the lego case study

HBS Cases: LEGO

Although it isn't part of the admissions criteria, experience playing with LEGOs can come in handy at Harvard Business School.

When Stefan H. Thomke teaches his new case about the iconic toy company, he gives students eight-studded LEGO building bricks to figure out how many different ways they can be combined. Thomke's experience goes back a long way—as a kid growing up in Germany he participated in a LEGO competition. As an adult, though, his interests lie more in the business behind the bricks. "When you've written many cases you have a gut feeling that one like this could be really great," he says.

Thomke, the William Barclay Harding Professor of Business Administration, wrote the case with Harvard Business School's Jan W. Rivkin, the Bruce V. Rauner Professor of Business Administration, and Daniela Beyersdorfer, associate director of the HBS Europe Research Center.

LEGO explores how the company-one of the most profitable toymakers in the world-grew to global dominance from humble beginnings; the mistakes that led it near bankruptcy; and why one turnaround attempt failed while a second succeeded. LEGO executives were unusually supportive about the case-writing process, Thomke says. "We had access to everybody; they wanted the story to be told truthfully, with all the good and the bad."

Building At The Start

Part of that access included a visit to a wood craftsman's workshop in the small town of Billund, Denmark, where LEGO began, in 1916. Carpenter Ole Kirk Kristiansen eventually shifted the business from making houses and furniture to crafting wooden toys. He based the name of his new venture on the Danish words for "play well" (and, as it turned out, the Latin words for "to assemble"). His motto "Only the best is good enough" would later be carved into a wooden plaque and hung in the workshop. These themes of good play and quality products were both bedrocks and touchstones for future generations of LEGO toy makers.

Godtfred Kirk Kristiansen represented the second generation, working alongside his father at age 12. The LEGO brick played with by kids and adults around the globe came into being during Godtfred's tenure. He considered it a unique, sturdy, simple product—a system—that offered endless opportunities for creative fun, and drew up a list of product characteristics including "long hours of play" and "quality in every detail" that was distributed to everyone in the company.

Like his father, Godtfred paid careful attention to every aspect of the business, applying, for example, his knowledge of material science and production technology to the brick-manufacturing process. It's because of these precise specifications that bricks made under his watch are interchangeable with those available today. Godtfred's cautious nature extended all the way to the profit margins: he championed slow, steady growth. Because of this, it could take years for a new product to go to market. Green bricks, for instance, appeared in play sets only after a decadelong decision-making process-and the idea to include them came from Godtfred's son (and third-generation toymaker), Kjeld.

The snail's pace served the company well, as did the grandson of its founder. Under Kjeld's management, product demand was so high at times that executives actually found themselves discussing ways to slow sales.

A Shock To The System

That all changed in the early 1990s as seismic shifts pounded the toy market. Big Box toy discounters trampled mom-and-pops and lowered prices dramatically. Meanwhile, birth rates declined, children had less time to play and not much interest in toys that didn't offer instant gratification. "These changes did not play well to our strengths," observed current CEO Jørgen Vig Knudstorp in the case.

Serious jolts were also taking place in the LEGO Group. Out of work for a year following a serious illness in 1993, Kjeld appointed a five-person management team to help him run the company when he returned. The group focused mainly on driving growth. When a benchmarking study revealed LEGO's global name recognition was on par with industry giants like Disney, the team started churning out new products and ideas to leverage the brand's untapped value. A line of LEGO-branded children's wear was created and a division of the LEGO Group was charged with pitching book, movie, and TV ideas. LEGO building sets became increasingly complex with more unique components.

While the number of LEGO-branded items grew, sales did not, and in 1998 the company suffered its first financial loss. "Their top-line growth was slowing down but their cost was accelerating, so they were starting to lose some significant money," says Thomke.

Danish turnaround expert Poul Plougmann was hired to reassemble LEGO and staunch the red ink. "He comes in and … does things by the book," says Thomke. "He lays people off, he streamlines some things, he globalizes." And yet the financial picture grew worse. "He's basically going by the turnaround book, but it doesn't work."

One continuing problem: the company's growing complexity was choking it. Adding more bricks made products harder to assemble, forecasts harder to determine, and inventory harder to manage. Depending on the kit, there was either too much inventory, or no inventory at all, and restocking could take months.

"You had this multiplier effect of added complexity that went through the entire supply chain," Thomke says.

The LEGO Group had also gotten too far away from the core values it had been building on for the better part of a century. The toymaker found itself needing to turn around its turnaround.

Outside The Family

Enter Jørgen Knudstorp. He was just 35 years old when Kjeld promoted him from director of strategic development to CEO in 2004. (Kjeld retired that same year.)

Like Plougmann, he had no family ties to the company. Unlike Plougmann, his turnaround attempt succeeded. Knudstorp's slow-it-down approach of careful cash management, focusing on core products, and reducing product complexity certainly contributed to that success. It would also take re-engaging with customers, many of whom passed a love of LEGOs to their children while still connecting with the toys themselves. "One of the insights Jørgen had when he became CEO was that he needed to reconnect with the community [of loyal LEGO fans], one of the most powerful assets the company had," says Thomke. "It was a huge part of the comeback."

Knudstorp worked hard to define the core business of the company. "How you work with, and experiment outside of, the core of your business is part of that balance," explains Thomke.

Knudstorp recognized that innovation was part of that core, but he'd also seen the result of unconstrained creativity, so new product design began to be informed by market research, user feedback, and how well the toys matched the vision of quality creative play laid out by its founding fathers. Putting parameters on how people innovate had the paradoxical effect of making them better at it.

Reining in the creative process was part of a larger push by Knudstorp to reduce overall complexity within the organization. On the supply chain side, he did away with many of the unique brick components added during Plougmann's tenure, and eventually decided to bring brick manufacturing back in-house to ensure quality control.

Finally, Knudstorp made big changes to the management team, firing five of seven manufacturing executives and appointing a new leader for the team. A psychoanalyst was brought in to teach the management team how to identify decision-making made by logic versus emotion.

Sustainable And Balanced

It turns out that LEGOs promote lifelong learning. While the bricks themselves teach children the fundamentals of construction and creativity, the company's almost century-old history of management change has important lessons for businesspeople. "Managing sustainable growth is also about managing a balanced business system," says Thomke. "Complexity is something you need to watch very closely."

Controlling complexity, clarifying the core of its business, and engaging the larger community helped save the LEGO Group. Although he was not a Kristiansen by birth, Knudstorp's management style and business ideals closely mirrored those of its founding fathers. Only the best was, and is, good enough.

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How Lego clicked: the super brand that reinvented itself

The revival of Lego has been hailed as the greatest turnaround in corporate history, ousting Ferrari as the world’s most powerful brand. Johnny Davis reports

F rom its founding in 1932 until 1998, Lego had never posted a loss. By 2003 it was in big trouble. Sales were down 30% year-on-year and it was $800m in debt. An internal report revealed it hadn’t added anything of value to its portfolio for a decade.

Consultants hurried to Lego’s Danish HQ. They advised diversification. The brick had been around since the 1950s, they said, it was obsolete. Lego should look to Mattel, home to Fisher-Price, Barbie, Hot Wheels and Matchbox toys, a company whose portfolio was broad and varied. Lego took their advice: in doing so it almost went bust. It introduced jewellery for girls. There were Lego clothes. It opened theme parks that cost £125m to build and lost £25m in their first year. It built its own video games company from scratch, the largest installation of Silicon Graphics supercomputers in northern Europe , despite having no experience in the field. Lego’s toys still sold, particularly tie-ins, like their Star Wars and Harry Potter -themed kits. But only if there was a movie out that year. Otherwise they sat on shelves.

“We are on a burning platform,” Lego’s CEO Jørgen Vig Knudstorp told colleagues. “We’re running out of cash… [and] likely won’t survive”

In 2015, the still privately owned, family controlled Lego Group overtook Ferrari to become the world’s most powerful brand. It announced profits of £660m, making it the number one toy company in Europe and Asia, and number three in North America, where sales topped $1bn for the first time. From 2008 to 2010 its profits quadrupled, outstripping Apple’s. Indeed, it has been called the Apple of toys: a profit-generating, design-driven miracle built around premium, intuitive, covetable hardware that fans can’t get enough of. Last year Lego sold 75bn bricks. Lego people – “Minifigures” – the 4cm-tall yellow characters with dotty eyes, permanent grins, hooks for hands and pegs for legs – outnumber humans. The British Toy Retailers Association voted Lego the toy of the century.

When The Lego Movie came out in 2014 the film snob website Rotten Tomatoes awarded it a 96% approval rating: only Oscar nominees 12 Years a Slave and Gravity matched it. This year’s follow-up, The Lego Batman Movie , outperformed the last “proper” Batman movie, Batman v Superman: Dawn of Justice , to such a degree that DC Comics now faces a genuine problem: audiences overwhelmingly prefer the Dark Knight in his pompous and plastic version voiced by Will Arnett , rather than Ben Affleck ’s portrayal.

Lego’s revival has been called the greatest turnaround in corporate history. A book devoted to the subject, David Robertson’s Brick by Brick: How Lego Rewrote the Rules of Innovation , has become a set business text. Sony, Adidas and Boeing are said to refer to it. Google now uses Lego bricks to help its employees innovate.

Lego’s saviour is the aforementioned Vig Knudstorp – a father of four, perhaps not uncoincidentally – who arrived from management consultants McKinsey & Company in 2001 and was promoted to boss within three years, aged 36. “In some ways, I think he’s a better model for innovation than Steve Jobs,” Robertson has said.

Last month I flew to Billund, a small town in the Jutland peninsula where Lego was founded. The landscape was flat and grey, but as I drove from the airport a large primary coloured arm or head would occasionally appear though the pine trees: the Lego Group owns several buildings here and has decorated the landscape accordingly. I was immediately in a good mood.

“Billund was built to function, not to please,” explained Roar Trangbaek, Lego’s cheerful, bearded publicist. “There’s not a lot of fun here.” He meant there wasn’t a lot to do there – it’s hard to imagine the nightlife is up to much – but given that 120m Lego bricks are manufactured here every day, fun was very much the point of the place. As if to prove it, Trangbaek handed me his business card. It was a Minifigure of himself.

The following morning the Lego Group was due to announce its latest annual results. Today was an opportunity to meet some of its key employees, tour the factory and be among the first to step inside Lego House – a 130,000sq ft marvel that will open in September, and is expected to draw 250,000 visitors a year. It has been designed by Bjarke Ingels , the hottest name in architecture right now, whose commissions include Google’s HQ, the new World Trade Center and last year’s Serpentine Pavilion. Ingels certainly seems to have enjoyed himself: Lego House resembles 21 giant Lego bricks stacked into a 30m tower. Visitors can climb up to the rooftop garden and down the other side, pausing to take in attractions, restaurants, play zones and a gallery dedicated to fan-made Lego extravaganzas. Life-sized Lego sculptures had been placed around the interior – a cop, a firefighter – while real-life construction workers in hi-vis tabards beavered away around them, a surreal sight.

Lego had compensated for the disruption to the town’s shops by allowing them to exclusively sell Lego kits of the Lego House, the only place in the world they’ll be available. (For Lego’s numerous cult fans, this is a massive deal.)

Vig Knudstorp rescued Lego by methodically rebuilding it, brick by brick. He dumped things it had no expertise in – the Legoland parks are now owned by the British company Merlin Entertainments, for example. He slashed the inventory, halving the number of individual pieces Lego produces from 13,000 to 6,500. (Brick colours had somehow expanded from the original bright yellow, red and blue, sourced from Piet Mondrian , to more than 50.) He also encouraged interaction with Lego’s fans, something previously considered verboten. Far from killing off Lego, the internet has played a vital role in allowing fans to share their creations and promote events like Brickworld , adult Lego fan conventions. A year before James Surowiecki’s landmark book The Wisdom of Crowds was published, Lego launched its own crowdsourcing competition: originators of winning ideas get 1% of their product’s net sales, designs that so far include the Back to the Future DeLorean time machine, the Beatles’ Yellow Submarine and a set of female Nasa scientists.

“Lego has this incredible ability to engage with people and that has single-handedly enabled it to weather very, very difficult seas,” says Simon Cotterrell, from brand analytics firm Interbrand. “What’s made them successful over the past 10 years is their ability to create new entities, movies, TV shows, by partnering with brilliant people. They’ve said: ‘We might not make as much money if we outsource it, but the product will be better.’ That mentality is very Danish. It comes from saying: ‘We’re engineers. We know what we’re good at. Let’s stick to our knitting.’ That’s a very brave thing to do and it’s where a lot of companies go wrong. They don’t understand that sometimes it’s better to let go than to hang on.”

It also started making hit toys again. As well as putting a focus back on classic Lego lines like City and Space, it has launched the ninja-themed Ninjago line, Mindstorms, kits that allow you to build programmable Lego robots, aimed at teens. And for grown-up kids, Lego Architecture, replicas of the Guggenheim, Burj Khalifa and Robie House , that last one not for the feint-hearted or time-poor – it contains 2,276 bricks. Most impressively for a company with a customer base that in 2011 was 90% boys, it finally cracked the girls’ market. Lego Friends features a reconfigured “Mini-doll” and centres on five characters in the fictional Heartlake City. None of this has happened by chance. Lego is said to conduct the largest ethnographic study of children in the world.

“We call it ‘camping with consumers’,” says Anne Flemmert Jensen, senior director of its Global Insights group. “My team spends all our time travelling around the world, talking to kids and their families and participating in their daily lives.” This includes watching how kids play on their own and with friends, how siblings interact and why some toys remain perennial favourites while others are relegated to the toy box. Children are fickle – as the makers of forgotten “must-have” Christmas toys, like Pogs and Furby, will concede.

Ninjago was crowdsourced: its first iteration featured skeletons as enemies because tests proved they were the most popular baddies among six-year-old boys, globally. “Ninjas crystallised themselves because we were, like: ‘What’s the greatest hero entry point?’” says Cerim Manovi, senior design manager and creative lead on the line. “We showed them superheroes, everything – but ninjas just grabbed kids right there.”

Lego Friends took four years of research (plus a $40m global marketing push) to get right.

“One of the main things was they couldn’t really relate to the Minifigure,” says Mauricio Affonso, Friends’ model designer. “It’s too blocky. Boys tend to be a lot more about good versus evil, whereas girls really see themselves through the Mini-doll. They wanted a greater level of detail, proportions and realism.”

Lego Friends sets (bakery, amusement park, riding camp, etc) tend to feature something else missing from boys’ sets: a loo. The boys don’t care, the girls’ pragmatism demanded it.

Roar Trangbaek shows me the original Lego house, where the company’s founder Ole Kirk Christiansen lived. It’s now a private museum that tells the Lego chronology through artefacts, packaging and toys. More than one adult visitor has been known to burst into tears when confronted by a key line from their childhood: in my case the Space Lego of the mid-1970s. (Lego gets inundated with requests for re-releases, but they won’t do it. Their focus is the kids of now and tomorrow, not yesterday.) Christiansen was an expert carpenter when the Great Depression hit. He figured the one thing people would always find money for was toys for their children. His company motto is carved into a plaque here – “det bedste er ikke for godt” (Only the best is good enough) – something borne out when Christiansen’s son Godtfred returned home one day to proudly inform dad he’d saved them some cash by only applying two of the usual three coats of varnish to a wooden duck. He got a tongue- lashing for his trouble.

“It is a good story, but it’s also a true story,” says Trangbaek.

In 1946, against everyone’s advice, the family invested in a newfangled plastic-injection moulding machine. Later they adapted Croydon-based inventor Hilary Fisher Page’s self-locking bricks (billed his “sensible toy”) – plastic cubes with two rows of four studs to enable stacking. The final part of Lego’s success clicked into place in 1958 when it created its “system”. Where previously they’d made toys of all shapes and sizes now every brick fitted with every other: everything was backwards compatible. “We’ve got the bricks, you’ve got the ideas,” advised a 1992 Lego catalogue. A mathematician recently deduced that just six eight-stud bricks of the same colour could be combined 915,103,765 ways.

During the factory tour we saw some of those bricks being created. Here, 768 moulding machines work 24/7, 361 days of the year. There was a constant hiss: the sound of raw granulate being fed into the vast machines. Then something akin to Wonka magic, brightly coloured pieces of joy materialising at the other end. Lego’s quality control and precision is rigorous. As any parent who’s trodden on a piece knows, Lego is hard. The bricks have to be strong enough to hold together, but not so strong they can’t easily be pulled apart by a child. They call it “clutch power”. It is a huge industrial process, with similar plants in Hungary, China and Mexico. “Our idea is to have factories located close to key markets,” Trangbaek explained. Most companies make product where it’s cheapest then ship it. Not Lego. “It’s much more costly for us to lose a sale,” he said. “If you go to a toy store and you don’t find the product there on the shelf, you will be disappointed. But you will also not leave the shop without another toy.”

Lego is increasingly concentrating on bridging the physical and the virtual. This year it rolled out Lego Life, a social network for kids too young for Instagram to share their creations, gaining “likes” from peers and Lego characters alike. “Lego Batman can comment in character. ‘That’s awesome – would have been better in black and yellow,’” says Dieter Carstensen , head of digital child safety and the Lego Life team.“That kind of stuff.” There’s also Nexo Knights, a video game where powers are unlocked by scanning Lego pieces. They’re researching VR and AR. “Some of the things we’re looking at are very near to being feasible now,” says William Thorogood, an irrepressibly bouncy Brit, and the senior innovation director with Lego’s creative play lab. “Other things are very exciting, but probably not feasible for 10 years, depending on how mature the tech becomes.” Later this year we can look forward to The Lego Ninjago Movie , whose tone looks every bit as irreverently daft as its predecessors.

The next morning in Billund, Lego announced the highest revenues in its 85-year-history. Since December the company has been run by another Brit, Bali Padda, the first non-Dane in charge, after Vig Knudstorp moved into a new role to expand the brand globally. Asia, with its booming middle class, is a focus.

“The reality is that the last few years the growth has been supernatural,” Julia Goldin, Lego’s chief marketing officer, tells me. “When you look at the proportion of revenue that’s coming out of the mature markets it becomes more and more challenging with the level of penetration. But we look at every year starting at zero because you have to recruit every child again and make the brand exciting for them. That becomes a good challenge, of course.”

Earlier I had met Bo Stjerne Thomsen, the director of research and learning with the Lego Foundation, an independent body that owns 25% of the Lego Group and studies early childhood development through play. (It has partnered with Unicef in South Africa, and funded the world’s first professor of play , at Cambridge University)

Thomsen produced two plastic bags containing a few red and yellow bricks, part of a basic kit they use to engage learning.

“Quickly build a duck,” he instructed me. “Everybody can usually do it in 40 seconds.”

We set to work. Thomsen’s duck had two outstretched wings. Mine had a red bill, a red slab for feet and a yellow block for a tail.

“Oh, that’s fun!” he said. “I like that.”

There was no wrong or right duck, of course. That was the point. “It’s about the process of making and investigating and learning,” Thomsen said.

“How fast do you think anyone can do a duck?” Thomsen asked.

I’m not sure, I said. Ten seconds?

“Ten seconds? OK, let me count.”

Then he slammed another set of pieces straight down on to the table.

“That’s my duck!” he beamed. “I just sliced it up so it’s ready for the oven. Ha ha!”

Lego is a serious business. It just happens to be in the business of fun.

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Ideas Made to Matter

Innovating in existing markets: 3 lessons from LEGO

Beth Stackpole

Sep 21, 2021

With the invention of the interlocking plastic brick, a favorite toy of generations, LEGO was a poster child for business innovation — that is, until it wasn’t.

The Danish toymaker’s trajectory from industry trailblazer to the brink of bankruptcy to sustained recovery shows there’s more to innovation than sheer luck or a wholesale focus on disruption.

“No innovation lasts forever,” said David Robertson, a senior lecturer in operations management, in a recent webinar hosted by MIT Sloan Executive Education. “Sometimes you get hyper growth for a couple of years, sometimes you get steady growth for longer. But innovations run their course.”

From its inception in the 1930s to its brush with bankruptcy in 2003 and its subsequent turnaround, LEGO tried every approach in the book to managing innovation, some resulting in spectacular success and others in great failure, said Robertson, author of “ Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry .”

Based on years of research and what he’s seen at LEGO and other companies, Robertson advocates for an expansive approach to innovation — helping customers get more value from existing products by offering innovative complementary products, services, and business models.

“It’s how Apple turned itself around, it’s how GoPro got five years of 90% growth, it’s how Sherwin-Williams gets twice the price per gallon of paint than other paints that are functional equivalents,” explained Robertson, who also teaches an executive education course on the topic . “Marvel Comics turned itself around in the same way.”

Among the innovation lessons to be learned from those firms: Have a variety of tools in the toolbox and don’t be afraid to use them, listen deeply to your customers, and prepare for a steady diet of continuous reinvention to remain relevant, even as an iconic brand.

LEGO’s brick-by-brick approach

LEGO was a small family business that grew steadily until the management reins were handed off in the late 1970s to the grandson of the founder and newly minted MBA, Kjeld Kirk Kristiansen, who quickly unleashed a wave of innovation.

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With the younger Kristiansen at the helm, LEGO branched out into the Technic brand — a more sophisticated building system to attract older children — and launched the first mini figure and fantasy action play sets, fueling 15 years of growth during which the company doubled in size every five years.

Growth slowed in the 1990s for a number of reasons, including a rise in digital play experiences from companies such as Nintendo and Sony, the rise of Toys “R” Us and other big box stores, the expiration of LEGO’s brick patents, and the relocation of production of Mattel’s and Hasbro’s products to China, lowering the cost of their competitive toys.

LEGO responded in 1999 by refocusing its innovation efforts on revolutionary products that would reinvent the nature of play. “They became convinced that if all they offered was another box of bricks, they would become a commodity,” Robertson said. “They believed they needed to disrupt themselves before somebody else did.”

After a series of missteps that included the rollout of electronic toys for toddlers and a digitally connected action hero, LEGO found itself nearly bankrupt in 2003. In the rush to innovate, the firm lost sight of its core — physical construction-based play. After layoffs, emergency loans, and other measures aimed at staving off bankruptcy, LEGO turned those innovation miscues into a new strategy — one that precipitated a turnaround and laid the groundwork for further growth.

Among the key lessons that companies with a mature product line can follow to innovate:

Respect what made you great. Sometimes knowing where not to innovate is just as important as knowing where to innovate, Robertson said. LEGO learned that in a new digital landscape it was no longer enough to offer a box of plastic bricks — the brick had become a commodity. But the brick was still necessary, because that’s what customers expected of the brand.

Through trial and error and a number of failed digital-only initiatives, LEGO discovered customers wanted digital experiences that complemented core offerings, rather than replaced them.

Centering innovation around the brick-based construction experience through new stories, games, and experiences, exemplified by the fan-favorite Bionicle product line, is what drove customers back to the LEGO brand and returned the company to profitability.

“You try to understand who your customer is, what they care about — that’s the way we should think about innovation,” Robertson said. “You need to be dating your customer, not fighting your competitor.”

Maintain a customer-centric development process. When the big box stores took over from its ecosystem of small toy stores, LEGO lost an important channel for getting reliable customer feedback. LEGO began to evolve product development practices to support design thinking principles, empowering experts to come up with ideas for new products based on that critical customer input.

Today, LEGO regularly engages children in the process of character development, storytelling, and providing feedback on new playset ideas. “LEGO has a great expression for why they listen to kids when developing new toys,” said Robertson.  “Mads Nipper, the former head of marketing and product development, liked to say, ‘Kids will never lie to you about whether something’s fun or not.’”

Develop a family of complementary innovations to distinguish yourself from competitors. Innovation leaders need to lean on a range of different approaches for innovation, since tactics will vary depending on the scenario and business goals. It’s important to nurture a culture that’s able to shift gears if traditional methods don't deliver desired results.

“You need to learn how to play chords, not keys, on the innovation ‘piano,’” Robertson said. “Pursuing multiple, complementary innovations that harmonize to create something is much better than any one key alone.”

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Open Innovation at Lego – The Back Beat in “Everything is Awesome”

After avoiding bankruptcy in 2003, LEGO has effectively used open innovation to align with customer demands and to become a global leader in toy innovation. Now, can LEGO’s use of open innovation maintain its growth with increasing digital competition?

The Interdependency Between LEGO’s Success and Open Innovation

In the face of digital competition, LEGO’s journey defending its market share has not been all fun and games. With 2017 revenues declining 8% (first decline in over a decade) and layoffs totaling 1,400 [1], LEGO needs a new growth strategy to compete in a slowing industry (the global toy market grew 1% in 2017) [2]. When faced with these pressures in 2003, LEGO’s initial response was to offer variety through new products, such as computer games and theme parks. However, these introductions had unintended consequences, adding complexity for the customer, inventory challenges for LEGO, and supply delays for retailers. [3]

LEGO’s famous turnaround strategy came from engaging its expansive customer base. LEGO utilized The Future Lab to develop low-risk, low-cost innovation techniques that led to rapid creation of minimum viable prototypes. [4] The goal was to generate customer feedback on a small scale before making substantial investments, illustrating LEGO’s philosophy that, “people don’t have to work for us to work with us.” [4] To further this practice, the company launched, LEGO Ideas , an online crowd-sourcing platform, allowing customers to share and to vote for ideas they wished to see as additions to the product line. LEGO Ideas yielded hundreds of suggestions annually, employing social media to generate actionable data. Focusing on products that would sell, LEGO was able to reach new audiences through its extensive physical footprint and brand awareness. Two successful efforts were LEGO Architecture (iconic building sets), which increased LEGO’s popularity with adults, and LEGO Friends, increasing its female presence. [5]

Open Innovation – Still the Answer

Now, to understand its next growth phase, LEGO is using open innovation to strategically increase its global footprint, widen its target audience and define its long-term product strategy.

Pathways to Just Digital Future

In the short-term, LEGO is expanding in China by partnering with Tencent (Chinese internet company) to create a safe digital platform for children, allowing LEGO to experiment with digital in a region where it has found some digital success. [6] At its Shanghai stores, LEGO is also launching its exclusive “Future of Shanghai” product. Utilizing a small-scale launch, LEGO offers four different spaces for consumers to build their own future city, generating immediate feedback. [6] Additionally, LEGO is utilizing Indiegogo Enterprise (an innovation validation platform) to test ideas through pilot projects, the first is LEGO FORMA , targeting adults looking for a creative outlet. [7] These pilots are being run in limited batches to crowdsource, to rapidly iterate and to ascertain demand.

In the long-run, LEGO is attempting to build a bridge between traditional toys and the digital world. [8] To lay the foundation for this middle ground, LEGO’s red Duplo train is an opportunity to test the market’s appetite for products that offer this in-between, with an optional mobile app. [8] Beyond bricks and toys, LEGO has been experimenting with a variety of play experiences in digital  – LEGO Life (children social media network) and LEGO Fusion (virtual mobile app) – and a variety of movie, television series and LEGO-themed playgrounds. [9] LEGO’s initial entry in the digital category has largely failed, while the later initiatives have found commercial success. [9]

Recommendation for the Future

With that lesson, LEGO needs to remember that while digital offerings not only increase competition, they also create a point of difference. LEGO’s value proposition to parents, the purchasers, is to provide children with an alternative to video games and to “do something physical that is good for fine motor skills, 3-D spatial realization, and creative construction.” [5] LEGO can leverage this in the short term and utilize open innovation to understand how it can better penetrate the educational market, increasing products targeted at developmental skills.  In a similar vein, Lego Serious Play , LEGO’s innovation seminars, use 3D models to help business professionals uncover deeper insights and increase performance. [10] LEGO can diversify its growth by expanding these non-play services.

To deepen its open innovation strategy long-term, LEGO should increasingly focus on outbound innovation, generating ideas with suppliers and retailers to foster successful partnerships. [11] This will combat the typical problem with open innovation and rapid prototyping – as products quickly enter the market, there is little time to innovate downstream processes. [12]

What’s Next?

While open innovation holds great promise for LEGO, the question remains – how do you consistently and effectively incentivize your partners to engage with your efforts? [13] Upon success in finding the right incentives, the question then becomes – what impact will virtual reality have on the toy industry and will open innovation be enough?

Word Count: 799

1)      The LEGO Group, 2017 Annual Report (Denmark: The LEGO Group, 2017), p. 5-6.

2)       “Toy Industry Sales Grew by 1% in 2017,” press release, January 25, 2018, PR The NPD Group, https://www.npd.com/wps/portal/npd/us/news/press-releases/2018/toy-sales-globally-and-in-the-us-both-grow-by-1-percent-in-2017-reports-the-npd-group/, accessed November 2018.

3)      Mocker, Martin and Ross, Jeanne. “The Problem with Product Proliferation.” Harvard Business Review . (May-June 2017): 5.

4)      The Leadership Network, “5 Sustainable Innovation Practices that Saved Lego,” Innovation Management, November 7, 2016, [https://theleadershipnetwork.com/article/lego-sustainable-innovation], Accessed November 10, 2018.

5)      Robertson, David. Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry (New York, NY: Random House, 2013), p. 8-39.

6)      “Lego Video Zone Goes Live on Tencent Video,” press release, May 25, 2018, on LEGO website, [https://www.lego.com/en-us/aboutus/news-room/2018/may/lego-group-and-tencent], accessed November 2018.

7)      “Lego Creative Play Lab Takes Pilot Project to Indiegogo for Open Innovation,” press release, September 27, 2018, on LEGO website, [https://www.lego.com/en-us/aboutus/news-room/2018/september/lego-forma], accessed November 2018.

8)      Milne, Richard, “Lego’s Niels Christiansen: picking up the pieces,” The Financial Times, August 19, 2018, [https://www.ft.com/content/955ec4de-8f3f-11e8-bb8f-a6a2f7bca546], accessed November 2018. – duplo

9)      Robertson, David. “Lessons from LEGO: What do you do when your current growth phase ends,” The Leadership Network – Innovation Management, June 1, 2018, [https://theleadershipnetwork.com/article/lessons-from-lego-what-do-you-do-when-your-current-growth-phase-ends], Accessed November 10, 2018.

10)   Dann, Stephen. “Facilitating co-creation experience in the classroom with Lego Serious Play,” Australasian Marketing Journal 26 (May 2018), p. 121-131.

11)   Supply Management, “Put procurement at heart of innovation, says Lego buyer,” October 16, 2018, [https://www.cips.org/en/supply-management/news/2018/october/put-procurement-at-heart-of-innovation-says-lego-buyer], Accessed November 10, 2018.

12)   Cina, Amelia and Cummings, Stephen. “Open innovation communication – improving strategy implementation in the public sector,” Policy Quarterly Volume 14, Issue 1 , (February 2018), p. 74.

13)   Bughin, Jacques and Chui, Michael. “The next step in open innovation,” The McKinsey Quarterly (June 2008), p. 3.

Student comments on Open Innovation at Lego – The Back Beat in “Everything is Awesome”

As a huge LEGO fan as a kid, I find this really fascinating. It’s noteworthy to see how LEGOs, which are predominately physical toys, have been able to leverage the digital world to get into open innovation. It’s interesting that your recommendation is to focus on the innovation with suppliers and retailers — my immediate thought would be doubling down on the connection with their end users, but I can see how the other folks in the supply chain play a big part.

To your final question, my bet is that LEGO attempts to bridge the gap between their physical toys and VR, not making the physical bricks entirely obsolete. It seems similar to the leap that was made by the LEGO Mindworks product that was released many years ago, which introduced motors and other mechanical items that allowed children to program the LEGO creations to move.

Along with Mike, I find it very interesting how this tangible product is venturing into the intangible. My main concern with VR and other purely digital platforms is that if you remove the blocks, is the product no longer LEGO? I believe part of why LEGO has continued to exist in the toy market is because of the universal satisfaction children get from the ability to physically create, destroy and create again. It’s hard to imagine how children could benefit from the motor skill development on a digital platform. To me, removing the blocks leaves you with just another digital game but with the name LEGO on it. Open innovation seems like an exciting method to learn how to better serve the interests of their suppliers, retailers and consumers, but I would caution against sacrificing what makes LEGO LEGO when exploring other digital platforms for their consumers.

Awesome article! I was also a big fan of LEGO as a kid, and was very interested to see how they’ve evolved and survived the bankruptcies of other peer companies like Toys-R-Us. As you cite that LEGO’s survival hinged upon their digital partnerships and open innovation platform, wanted to add one more consideration into the mix – as LEGO partners with more digital partners like Tencent, they should also be wary about the growing rise of anti-screen parents [1]. As kids have become more digitally dependent, parents have in turn become more strict, and we might see a decline in usage, which could force LEGO to pivot once again.

[1] https://www.nytimes.com/2018/10/26/style/phones-children-silicon-valley.html

Good point – I think this is why LEGO is targeting the middle ground between digital and traditional. Specifically, their digital offerings have been very strategically targeted in markets where they’ve previously had local success and strong partnerships, i.e the investment with Tencent and China. Additionally, in the Tencent example, LEGO is directly responding to Chinese parental desire for safer digital platforms for their children. In other offerings, LEGO has been quick to remove failed digital products from the market, keeping with the spirit of open innovation and the idea that “the customer knows best.”

Jaclyn – great work here. Though the product outsourcing seems like a great idea and it has worked well, I’m reminded of something we talked about during our Gap case in Marketing – consumers are very bad at predicting their own future preferences. The issue may be less prevalent here given tastes in toys may be less fickle than tastes in clothes. However, there will be a delay from the time LEGO sources ideas from customers to the time the products appear on store shelves. I wonder if they have much exposure to consumer preferences changing during the “throughput time” of the product. All in, though, it may still yield better results than creating products without consumer input.

That’s an interesting point. I think the beauty of LEGO’s offering is that within their traditional brick toy sets, the end design is ultimately determined by the user. LEGO should keep in might that concern as they offer more specialized products, especially in the digital area, that do not offer this original flexibility to customize output.

Awesome essay, Jaclyn! As a huge Lego fan, I found it very intriguing to see how Lego is trying to interact with the new generation of children. On your first question, I really liked your recommendation that they partner up with retailers and suppliers for further idea generation and product prototyping. That didn’t even cross my mind as I was reading this as I was so focused on the consumer. I think it would be extremely interesting to hear from toy retailers (maybe a store like Target) as they are seeing the daily reactions of children to toys and are also seeing what parents are pulled towards in the aisles.

To your second question, I worry about Lego venturing into VR for children because, as you mentioned, parents want Legos so that their children stay away from screens. Would they lose their current customer base if they moved towards VR? I think a crowd sourcing platform to hear from parents would be critical to ensure they are not losing any part of their customer base to keep up with new technology. One idea that I think could combine the best of Legos and new technology is for children to build a scene with physical Legos and then be able to explore the scene with a VR experience. I won’t lie, I am not sure if or how this is possible, but open innovation is supposed to draw out even the craziest ideas!

Thanks for the comment. I agree that VR is likely too far from LEGO’s core competencies to successfully implement and appreciate you elaborating on the point. My concern was that the impending increase in VR offerings in the video game industry more broadly may significantly increase the competition LEGO faces, challenging the capacity and resilience of Lego’s open innovation strategy to foster growth in the future.

Thanks! I think education is the front where LEGO could potentially succeed in terms of open innovation and commercial success. While LEGO seems to expand into various kids-related categories, I feel have tremendous potential to leverage on new technologies and their adoption by youth. Firstly, while 3D printing is a hot topic among adults, LEGO could easily mimic the learning potential through its existing products. By structuring the construction experience around designing and “printing” new structures with bricks, they can convey complex concepts at entry level. Secondly, LEGO has incredible resources and storytelling capabilities to move older kids into a VR-like experience where they could build larger structures and learn how things work in real life. Based on what kids end up building and learning most efficiently, LEGO can repackage this information into new products and services that tie customers closer to the brand.

I think open innovation is a very relevant alternative for mature and declining industries. The toys industry is a good example of that. The important consideration that LEGO should have in mind is that other industry players are also betting on it. For instance Mattel created My Mattel Ideas, which is a portal for people to contribute with ideas of products (see link below). This doesn’t represent a threaten per se but it is important that LEGO executes the right strategy so this can become a competitive advantage (as you mentioned above).

https://www.mymattelideas.com/ideas/myidea

This is an awesome article — also a childhood lego fan here. This is a fascinating case-study on how a company is using open innovation to grow their companies. Two things came to mind here: 1. How does Lego maintain engagement with Lego Ideas users? 2. Is Lego worried at all about competitors potentially stealing some of the ideas from the Lego Ideas platform? I’d be curious to know the distribution of people who source good ideas on the Lego Ideas platform and what kind of relationship/engagement Lego (the company) has with active users. With these open ideas platforms, how do people find these platforms and what is their average level of engagement. Presumably, you’d like to keep the active users for longer period of time but I wonder how companies incentivize users to stay engaged. On the competitor front, Lego has some unique brand qualities that other competitors cannot replicate but I do wonder to what degree competitors leverage the Lego Ideas platform for “inspiration” and what legal bounds there are about copyright/trademark -ing these open-platform ideas.

All in all, this was a fantastic move on Lego’s part that has clearly yielded positive results for the company and increased brand loyalty amongst its users.

I loved legos as a kid and would definitely consider trying out a product tailored to adults. I had no idea that they were pushing in this direction.

Do you have any insight as to how they’re handling the transition between minimally viable prototype / product –> full product release? I also recently saw that Lego was releasing products focused on teaching young kids to code. This interested me because it opened the door to partnerships with schools and local governments. Do you think that there is similar potential here where Lego could partner with organizations trying to spur creativity among children?

It is interesting that across industries, the challenge for open innovation remains long- term engagement of innovation partners. It may be than in LEGO’s case, there is a campaign or a reward they could provide their innovators (essentially their customers). Another idea is to create a platform for enthusiasts, and provide enough stimulating content to drive engagement. In addition, they may need to find new potential sources of innovation outside of their customer base.

Cool findings, Jaclyn! I’m also a Lego fan, and it breaks my heart a bit to think of them doing poorly. It would also break my heart if they steered too much in the direction of digital, and away from their physical building blocks. Though I agree with you that VR might be a stretch for them, I wonder if you could keep the blocks, and kids could one day “navigate” through the physical structures they build using VR. Or perhaps whatever they built, could be uploaded and inserted into a computer game. I mostly hope that parents are indeed steering their kids away from screens and back to physical toys, which I believe are generally better for their physical and social development. I did find it very cool that Lego let people way in on what they want to see in the future. Seems like the best way to make sure they give their customers what they want! At least the adults..

I agree with Mark’s concerns on the side of the customers not always knowing what they want. I would also like to know which customer age groups are providing this feedback. I remember loving LEGO blocks as a kid, but I am hesitant as to whether the feedback they are getting today is from kids as some of the ideas seem more as coming from adults (architecture does not sound like a child’s ask). If this were the case, I would be concerned that we would be neglecting the very customer base that has made LEGO a favorite toy brand. In this case what would you think would be the appropriate channels to ask for children’s feedback? Do you think balancing a “creative director’s” input and a customer’s suggestion would yield better toys for the future?

Great article. I think Lego has used open innovation effectively. However, from a customers perspective my inputs on innovation will typically be very marginal or in some cases not practical. Lego will have to manage the risk of listening to customers needs too easily. The company has to be rational in terms of what innovations are commercially viable. Also, Lego will need to invest in R&D to develop the next “big thing” in Lego given a customers recommendation is most likely limited to the products he or she has already seen. To really grow dramatically, Lego will have to introduce a product that the customer did not know they wanted in the first place.

Loved the article – thanks, Jaclyn! While I think that Lego has correctly identified the direction it needs to move in to keep up with the digital age and has used open innovation to produce products with known consumer demand, I also think that Lego, with it’s immense brand equity, is uniquely positioned to do something really disruptive in the toy industry. I like your idea of collaborating with the other parts of the supply chain to generate more ideas, and I think that relying on consumer feedback heavily for idea generation can prevent truly novel innovation.

Another random thought – with its digital focus, Lego has the opportunity to make its product a lot more collaborative in nature. I can envision a digital platform that allows children to team up with other children across the world in designing and building anything from a rollercoaster park to a fortress and gamifying the combined results. While I think there’s the very valid concern of Legos being the antithesis of video games, I believe Lego has the ability to add a hands on, tangible aspect to gaming in its quest to build connected toys.

Lego is a well-known brand around the world. It lends credibility on children related projects and has a large group of loyal followers. I would imagine this is why Tencent agreed to partner with Lego in China: Tencent is good at digital products in China while Lego is a major player in the kids’ market. The combination produces a powerful product for children in China. In a similar vein, Lego can seek partners in areas that both Lego and its partner wish to grow into.

As seen in the case of Toys R Us, rival manufacturing and digital distribution competition are bigger threats to brick and mortar stores than virtual reality in the near term. While VR may one day take over, it is difficult to see how parents will replace Lego products, physical toy that is proven to stimulate children’s brain activities, with virtual reality/computer, products that are traditionally known to slow down children’s brain development.

Thanks, Jaclyn. I was not aware of the troubles my beloved childhood toy went through and how they recovered. I’m a bit wary of the reliance on the strategy of crowdsourcing as the primary method for innovation. Mark B. mentioned above and was similarly my thinking as I read your story, it’s something that is exciting and working now but how is the company thinking about a potential trend away from consumer engagement? I’d be curious to see how they think of trends as an organization and how these match with the ultimate consumer. Against virtual reality, I do see the organization as insulated in some ways given their requirement for physical pieces. A move away from this would change who they are as a company and remove many of the selling points they currently have i.e. non-screen, motor development. Lastly, I thought your point regarding moving to non-play spaces would be worth exploring, I wonder how much their brand would stand in the way of business professionals taking them seriously.

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Brick by Brick: A Case Study on LEGO’s Culture of Innovation

by Carla Johnson

December 6, 2022

How does a company swing from scrapping together toys from actual scraps in the Great Depression to becoming a household name to nearly filing for bankruptcy to being one of history’s greatest innovation superstars?

By being really good at building, and rebuilding, one brick at a time.

I’m talking, of course, about LEGO . 

LEGO wasn’t always an innovation success story. Like all large companies, they’ve gone through more than a few ups and downs. But somehow they always managed to turn things around.

Let’s take a look at how they consistently innovated their way into the hearts of kids and adults alike.

How LEGO built itself from nothing

LEGO bricks actually began as scraps of wood in 1932 by Danish woodworker Ole Kirk Kristiansen. Before making toys, he made practical objects like ladders, ironing boards, and farm equipment. The Great Depression made work scarce, so he switched to making toys since scraps were easier to come by than large bits of lumber. But even resourcefulness and innovation didn’t immediately save him. People considered toys a luxury in the Depression, and many of the folks in town couldn’t afford them. Ole often traded toys for food just to survive. 

Fast forward to the 1940s and when the Nazis occupied Denmark. Not only was lumber crazy expensive, but Ole’s workshop also caught fire, and he lost his entire inventory and blueprints.

He managed to hold on to the business until the early 1950s when he met his next roadblock. World War II had made lumber nearly impossible for Ole to get his hands on. Instead, he used a new material: plastic. This is when he developed the patented interlocking system that made the LEGO bricks famously stackable.

LEGOs became wildly successful shortly after.

Success meets a brick wall

By the 1990s, LEGO’s popularity took a hit. The digital era began eeking its way into kids’ games and quickly caught the eyes of the brand’s curious customers. Nintendo was the sexy new stud on the block. (Yes, I’m absolutely going to fit in as many puns as I can.) Small toy shops closed their doors thanks to heavy competition from big box stores like Toys ‘R Us.

LEGO tried to keep up with the new trends in toymaking, even getting into the video game business to keep up with Nintendo. But it quickly became a case of trying too many things, getting away from its core business, and stretching itself too thin.

Teetering on the edge, LEGO barely avoided bankruptcy in the early 2000s. But a few emergency loans kept it afloat long enough to simplify its business and get back to its roots. By chasing every trend in the world of toys, LEGO had lost sight of what they were good at. They recentered their business on their iconic building sets, launching franchise sets including Star Wars, Harry Potter, Indiana Jones , and many other cult favorites.

That one move saved the company.

More renovations

The success of LEGO franchise sets gave the company enough liquidity to experiment again. But this time, they tried something they hadn’t done in years: openly accepting feedback from their fans. The relationship between customers and small toy shop owners used to be their main avenue for customer feedback. But thanks to competition from big box stores, small toy shops were closing and that invaluable feedback was lost. Until 1998.

In 1998, LEGO launched the Mindstorms robotics kits, a combination of hardware and software that let fans build robots using the iconic LEGO bricks. Just hours after the launch, thousands of hackers hijacked the software to make unauthorized modifications that gave new functions to the robots.

LEGO had a choice: prosecute the hackers… or embrace them.

LEGO recognized that they could collaborate with fans for feedback, and that would turn out to be invaluable.

They took a gamble and it paid off. Big time.

Using an open innovation strategy, LEGO re-launched the Mindstorms NXT series in 2006 which went on to become one of their biggest successes of all time. Why? They co-created with their customers.

LEGO used the feedback ecosystem they developed around the Mindstorms products as a model to create their now-famous culture of innovation. They started the LEGO Ambassador Program, which allowed fans to engage with the company around its kits. This continuous feedback loop gave LEGO tons of new ideas and partnerships, while making fans key decision-makers in the process.

Around the same time, LEGO started the crowdsourcing platform LEGO Ideas . The platform encourages fans to submit their ideas, and fellow fans can vote on which products they’d like to see put into production. Once an idea hits 10,000 votes, it moves on to a LEGO review board. If selected, the original creator receives 1% of the product’s revenue.

Building on success

Using feedback from their fans, LEGO consistently churns out great idea after great idea. Go to their website and, besides ordering products, you can build things, share them with friends, and watch videos. Five times a year they publish a magazine that kids go crazy over. They produced Beyond the Brick: A LEGO Brickumentary – a documentary for adult fans of LEGO bricks. They’ve released Hollywood feature films that grossed hundreds of millions of dollars. Their YouTube channel has millions of subscribers. They have eight amuse ment parks . There’s even a game you can download from the app store.

All from a company that sells little rectangular pieces of plastic.

LEGO’s 4 building blocks of success

Not every company has the massive innovation budget of LEGO, or the decades of experience as an industry giant, or the rabid (and vocal) fan base. So what are some lessons any company can learn from LEGO’s giant success?

1) Respect why your customers fell in love with you in the first place

LEGO became famous for its iconic bricks. But over the years, chasing too many trends drove them away from their core business model. While sometimes shifting the entire company makes sense – especially when technology deems old product lines extinct – in LEGO’s case, it was unnecessary. It wasn’t until they recommitted to their building sets in the early 2000s that LEGO was able to become an innovation legend.

2) Listen to your customers, including your biggest critics

From bringing hackers on board in the 90s to LEGO Ambassadors to crowdsourcing ideas, LEGO became a model for open innovation. The constant feedback loop with their fans tuned LEGO into exactly what their customers wanted and sparked endless ideas. It doesn’t have to be complicated. If you listen to your customers, they’ll tell you what they want to buy.

3) Develop complementary offerings instead of reinventing the wheel

LEGO only really started becoming the innovation darling we know today once they started listening to their customers. And what did their fans want? More ways to enjoy LEGOs! From movies to theme parks, LEGO created tons of new ways to enjoy the brand that didn’t compete with their core products. And that last part is key. Not only are you competing with your rivals, but your company might also just be competing with itself.

4) Create a culture of innovation

Google’s corporate campus has nothing on LEGO’s. Little toy bricks are everywhere . LEGO encourages all its employees to play regularly and submit ideas. So not only do they source ideas from their fans, but from everyone at the company, as well. From Frank in Accounting to Nadia in HR, everyone is invited to make the company better.

Want to know more about how to create a culture of innovation like LEGO? Check out:

The Museum of Play: The Connection Between Play and Innovation

How to Create a Culture of Innovation

Why Innovation is Your Competitive Advantage

How to Innovate

Photo credit: Jason Leung via Unsplash

About Carla

Carla Johnson helps leaders who are often paralyzed by traditional thinking. They suffer from slow growth, an eroding competitive advantage, low employee engagement, and depleted investor confidence. Their teams lack purpose and progress and constantly battle a resistance to change and new ideas.

As the world’s leading innovation architect, Carla’s spent 20 years helping leaders shatter limits and discover undiscovered possibilities. Through years of research, she’s developed a simple, scalable 5-step process that teaches people how to consistently produce inspired ideas that lead to uncommon outcomes.

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Innovation Under Constraint: Constructing a Turnaround at Lego

Lego has been helping children piece together dreams and build their imaginations for decades, and has become one of the world’s most popular toys and most powerful brands in...

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Lego has been helping children piece together dreams and build their imaginations for decades, and has become one of the world’s most popular toys and most powerful brands in the process. But the company known for great directions lost its own in the 1990s and has stood on the brink of bankruptcy a few times since. Harvard Business School professor Jan Rivkin takes listeners behind the brick and into the minds of Lego’s leadership as they tackle digital disruption, how to innovate while remaining true to their core product and mission, and engineer an impressive 2004 turnaround that positions the company for huge future success. Rivkin is the author of the case study entitled “Lego: The Crisis.”

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HBR Presents is a network of podcasts curated by HBR editors, bringing you the best business ideas from the leading minds in management. The views and opinions expressed are solely those of the authors and do not necessarily reflect the official policy or position of Harvard Business Review or its affiliates.

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Lego Case Study: The Lego Group Competitive Advantage & Strategy

Main feature of organization, strategic products and current mission, internal and external environments of the lego group, internal environment – swot value change of the company, external environment – pestel, porter five forces, power interest matrix of the lego group, new strategic directions for the organization, works cited.

The Lego Group is a toy-manufacturing company which is based in Billund, Denmark. The company was founded as a family organization in the year 1932, by Ole Kirk Christian. Today, the company stands high as a global player in the world of toys, among other strategic entertainment products (LeGoff 557).

Initially, Lego started as a manufacturer of ironing boards, toys, stepladders, and stools. Among these products, the wooden toys have been the best selling items, thus according the firm a strong reputation in the entertainment business. By the year 1949, the firm started manufacturing early versions of the popular LEGO plastic bricks and this was a strategic approach by the organisation, considering the fact that plastics had just greeted the markets as a new material (Simoes and Dibb 219).

However, the outcome was not what the company managers had anticipated, since the public was a bit hesitant in accepting the new material. The company would rapidly gain popularly in most parts of the world, as a result of progressive development of its products. For instance, the basic bricks were sustained with extra figures and features, in a manner that diversified the playing opportunities for children.

The company’s sales and profit scales were rapidly taking a positive charge between 1950 and 1970. However, the period between 1970 and 1990 proved to be a difficult moment for the company, owing to the serious economical implications that greeted the world then, following the oil crisis of the time.

In the course of this era and the period that followed afterwards, the Lego Group underwent serious fluctuations, due to a number of reasons which included; rapid change in the business environment witnessed at the time, complications in logistic matters and financial control, and the extended times that would be required to run into the future plans of the company.

Among the many problems which threatened to shake the firm’s potential, was the issue of the rising competition from much bigger companies such as Hasbro and Mattel (Hicks 41). Other new firms such as Sony, Activision, and Nintendo, who had just ventured the scene with more advanced electronic products, also posed great challenge to the productivity of the Group.

In this regard, the company’s only survival option in the competitive market was to adopt a strategic development plan that would see it come up with new and more exciting products. According to Claus, Riggs & Sekeran, the toy company enjoys a wide range of products that are fit for children of all ages (71).

These products are grouped in various categories, and some of the latest developments include video gaming, pre-school products, play themes, bricks, licensed products, and educational-based products for children, just to mention but a few. This is a clear indication of how the company has managed to remain high in the current competitive business of toy products.

The Lego Group was actively been involved in several turnaround attempts for the better part of 1990s and in the early 2000s, but with little success. No one could have foretold a possible solution to the progressive issues which appeared to claim the company, until towards the end of the year 2004, when a glimpse of hope shone onto the firm.

It was in the course of this period when the company’s serving CEO, Kjeld, took on more involvement in strategies that helped to identify the factors responsible for the company’s downsizing. This helped in the design of effective strategies that would eventually see the firm come back on track. The design and implementation of these strategies was based on the company’s organization, management and business expectation plans.

This involved the replacement of over three quarters of the senior management team with a new batch. Other strategies would be centered on the firm’s operational systems, among other key interventions.

For instance, a thorough revision was carried out on the cost and the supply chain operations of the company, and major changes were inflicted on the sectors right away. More importantly, the Lego Group had realized that working alone would not take them anywhere, and this would see them cooperate with licensing partners in the widely acclaimed gaming sector.

These interventions were sustained with a progressive development of the company’s products, to fit the demands of the modern era. The company has shown steady advancements lately, as a result of these interventions. The climax of this success was realized in the 2008-2009 financial year, which saw the company registering the biggest rate of growth in sales and profits, since the year 1981.

With these positive outcomes, there can’t be any doubts that the Lego Group is now back to its place in the development of children’s creativity, after several years of financial loss and failure (Irani, Sharif & Love 59). The objective of the company is to develop innovative products to meet the expansive consumer requirements, as they occur in the market.

As part of their recovery strength, the Group has reclaimed its position in the global listings, where it is ranked among the top five toy companies, with an approximate value of 4.8 percent in market shares. Lego’s success can also be associated with their mission, which aims at inspiring the current generation of children to be able to explore and challenge their own potential in creativity (Stacey 79).

This has been achieved through the group’s brand values, which are tailored on aspects meant to bring a significant impact on children. Some of these aspects would include things such as quality, imagination, fun, creativity, caring, and learning.

Lego group is a good example of the international companies that have managed to balance the nature and constraints of the internal and external environments, to make a notable difference in the current competitive world of business. From the perspective of various reports about the company, it is apparent how the toy company has reacted in adapting and utilizing the potential offered by its internal resources, in meeting the demands of its external environment.

According to Dyllick, Thomas & Hockerts, the company’s current strategic development has been achieved through the focused leadership of its former CEO, Kjeld Kirk (139). A better part of this success however, has been reached upon through the feedback which had been received regarding the internal competencies of the firm and its external operating systems.

A major tool that can be used to assess the overall potential of a firm is the SWOT analysis structure, which stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis basically considers two main parts; a company’s inward elements which normally constitutes of its strengths and weaknesses, and the attempts to consider the way these factors would come to fit against the external aspects of an organisation’s threats and opportunities.

The company’s key strengths are commonly associated with its constant ability to apply the concept of brand recognition in all its products and services, without having to compromise their core values. The company also maintains a close mutual relationship with its suppliers and retailers, and this gives it a powerful business advantage over its rivals in the industry.

The toy market is an industry bulging with a big number of competent players, but Lego’s products and services are the most preferred by majority of the people in the world (Oliver and Roos 911). This is due to their effective leadership in the development of a wide range of children products that have been praised for quality and originality. The newest products by the company are real manifestation of how the power of innovation applies, in meeting their goals and objectives in business.

Brand heritage is another strength which has succeeded at keeping the company ahead of its rivals in the industry (Hatch and Schultz 597). This is evident in how the company’s products are manufactured to fit in their brand values, which are aimed at making a significant impact on the lives of children all over the world.

Lego’s weaknesses in business can be observed through a number of ways. For instance, even though there have been serious attempts by the company to diversify its products, the company has been poor in technology and IT related matters compared to other competitors, who have fully embraced the power of technology in making their products more enticing to the users in the new media age (Schau 43). Lego Group has also been operating through large toy retailers, and this has been one of their biggest drawbacks in the market.

The large retailers are effective marketing outlets, but they normally operate on high costs and this is likely to deprive the company of substantial amounts of money in profits. More importantly, the company has failed to understand the marketing concepts which are in line with their consumers all over the world.

In other words, Lego group seems to be lacking full understanding of their consumer preferences in the market, and due to this lack of a strategic fit, they have often ended up losing more sales to their competitors in the market, who are well informed of the consumer needs regarding toys and gaming products.

It is also apparent that, Lego Group lacks the ability to effectively translate potential strengths into implemented strategies. This actually explains the company’s gradual response to financial and management issues, among other problems which have affected the company previously (Hölzl 39).

Opportunities & Threats

The company’s notable opportunities and threats can be linked together as key aspects which the company can utilize in achieving its goals and mission in the toy business. According to Schultz and Hatch, while the company has been widely acclaimed all over the world for its production of toys and other children products, there has been a decline in the sales of its traditional toys which constitutes the largest part of their products, due to the increasing attention of children on devices from other companies, that are more electronic (21).

The other biggest threat of the group is the growing number of giant competitors, who are utilizing every opportunity possible to thrive in the industry, thus making it one of the most competitive sectors in the world (Johnson 11). However, Lego Group has always seen these threats as opportunities for further developments in business.

New developments and increase on products has always remained the biggest opportunity to the company. More importantly, as a result of the rapid competition in the market, the company has managed to come up with numerous categories of products, a key strategy which has enabled it to be able to meet the needs of children in the modern era of technology.

Porter’s five forces analysis is observed to have a significant impact on a business, in relation to elements of the external environment (Michael 13). These forces include level of rivalry, power of suppliers, threat of entrants, power of buyers, and threat of substitutes. Each of these five forces is considered individually in assessing and analysing the external environment of the company in this case.

Level of rivalry

The level of rivalry is quite intense and strong for the Lego Group. While it is clear that the company enjoys a strong position in the industry, with relatively few giant competitors, it should be considered that they are taking part in a broader market of toy production, which also includes key players in the electronic sector, such as Sony and Nintendo, among others (Martin 84).

Power of suppliers

The company, whose main products are largely based on standardised inputs, has an average power of suppliers. However, it should be noted that, the power of suppliers is likely to go up, in case the company decides to major in more sophisticated areas of productions, such as games or films.

Power of buyers

The power of buyers is relatively high for the Lego Group, with minimal costs between alternative products.

Threat of entrants

As it would be expected, the toy product industry normally requires huge investments of time and money, in a number of ways that include things such as business capital, research funds, and development costs. All these serve as obstacles to entry in the industry, thus restricting the number of new entrants in the sector. In that case, there is a relatively low threat of new entrants in the wider entertainment market, and this offers the Lego Group a much stronger bargaining power over majority of its competitors in the market.

Threat of substitutes

This is arguably one of the biggest threats facing the entertainment product company today. Even though the company is said to have developed electronic products such as video and games, there is still evidence that some of the company’s products are still made in the traditional form. This has the meaning that, the company is faced by a big threat, given that users are likely to substitute between traditional toy and gaming products through to the ones that are made into electronic features.

It is also apparent that the Lego group has touched many people with its products and services in the entertainment sector. Through the engagement of the right people in its management and productivity systems, the company has made a big success in its mission and objectives in business (Beal 29).

As it would be observed in the above internal and external analyses, the company has tried to implement a number of strategies, in order to influence and attract people on their products. Through these interventions, the company has successfully managed to impact a large number of people from all over the world, with both electronic and alternative traditional products for children entertainment. Among other key players in the market, the company has a high interest on its stakeholders and the community.

The firm recognises these as the people who play the greatest role in helping them achieve their business goal and for that reason it treats them with much respect. Both the shareholders and the people from the diverse community have a positive impact to the company’s financial interest and what motivates them most is to get nothing less of the best from the company. In that respect, the Lego group is fully engaged in putting the necessary efforts which are needed to satisfy these significant groups.

The Lego group is arguably one of the most successful companies in the toy manufacturing industry. Through a wise interaction of its internal and external systems, sustained by the effective management, the company has gained a sustainable competitive advantage over many of its rivals in the market.

However, there are numerous strategic directions which the product company can utilize, to be able to maintain a more sustainable competitive advantage over its rivals.

The Lego Group may have amassed great reputation and success in the entertainment sector, but changing the company into an all-time winner in the global toy market is something that would require much effort, from the company (Schroeder 54). Some of these efforts would tend to involve numerous aspects of strategic management, whose significance in business has often been underestimated.

Some of the strategic directions which the company can incorporate in its operation systems would include; a focus on international opportunities, expansion of digital systems and strategies, constant focus on cost, expansion of target markets, widening of product range, and focus on effective online distribution strategies.

The Lego Group may have made significant attempts in trying to incorporate some of these strategies in their routine business operations, but there is still room for improvement which can be achieved by revising these strategies over and over, to eliminate all the problems which continue to pose a big challenge to the company’s productivity and accountability in children’s toy and entertainment products (Morgan 45).

For instance, the company should focus on the many opportunities provided by the international community and try to utilize them effectively. A good way of achieving this goal is by ensuring that the toy products are manufactured and distributed in all regions of the world, where they are needed most by families, as a key engagement for their little ones.

It should also be considered that, things are changing with the times nowadays and in that respect, expansion of digital systems and strategies is very crucial for the development of the company to fit in the demands of the modern era, which is defined by technology (Cooper 75). To be able to comply fully with this call of modernity, the company should try to ensure that all their products are made into electronic features, to fit the growing demands of technology (Laudon and Traver 18).

It is also necessary for the company to make a constant focus on cost matters, to ensure that there is a two-sided benefit between the producer and the consumers. More importantly, there is also the need for the Lego Group to conduct extensive research on new developments to widen its product range.

Through a corporate level strategy aimed at increasing international coverage and product diversity, the company would be certain to realize more sales and profits out of its toy products. The company should also consider the vast potential business opportunities that are offered by the upcoming trend of e-commerce, and try to utilise these online mediums as effective distribution channels for their wide range of products.

Apart from these strategies, the Lego Group should also try to make good use of other strategic tools in today’s dynamic business world, such as important business information that would provide them with good lessons on how to achieve and uphold a sustainable competitive advantage in business affairs. All these strategies, sustained with the magical touch of an effective organizational management style are likely to bear promising results in the future operations of the company.

Beal, Reginald. Competitive Advantage: Sustainable or Temporary in Today’s Dynamic Environment? Tallahassee, Florida: School of Business and Industry, 2001. Print.

Cooper, Robert. “New products: the factors that drive success.” International Marketing Review 11. 1 (1994): 60-76. Print.

Claus Brian, Riggs Neil & Sekeran Hari. Development of a low cost instructional platform for submersible design: Electrical and Computer Engineering . New York: IEEE, 2009. Print.

Dyllick, Thomas & Hockerts Kai. “Beyond the business case for corporate sustainability.” Business Strategy and the Environment 11 (2002): 130-141. Print.

Hatch, Mary and Schultz, Majken. “Toward a theory of brand co-creation with implications for brand governance.” Journal of Brand Management 17 . 8 (2010): 590-604. Print.

Hicks, Mark. “Collaborate to innovate?: getting fresh small company thinking into big company innovation.” Interactions 17. 3 (2010): 39-43. Print.

Hölzl, Werner. The evolutionary theory of the firm:Routines, complexity and change . Vienna: Vienna University of Economics and Business Administration, 2005. Print.

Irani Zahir, Sharif Amir & Love Peter. “Transforming failure into success through organisational learning: an analysis of a manufacturing information system.” European Journal of Information Systems 10. 1 (2001): 55-66. Print.

Johnson, Whittington. Exploring Strategy . Harlow: Pearsons Education, 2011. Print.

Laudon, Kenneth and Traver, Caroh. E-Commerce Business, Technology, Society . Boston: Adison Wesley, 2008. Print.

LeGoff, Daniel. “Use of LEGO as a therapeutic medium for improving social competence.” Journal of Autism and Developmental Disorders 34. 5 (2004): 557-571. Print.

Martin, Fred. Circuits to control: Learning engineering by designing LEGO robots . Cambridge: Massachusetts Institute of Technology, 1994. Print.

Michael, Porter. Commerce Strategy . Boston: Freepress, 2004. Print.

Morgan, Gareth. Images of Organisations. London: Sage Publications, 2006. Print.

Oliver, David and Roos, Johan. “Decision-making in high-velocity environments: The importance of guiding principles.” Organization Studies 26. 6 (2005): 889-913. Print.

Schau, Hope. “How brand community practices create value.” Journal of Marketing 73. 5 (2009): 30-51. Print.

Schroeder, Jonathan. Brand culture . United Kingdom: Taylor & Francis Publishers, 2006. Print.

Schultz, Majken and Hatch, Mary. “A cultural perspective on corporate branding.” Brand culture 13. 5 (2006): 17-26. Print.

Simoes, Claudia and Dibb Sally. “Rethinking the brand concept: new brand orientation.” Corporate Communications: An International Journal 6. 4 (2001): 217-224. Print.

Stacey, Ralph. Strategic Management and Organisational Dynamics . London: Pitman Publishing, 1993. Print.

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IvyPanda. (2022, July 31). Lego Case Study: The Lego Group Competitive Advantage & Strategy. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/

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1. IvyPanda . "Lego Case Study: The Lego Group Competitive Advantage & Strategy." July 31, 2022. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/.

Bibliography

IvyPanda . "Lego Case Study: The Lego Group Competitive Advantage & Strategy." July 31, 2022. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/.

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LEGO: A Game of Tensions and Paradoxes

By: Aramis Rodriguez

The case presents the strategic dilemma faced by the company's leaders, especially Jorgen Vig Knudstorp, Executive Chairman of the LEGO Brand Group. In 2021, Niels Christiansen (CEO of the LEGO…

• Length: 25 page(s)
• Publication Date: Aug 25, 2023
• Discipline: Strategy
• Product #: BL0015-PDF-ENG

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The case presents the strategic dilemma faced by the company's leaders, especially Jorgen Vig Knudstorp, Executive Chairman of the LEGO Brand Group. In 2021, Niels Christiansen (CEO of the LEGO Group) was celebrating the financial results that the LEGO Group had obtained the previous year, a period in which they achieved the highest sales peak in the company's history, despite the complexity brought on by the Covid-19 pandemic. The LEGO Group was the largest of the four units grouped under the LEGO Brand Group umbrella. It generated 70 % of the revenue of the LEGO® brand business, and was the main source of income for Kirkbi, the holding company of the Kristiansen family. Nearly ninety years after its founding, the LEGO Group still relied on the world-famous LEGO® brick and the philosophy of learning through play. Over the past two years, the LEGO Group had stepped up investments to drive expansion into other regions and had bet on innovations in the brick-based play and retail ecosystem. However, there were still many missing pieces in the strategic consciousness. The LEGO Group had not been able to carve out a niche in the video game market and had not yet developed a new growth engine that would diversify the traditional brick brand. Jorgen Vig Knudstorp, now at the head of the governing body managing the LEGO® businesses, had to come up with a vision that would lay the foundation for the future of the brand's business. The case creates discussion spaces for students to deliberate on the strategic decisions to be made and how to carry them out. The story starts from the LEGO Group's beginnings, in 1932, and describes the most notable strategic moves through 2020; from the "pieces", or founding moments, through the "pieces" of diversification, repair, transformation, entrepreneurship and expansion. Thus, it describes the strategies that each CEO devised to overcome the company's circumstances.

Although the case focuses on the decisions and dilemmas of Jørgen Vig Knudstorp (head of the LEGO Brand Group), it concentrates mainly on the LEGO Group as the company that gave rise to the brand, the one that generated the greatest value for shareholders and allowed for the development of all related businesses. BALAS' case collection

Learning Objectives

Identify the characteristics of a company in financial stress from internal information, industry, and the environment in which it operates.

Analyze different courses of action of a public offering company in the process of restructuring.

Aug 25, 2023

Discipline:

Geographies:

Denmark, Europe

Industries:

Media, entertainment, and professional sports, Plastics and rubber product manufacturing, Video game industry

CLADEA-BALAS Case Consortium

BL0015-PDF-ENG

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LEGO: The Marketing Strategy Behind the Toy Industry Titan

LEGO’s claim to fame goes well beyond its famous interlocking plastic bricks. Since its founding in 1932, LEGO has diversified into movies, video games, television shows, popular social media channels, and even major amusement parks. And despite how devastating the COVID-19 pandemic has been for many in the toy industries, LEGO’s sales  rose 14%  in the first half of 2020 compared to the same period in 2019, with its operating profit rising 11% to $622 million.

Much of this success is due to the LEGO marketing strategy, which embraces digitalization and emphasizes knowing its customer base. By staying true to the brand identity it established in its inception and merging it with modern marketing techniques, LEGO has managed to keep at the forefront of the competition. In this article, we’ll take a close look at the tactics and tools LEGO uses to market its products successfully, even during the current pandemic. 

Table of Contents

The history of LEGO

Analyzing the retail lego marketing strategy.

• LEGO’s phenomenal market entry strategy
• Licensing & merchandising mentality
• Social media/content marketing strategy
• Integrated customer experience which generates endless UGC
• Strong partnerships with the education sector
• Remains “parent-approved” at all costs
• Analyzing LEGO’s eCommerce website
• Analyzing LEGO’s Category Page
• Analyzing LEGO’s Product Page
• Analyzing LEGO’s Checkout Process
• How LEGO could have increased its revenue by +1% with a single automation

Impressive LEGO stats you may not know

Play hard, like lego.

Founded by carpenter Ole Kirk Kristiansen, the LEGO Group remains a private, family-owned company based in Billund, Denmark. While Kristiansen originally produced wooden interlocking bricks, the company continued innovating and experimenting with new designs. Eventually, the traditional plastic LEGO brick was patented in 1958, offering a timeless design that endures to this day. Over the years, LEGO bricks have grown in popularity and have been named “Toy of the Century”—twice. 

Although the LEGO brick remains their trademark product, the company expanded into new ways of making toys and marketing during the 20th century. LEGO designed its new playsets to appeal to both boys and girls and released more complex products to challenge older children. Realizing their customer base now included children and adults from older, nostalgic generations, LEGO adjusted its marketing to communicate with its audiences. Lego had even been able to engage its existing customers to influence new product development and nurture an entirely new consumer base.

In the 21st century, LEGO remains a thriving, highly adaptable company. Although its core brand—offering its customers a way to develop their imagination and creativity through free play—remains the same, it continues to innovate by researching and adapting the LEGO marketing strategy to new digital communications. This mix of time-honored ideals and cutting-edge marketing enables them to adjust to societal changes and grow even through challenging times. 

This growth is the result of six key factors in the overall LEGO marketing strategy. Thanks to the LEGO Group’s willingness to enter new marketplaces, diversify its merchandise, and embrace social media marketing, their product lines are better suited to adapt in beneficial ways. At the same time, LEGO knows what marketing strategies to always continue, from its educational partnerships and parent-safe brand, and how to use this to develop better customer relationships. 

Key marketing strategy #1: LEGO’s phenomenal market entry strategy

LEGO products are in 130 countries—but the company is always looking to expand its operations. When  LEGO set its sights on China , it entered the market by putting money into opening LEGO stores in major cities as well as cities that showed demand and interest for their products.

LEGO also studied the new market, not seeing a need to create any Asian-specific product lines as Chinese consumers already strongly valued the traditional LEGO creative play experience. On the other hand, they also acknowledged the advanced digitization in Chinese play that would require them to continue creating their own digital LEGO products.

This focused strategy paid off, as LEGO saw a 4% increase in profits and sales in 2018. As China continues to develop a very affluent middle-class numbering in the millions within the coming years, it represents a significant opportunity for LEGO and its market position. 

Key marketing strategy #2: Licensing & merchandising mentality

Diversification is an essential part of the LEGO marketing strategy. Aside from its multiple toy sets, it has also branched out into multiple mediums to promote its brand. 

The LEGO Movie  franchise and  The LEGO Batman Movie  raised the profiles of its licensed properties while celebrating LEGO’s philosophy of play .  LEGOLAND theme parks have opened in Billund, California, Florida, Malaysia, Dubai, Windsor, Japan, and Germany. And, seeing the movement toward digitization, it produced video games based on its product line.

LEGO playsets also reflect the company’s focus on regular innovation. After research revealed most of their consumers were boys, LEGO developed their LEGO Friends line aimed explicitly at relating to girls. 

The company has also partnered with Disney, Marvel, and DC Comics to create its popular Star Wars and superhero-themed playsets—which are vital marketing tools since they generate publicity and drive higher sales. 

As both young and old LEGO enthusiasts enjoy displaying their skills as master LEGO builders, LEGO Group became involved in official TV show competitions such as  LEGO Masters  to build further awareness of their brand.  

Key marketing strategy #3: Social media/content marketing strategy 

While LEGO is already a well-known brand, its popularity on Facebook, Instagram, and YouTube highlight the effectiveness of using social media channels to engage with customers. LEGO’s Facebook page has well over 13 million followers and regularly updates the page with photos and videos of new LEGO releases and innovative creations. Their Instagram page offers similar content, and posts receive numerous likes and comments, showing excellent user engagement.

LEGO is also YouTube’s most popular  brand channel  as of June 2020, with 10.04 billion views. Their channel offers promotional, educational, and how-to videos that promote the company’s brand. Its popularity on social media has encouraged fans to create their own LEGO fan channels, such as “ Beyond the Brick ,” a YouTube channel with over 821,000 subscribers who promote additional awareness of LEGO’s brand independent of the company’s marketing efforts. 

Key marketing strategy #4: Integrated customer experience which generates endless UGC 

LEGO uses its digital platform to provide each segment of its consumer audience with an integrated customer experience. LEGO Life, a social network app aimed at children under 13, lets users share photos of what they made with LEGOs and leave comments on other people’s creations. The online community has over 10 million members, offering an effective way of increasing brand awareness by enabling younger audiences to engage through social media.

However, LEGO also has a sizeable adult consumer base who can join its LEGO Ideas online community and become part of its creative process. This community lets members share their LEGO creations’ images and offer proposals for new LEGO Ideas sets that members vote on for the company to produce. In 2017, journalist Maia Weinstock’s  “Women of NASA”  LEGO idea gained the necessary 10,000 votes from supporters, was produced, and became a top-selling product on Amazon. 

To put it simply : Throughout the everyday life of an average kid raised in advanced countries of the world, its parents, its teachers, and its friends will encourage it to play with LEGO. Moreover, if someone looks at its surroundings and its (social) networks as well, there is a tremendous amount of LEGO-related user-generated content which also continuously “validates” that this toy is, maybe, one of the healthiest, most educative, and most beneficial addictions of its life. This is something that no other brand has ever achieved.

The levels of passive and organic customer engagement LEGO has reached are out of this world and surely a case study for any brand, in any industry.

Key marketing strategy #5: Strong partnerships with the education sector

LEGO has always promoted its plastic bricks as educational toys that empower children to become imaginative, engaged learners through play. This brand extends to the overall company, which has established strong partnerships with the education industry. In 2020, the LEGO Foundation committed  $24 million in educational aid  for schools, foundations, and educational programs in multiple countries. 

LEGO’s stand-alone education company,  LEGO Education , has been offering schools educational products since 1986. Its website currently offers many LEGO-based building products specifically designed to help students build STEAM (Science, Technology, Engineering, Art, and Math) confidence in primary and middle school. 

Other sections offer homeschool and distance learning resources for children learning during the pandemic. As LEGO’s commitment to education is well respected, educators are far more likely to see the value in these products and online resources.

Key marketing strategy #6: Remains “parent-approved” at all costs 

Although kids remain a key target audience for LEGO, the company also understands LEGO’s marketing strategy needs to appeal to their parents, who are the ultimate purchase maker. By continuing to promote the educational value of their toys and market them as a way to nurture a child’s interest in STEAM, LEGO ensures its products are “ parent-approved .” This approach incentivizes parents to keep buying, which’s been key to the LEGO marketing strategy from the start.

Analyzing LEGO’s eCommerce website

LEGO’s main eCommerce website offers many outstanding features in its category, product, and checkout process pages. Here’s our assessment for what we liked best—and what we didn’t. 

Analyzing LEGO’s Category Page

What we liked:

• Detailed mega drop-downs : Provided plenty of options for visitors to get to product pages by theme or interest.
• Filter navigation useful:  “Shop By” drop-down has options to search by age, price, popularity, or even product type, which would be useful when gift-shopping.
• Mobile phone friendly : Drop-downs could be seen and used easily on smartphones and mobile devices.

What we didn’t:

• Ads crowd filter navigation:  Promoted LEGO products continue to show up on the screen while using the filter function, making it challenging to separate desired from undesired items.

Analyzing LEGO’s Product Page

• Easy to navigate:  Each page could be easily scanned simply by scrolling down.
• Excellent ad copy : Very detailed descriptions of each playset, game, and toy. Copy also did not simply repeat boilerplate text from the Category Page.
• Excellent product images : Customers get all the LEGO product images they need, including the box, figurines, and even display options. Images come with zoom views and 360 rotating views.
• Product reviews:  Multiple written reviews and ratings accompany most products, helping consumers get a sense of past customer satisfaction.
• Images harder to navigate through on mobile devices:  Photos harder to zoom in and out of on a touchscreen. The zoom function also did not work when the computer screen was minimized.
• Delivery charges not on the product page:  Delivery charges are not included on the product pages. Currently, it only offers free shipping and express shipping.

Analyzing LEGO’s Checkout Process

• Guest checkout option:  New customers can check out as guests without becoming members, a step that increases the risk of checkout abandonment .
• Multiple payment options:  Customers can pay with multiple credit cards or PayPal.

• Shipping costs hidden until after information is submitted:  Customers need to submit their addresses before seeing the cost for express and express saver shipping.
• Holiday delivery delay not specified:  Customers are encouraged to order gifts early to avoid holiday delays, but LEGO does not specify how early gifts should be ordered for on-time Delivery.

How LEGO could have increased its online revenue by +1% with a single automation

Adding a benefit-driven exit-intent pop up on checkout..

Based on our platform’s data, during 2020 we’ve seen that a benefit-driven exit-intent pop up on the checkout process had a median conversion rate of 1.47%. This percentage actually also represents the recovery rate of this tactic. During our tests, we didn’t detect such a tactic at Lego’s website. So, a brand like LEGO could further increase its revenue, on average, from this automation alone. But how big would the impact be? 

Let’s write the numbers down:

• LEGO’s revenue in 2019 was $531.2 million US dollars   
• During the pandemic the company’s sales rose by +14%, resulting in ~605 million US dollars approx.
• Even if LEGO achieved a recovery rate of 1% from the benefit-driven exit intent pop up strategy, this means that its additional turnover would be around 6 million US dollars.

Why 1%? 

Because we know it works. We’ve seen this tactic working for far smaller and less famous brands than LEGO. So, we strongly believe that a brand with so much content and such brand prestige as LEGO, will surely achieve an even higher conversion rate than 1.47%.

How to setup a benefit-driven Exit-Intent Pop up in ContactPigeon

5. Define the appear triggers of your exit intent pop up

6. Set the trigger rules and the settings of the exit intent pop up(s)

7. Last Step! Configure the graphics, the copy and the rest settings of your exit intent pop up

With an 88-year history, LEGO has accumulated some very  impressive statistics , including: 

• Seven LEGO sets are sold every second in some parts of the world. That calculates to more than 600,000 a day.
• Every second, about 1300 LEGO pieces are made around the world.
• The LEGO Group’s logo was designed in 1973 and has not been changed since.
• You can potentially combine six 2X4-inch LEGO bricks in over 915 million ways.
• LEGO consumers spend nearly 5 billion hours per year on LEGO products.
• There are more than 400 billion LEGO bricks in the world.

The success of the LEGO Group may seem like a phenomenon. 

Still, the company continues to thrive after almost ninety years simply because of its willingness to innovate and acknowledge aspects of the LEGO marketing strategy that needed to change over the generations—and which investments needed to be kept stable to sustain a healthy marketing brand. Its well-thought-out assessments and its willingness to execute consistently enables this family-owned company to survive even today.

With the COVID-19 pandemic forcing businesses everywhere to re-evaluate their priorities and marketing strategies, it is more crucial than ever for company owners to be proactive in developing a well-conceived plan. This will not only let your business survive the current pandemic but also thrive for years to come. 

Ready to make your business a thriving one? Then book a free retail customer engagement consultation with  ContactPigeon . Our experts will help show how to use our platform to engage with customers today and adapt effectively to the new reality.

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Aligning Values to CSR: A LEGO Case Study

• July 17, 2020

The role of business in society is evolving – and was evolving even before COVID-19 forced companies to pivot how they engage with customers, employees and other stakeholders. How people view their relationships with work and the brands they support is changing. Sustainable Brands’ recent report, Enabling the Good Life , found that across generations people are looking for simple, more balanced lives with meaningful connections to people, communities and the environment. 

Having a business model that prioritizes social responsibility, equity and inclusion, and sustainability will win favor with prospective customers and employees alike. So how should a company start to implement these programs and policies when there are so many worthwhile causes? By starting with their core values. ✨

Let’s look at LEGO as an example. LEGO’s mission is to “inspire and develop the builders of tomorrow,” which is guided by values like imagination, creativity, fun, learning, caring, and quality. 

Having a well-articulated mission and set of values gives LEGO the ability to assess what sort of commitments it can and should make as a brand. In this case, LEGO has made four key promises:

People Promise 🧑🏽‍🤝‍🧑🏽 LEGO cares deeply about the people who are part of making LEGO possible, and is committed to upholding human rights and ensuring safe, healthy and respectful workplaces for our employees. This is huge – people who view their employers as good corporate citizens feel a higher sense of engagement and are more committed to their employer . 

Play Promise 🧰 The company recognizes the vital role of play in a child’s development. LEGO has a unique opportunity to help children problem solve, be creative and develop resilience. 

Planet Promise 🌎 LEGO is designed for children – children who will one day inherit the planet. LEGO’s promise to minimize the environmental impact of its operations not only demonstrates caring for children who love LEGO, but also the core values of creativity and quality by implementing more sustainable practices. 

Partner Promise 🤝🏼 A critical component of any corporate social responsibility strategy is thinking about stakeholders beyond shareholders or investors. LEGO understands the importance of building partnerships with stakeholders like customers and suppliers in being a better corporate citizen.

These promises are embodiments of LEGO’s core values and offer a framework for how LEGO engages with stakeholders from employees and customers to the environment. This is also reflected in the three pillars of LEGO’s corporate social responsibility: children , environment and people . It’s easy to see the connection between these pillars and the brand promises LEGO has made. 

Focusing on core values also gives companies the ability to evolve what CSR looks like over time. As employee and customer needs and expectations change, taking a values-based leadership approach offers greater ability to respond. LEGO’s core products are the classic bricks many of us know and love, but LEGO has more recently ventured into digital play offerings. While digital play offers children new ways to engage with the LEGO brand, there are also risks with giving children access to mobile devices. LEGO responded to this risk by taking a values-led approach – the brand’s digital experience prioritizes child safety . Beyond that, LEGO joined forces with UNICEF to develop an industry-first Digital Child Safety Policy. LEGO even helped create a tool called the ‘Child Safety Online Assessment’ to help other companies understand and address children’s rights online. 

For any corporate social responsibility program to be successful, it has to be authentic to the business’ culture and principles. LEGO is just one example of walking the talk of values-aligned corporate social responsibility. We’re excited to see how even more businesses implement these types of initiatives!

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Why would anyone steal $300,000 in Lego sets? Believe it or not, there’s a booming black market

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Four middle-aged suspects were arrested in Southern California this week when officers found them in possession of roughly $300,000 worth of purloined Lego sets, according to the California Highway Patrol.

Yes, Lego sets. The little toy bricks that hurt like hell when you step on them barefoot. Apparently, some people like having them around so much they’re willing to pay an astonishing price for the privilege.

The suspects, who range in age from 35 to 47, hit stores including Target, Home Depot and Lowe’s in search of limited-edition box sets of the toys, the CHP said. Then they allegedly scattered their loot in four separate stash houses across Los Angeles and Orange counties where California Highway Patrol officers served search warrants on Tuesday.

Incredibly, this is not an isolated incident. Similar thefts have been reported in Philadelphia and Green Bay, Wis. A store in Las Vegas that opened in 2022 and specializes in Lego sets had been hit at least four times by the end of 2023 in what Inside Edition dubbed a national wave of “Lego Larceny.”

As unbelievable as it may seem, rare and exceptionally popular Lego sets trade online like precious metal or cryptocurrency.

Kits that turn into “Star Wars” spaceships, for example, routinely sell for north of $1,000. A set that turns into Han Solo’s Millennium Falcon fluctuates between $1,000 and $4,000, according to the website Work + Money .

There is no shortage of online reports on Lego thievery — with robbers smashing through glass storefront doors and stomping around toy shops in masks and dark hoodies. One vertically challenged bandit can be seen on security video hopping up and down, desperate to reach the most valuable Lego boxes stored on the top shelf — like fine Scotch.

The four arrested in Southern California this week were booked on charges related to organized retail theft, grand theft and conspiracy.

If you have information about suspiciously sourced Lego sets, or any other kind of organized retail theft, you can report it to the CHP here .

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