BUILDING NEW WORLDS
President and CEO
The Rodon Group and K’NEX Brands
The Rodon Group had been successful in the plastic injection molding field for decades when the company’s chairman decided to follow his dream of making building sets that would allow children to make the worlds they imagined a reality. K’NEX Brands was born. Today, president and CEO Michael Araten leads both branches of the company, overseeing a period of tremendous expansion and innovation.
Q: The Rodon Group started in the 1960s, focused on plastic injection molding. In the 90s, the company branched out into toys, creating K’NEX. How did that come about?
A: Joel Glickman, our chairman, was an erector-set kid growing up. He thought he could make a modern and more versatile version that was easy to use, fun, and didn’t cause you to get cuts and bruises from the old metal parts.
His vision led to the original 22 color-coded rod and connector building system. He wanted the parts to be color-coded so that children all over the world (no matter their native tongue) would be able to build cool stuff without written directions. He had a plastic injection molding factory (our legacy business) and was able to fully develop the K’NEX system.
While he originally planned to be a manufacturer for a large toy company, all the toy companies turned him down. So, as he said then, “If they are that dumb, what they know can’t be hard to learn, so we will do it ourselves.” His relentless drive led to a test with Toys R Us in two cities in 1991. That went very well, and K’NEX went nationwide in 1992, and into Europe and Canada in 1994. We now ship to approximately 40 countries.
Q: The Rodon Group and K’NEX are both family-owned businesses. What are some of the unique challenges you face in this environment?
A: We see the family ownership as providing a core set of values that guide us every day. We center our values around integrity, accountability and communication. We also take a long-term view, and have the luxury to do so because we are not pressured to achieve quarterly results that you often see in the public company context.
Q: How do you ensure the K’NEX building sets and toys stay relevant, given how rapidly trends in that industry can change?
A: We work hard to listen to consumers, identify significant trends and keep the sets fun. What is great about building toys is that all children go through a stage of development where they attempt to create with their hands what is in their imagination. Since you can build anything you can imagine with K’NEX, there is a natural connection (at least until we all evolve into floating heads).
We focus on building worlds kids love. We actively solicit reviews of our sets from consumers and the blogging community; we use focus groups; we speak to school teachers and we speak to our retail partners. We see STEM (Science, Technology, Engineering and Math) as a major trend that helps drive our future development. We also know that millennial moms are looking for toys made in the U.S., and fun toys that make their kids smarter. As we develop our product line every year, we seek to deliver on all of this.
Q: A big milestone for K’NEX was securing the licensing rights to make Sesame Street products. Can you tell us more about that deal and what it meant for the company?
A: Sesame Street is the most revered children’s program in American history. A key strategy for us is to make sure we have relevant building worlds for every key age category, including preschoolers. In addition, licensed toys are around 35 percent of all toy sales, and at the time (2007) we had almost no licensed toy sales. Our dream was to do a deal with Sesame Street because we loved the brand and we knew it would give us total credibility with every other potential licensor that we had our eye on. That deal catapulted our brand awareness, our sales and our innovation. It was a seminal moment, and I will be forever grateful to the team at Sesame Workshop.
Q: During the Great Recession, K’NEX made the decision to move its manufacturing back to the U.S. from China. Why was that decision made and how has it worked out?
A: The decision stemmed from our goal to keep our people employed, which was a major challenge as the Great Recession hit. As we examined the decision, we also saw tremendous opportunity for supply-chain advantages (namely speed to market) and a branding advantage (namely Made in the U.S.A.). Since making that decision, our speed to market is three times faster; we can make and ship toys during the holiday season; and we were recognized by President Obama as a leader in re-shoring. He visited our factory in November 2012.
Q: The Rodon side of the business is still going strong as well. What new initiatives do you have in the pipeline there?
A: We have developed a digital-content and lead-generation engine that continues to bring us new projects. We are enhancing that with social media content and aggregating relevant content for our injection molding audience. We have also developed a proprietary line of window component parts and see this as a growth area for us in the years ahead.
Q: What are your plans for expanding K’NEX and Rodon into new countries/markets in the coming years?
A: Between now and 2020, we will expand our UK division (which launched in mid-2014) and expand our ecommerce footprint. We have set a goal of 40 percent of our revenue coming from outside the U.S. by 2020. We are at just over 20 percent today.
Q: Before you joined the company, you were a lawyer in private practice. Why did you decide to make the change?
A: How could anyone say no to making toys?
Q: What advice do you have for other entrepreneurs?
A: One of my favorite quotes is, “The wise man knows what he does not know.” I make sure I surround myself with people who have much greater expertise than me. It is the collection of diverse talent that allows us to grow and thrive.