps in the steel business, not because steel excited her, but because such state-owned industries were the only thing she knew. With that in mind, she earned a degree from the Economic University of Vienna. “If I could do it over again, I would not study economics,” she says. “It was too theoretical and too far away from real business life.”

Next, she applied for postgraduate studies in South Africa – about as far from Austria as one could imagine. But she wasn’t accepted there because her proposed thesis was “too pro-black,” they told her.

IESE: Practical Knowledge

Then she met an IESE recruiter who was scouting for fresh, young talent to boost the international, bilingual mix of the Barcelona business school’s growing MBA program. “I wasn’t thinking at all about going to Spain,” says Christenson, who spoke French and English as well as her native German, but “not a word” of Spanish. “I thought if I did an MBA, I would go to America. But something about the European orientation, as well as the close, personal attention that I would receive, was very appealing to me, and by the end of our two-hour meeting, I was convinced.”
She attended IESE on a full scholarship, graduating in 1983. “I remember the case studies were hard work. I had to sit with a dictionary and look up every other word,” she recalls. “I also remember some lively discussions between the Argentinean and British students around the time of the Falklands War.” Most of all, she says she remembers the unparalleled personal attention the students received from their professors, and how practical the coursework was compared to her economics degree. “It taught me about quick thinking and gave me vital decision-making skills that I still use to this day. Most importantly, it showed me how much fun can be got out of doing business.”

Finding Fun in Business

Christenson’s search for the fun side of business made her decide against working for a “soulless, structured” multinational after graduation. Instead she opted to work for the Boston Consulting Group (BCG), in its Munich office, which was the first of several offices that the U.S.-based general management consulting firm was opening across Germany. Reading a description of the Munich office on the BCG website, it’s easy to see what Christenson means when she says they didn’t take “the pinstriped suit approach” to business:

“The office itself is in the heart of Munich, surrounded by the Viktualienmarkt, the city's open market. From the rooftop terrace, we enjoy an expansive view of alpine peaks. Munich residents are known for their joie de vivre. From this vitality emerges a vigorous city. The office atmosphere encourages diversity in backgrounds, learning and character, while discouraging hierarchical managerial approaches. BCG Munich's team spirit is reinforced through frequent discussion and exchange of ideas among colleagues. Through the worldwide ambassador program, idea-sharing reaches from Munich to many destinations in North America, Asia, Australia and New Zealand. Closer to home, the team refreshes its thinking and spirits with weekly Monday morning office breakfasts, periodic lunches for the staff, social activities, seminars, special events and, of course, all-staff business meetings.”

Motivating Entrepreneurs

During her eight years with BCG Munich, Christenson says she most enjoyed the small-team approach, which was stretching the boundaries of that definition by the time she left to manage Käthe Kruse – from a staff of 25 in 1983 to 180 in 1990 – and the office has since grown to 550. Her time at BCG was fruitful on both a professional and personal level. Not only did she gain vital expertise in the areas of “consumer goods” and “gifts” as a senior project manager with responsibility for Europe and North America, but she also met her future husband, Steve.

Christenson maintains links with her former employer through two joint initiatives run in conjunction with the German business community. The first is “Move On,” leading two-day seminars for up-and-coming female entrepreneurs in their 20s and 30s. “I see a lot of ambition coming through, particularly among women in their 30s,” she says, although she admits that Germany is still behind the U.S. and even Spain for raising up female entrepreneurs, managers and CEOs.

The second pro bono initiative of BCG is “business@school,” teaching business-related concepts in high schools in Germany, Switzerland and Austria. Offered as an elective, the program encourages students between the ages of 14 and 17 to develop a workable, financially viable business plan based on their own ideas, and three winners are chosen every year. An example of one winning idea was a proposal for a centralized system involving 45 schools running a textbook exchange, which would help to save the schools 1.5 million euros.

“I love to be around wonderful, creative young people who have brilliant ideas, and to see the way they think,” says Christenson. “It challenges me to rethink my own ideas.”

Challenges of the Toy Market

Thinking outside the (toy) box is certainly necessary in Christenson’s current field. The toy industry is dominated by a few leading brands mass-produced in China and mass-marketed around the world through extensive TV advertising, which has had the negative effect of elbowing out the small neighborhood specialty toy store in favor of a few global giants. Also, unlike most dolls dominating the market, which increasingly incorporate some kind of technological gadget or electronic novelty, Käthe Kruse dolls don’t “do” anything besides look pretty. Tied with this is a less-than-robust economic environment, where luxury items, such as a specially handcrafted doll retailing for 50 to 1,500 euros, are among the first to feel the pinch.

The answer has been to diversify the range, breathing new life into the brand by expanding into other areas such as home items, clothing and jewelry, while still aiming at the 20 percent of families at the top of the pyramid. At the same time, in order to reduce costs, Christenson transferred production from Donauwörth to Latvia, where by 2003, 90 percent of the products was being manufactured.

The Dolls Travel

While outsourcing to Latvia has proved successful, the inclusion of Latvia in the recently enlarged European Union means there is reduced scope for further gains in that area. “It was much easier before,” says Christenson, “but now more multinationals are investing heavily into these growth areas, and there is more local competition as British companies, for example, are moving in and can pay more.”

“Still, there are advantages to being in Eastern Europe rather than East Asia – the turnaround time is faster, the lot sizes are smaller and they understand what we want in terms of quality and looks.” Labor costs in Latvia may have gone up since 1989 from 50 to 330 euros per month, but they are still well below the 2,000 euros that was the going rate in Germany in 2003. “If prices keep going up, we’ll move further east into Belarus,” she adds.
Another area that Christenson has tackled is distribution. With specialized toyshops shutting down, she realized that new ways of reaching customers were necessary. With that in mind, she created the Käthe Kruse Collectors Club in 1993. She also sent a direct sales catalogue to thousands of new addresses owned by Funky, a catalogue sales company that Käthe Kruse acquired in 2001. “In order to grow, we need to find more direct forms of marketing,” she says, adding that she is launching a new website for selling Käthe Kruse products through the name of Funky.

The Big Celebration

Now, in between rushing to toy fairs in Shanghai and the United States, Christenson is busy preparing for the 100th anniversary of Käthe Kruse to be marked in 2005. To celebrate the occasion, Käthe Kruse is creating a special limited-edition replica doll for the serious collector. Only 500 dolls will be made, and they will retail for 1,100 euros apiece. “The last time we offered a special edition doll like this, they all sold out in two days,” she says. Earning 550,000 euros in two days would certainly be cause for celebration.

“This job is so much fun, meeting people and making things happen,” says Christenson, returning to the recurring theme of her professional life. Her charm and enthusiasm for business no doubt contributed to her being recently invited to become a member of IESE’s International Advisory Board, where she will share her business insights along with 33 other CEOs from 15 countries who advise IESE on changes in international business and economics, and their impact on the corporate world and management education.

Her business experience has also been written up as a case study for class discussion by IESE MBAs. “I’m looking for new ways to market our products over the next 10 years,” Christenson is quoted as saying in the case study. Perhaps a future generation of IESE MBAs will be able to offer this fun-loving entrepreneur a few ideas to toy with.