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With the Internet going on all cylinders in 2004, and Lego experiencing the worst loss in their history, many thought the company wouldn't survive the new era.

It was in that atmosphere that Jørgen Vig Knudstorp was promoted to CEO of the company in October of 2004. Many believed his career would end, along with the company. so far he has proved them all wrong.

During these few short years, Knudstorp has brought the company from a loss of 374 million USD, to a profit in 2006 of $281 million USD. The results of 2007 will be revealed in February, and should reveal growth that will lead their market, as the company as grown by about 24 percent in 2007.

Here's some of Knudstorp's steps he took to make the successful transition:

* Refocused the business on its core strengths.

When Knudstorp took over the business, they has attempted to extend the brand by merchandising. It was a disaster, and overall, nobody was buying their branded products.

"It has been a process of getting back to what we are all about, which is putting two Lego bricks together, tossing them in the air and seeing that they don't fall apart," said Knudstorp.

* Changed the business culture.

In an amazing statement, Knudstrop said he had to reteach people at the company that they were there to make money. "We had to change the culture," said Knudstrop. "I told people: we're actually here to make money."

They had lost their focus on core strengths and why they existed. Instead the prior management had almost driven the company into the ground by "keeping its staff happy than on making money." They had forgot they were a business.

* Cutting Costs

With the above two steps in place, Knudstorp knew he had to attack the waste and costs at the company, and aggressively took his knife out.

He got rid of perks like the company jet, while also having to do the tough task of cutting jobs.

Another way of cutting the growing cost of doing business, was to outsource the distribution, packaging and production plant operations of the business.

* Asset Sales

Along with dropping out of the branded merchandising game, the company also sold off its Legoland theme parks to the private equity group Blackstone, again, so it could focus on its core strengths.

* Organic Growth

Knudstrop has no interest in acquisitions as a mean of growth, and said with their "unique brand," they are focused solely on organic growth.

He acknowledges that while cost cutting was necessary, that was the easy part. Now facing the challenges of a changing marketplace and growth, is what's ahead for the company.

The major strategy there is to target techological innovation and emerging markets.

With the industry changing a lot from the general abandonment traditional toys, he knows digital is the place to go in the innovation area, and he says over the next 10 years Lego will be strongly particating in that reality. At the same time, he said he can't see the company leaving the plastic bricks and pieces that made the company what it is.

It's actually a good way of continuing to cater to you core user while building a further customer base without alienating them. A good strategy.

One popular website they already have is the Lego Factory, where users and fans can build their own models and then have the pieces needed shipped to them. You can also show off your own creations to other interested parties. You even have a Lego digital designer you can use to build your creations on your computer.

The Internet should be an especially strong place to put the lego brand on, as there are so many creative things that could be done with the product.

Lego will definitely be a different company over the next years, but from the steps being taken, it looks like it'll continue to prosper.