Introduction
Lego is a prolific and exemplary toy company, operating in the last couple of decades, managing to become a household name, an innovation giant, and a profitable business. As a result of smart marketing and innovation decisions, the organization was able to effectively utilize its existing assets in order to stay competitive in a globalized environment. While the Lego success story is not without its problems, there are significant business lessons that can be derived from understanding its corporate innovation. This work will examine Lego’s innovation efforts of the 2000’s their basic premises and the effect they had on the brand’s future developed. As a result, a comprehensive understanding of Lego’s storied history will be achieved, and prominent examples of product innovation will be discussed.
The Problem in the Early 2000’s
In 2004, the Lego company was faced with a changing global climate. The results of technological innovation and globalization rapidly begun began an important consideration, and leadership understood the need to innovate. Through innovation, the company could attract attention to its products, find lasting customers and differentiate itself from the competition. It was necessary for Lego to pursue change, but the possible options were diverse. The company needed to strike a precise balance between utilizing its strong sides and finding new avenues for profit and product design.
Pursuit of Change
Among the possible options, the prospect of branching out was prominent. Much like other toy brands around the world, i.e. Hasbro and Barbie, the Lego company has the capacity to widen its range of products and diversify. In the early 2000’s, the company leadership decided to do exactly that, hiring new talent, increasing building block numbers and introducing many Lego-centered experiences. Amusement parks, consumer electronics, video games, fashion and lifestyle products – Lego has attempted to infiltrate many diverse markets in order to establish itself as a prominent player. However, this strategy proved to be extremely ineffective. Audience engagement was low, and most of the products introduced during this era turned out to be failures. In addition, the use of more materials and a larger workforce increased the financial strain of Lego production, bringing with it financial losses. As a result of the initial pursuit of diversification, the Lego Company has almost fully went bankrupt (Knowledge@Wharton). A different approach towards staying relevant was needed urgently, and a hope for a better future came with the new company leadership.
Commitment to Change and Brand Reimagining
Jørgen Vig Knudstorp, as the new CEO of Lego in 2004 begun the initiative towards proper brand development. Change was badly needed in order to match the existing and evolving competition, as well as save the company from financial ruin (Davis, 2017). Instead of spreading out into different segments of the market, the company decided to turn to a more focused effort, utilizing its strengths to its advantage (Davis, 2017). The decision helped mitigate costs, promote innovation and root any potential change in company’s core competencies.
What Was Accomplished
The size of company staff was drastically reduced, cutting costs on wages and getting rid of the bloated management system. In addition, the Lego brand has decided to shift back towards focusing on its building block brand, making improvements to the already existing formulas and basing their advancement off them. As a result of sweeping changes in management, direction and production, Lego was able to gain back its popularity and amass profits like never before. The company’s success can be attributed to several key factors, each of which should be discussed separately.
Key Factors of Success
- Fostering a customer-focused creative process. The Lego company realized the importance of its community, and effectively used it in order to improve its standing. Listening to children and watching them play became an irreplaceable part of the product design process, where Lego experts analyze consumer’s behavioral patterns (Knowledge@Wharton). Seeing which products children enjoy, how they play with them, and which aspects require improvement becomes vital towards mediating change. Furthermore, other fan communities, such as competitions and conventions became a source of corporate benefit (Knowledge@Wharton). Engaging with their customers, the Lego company was able to foster a sense of connection and better understand the needs of their buyers
- Sticking to the basics, and improving upon them. Instead of working to expand their brand name into various fields, the Lego company stayed dedicated to its work of manufacturing Lego building blocks, which were and remain a central recognizable product for the brand. Taking advantage of the most prevalent aspect of their corporate persona, Lego improved upon older techniques and refined their products. From the better and more sustainable plastic use to a more connective design, almost every subsequent design decision was focused on improving Lego’s strong foundation
- Keeping the number of suppliers small while using large distribution channels. The organizational decisions of the Lego company helped it to avoid unnecessary costs and maximize profits (Greenblatt, 2015). A small set of material suppliers stabilizes pricing, while a well-established net of distributors guarantees the intended audience reach. Being smart with their resources gave Lego an opportunity to grow.
The Results
Overall, it can be said that the Lego Company is among one of the most profitable, popular and well-known brands today. Owing to their distinctive presentation and a prolific toy line, the organization managed to become successful and introduce change that was needed to stay relevant. A use of a strong foundation, coupled with the desire for excellence gave Lego the golden opportunity for professional greatness.
Reference List
Davis, J., 2017. How Lego clicked: The brand that reinvented itself | Johnny Davis. The Guardian.
Greenblatt, S., 2015. The Lego Success Story: Getting everything to awesome!Technology and Operations Management.
Knowledge@Wharton, Innovation almost bankrupted Lego – until it rebuilt with a better blueprint.Knowledge@Wharton.