case study lego

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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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.”

LEGO Case Study: How to revitalize a beloved brand

This article is written by Graham Robertson, the founder of Beloved Brands

Brand Toolkit

LEGO, the iconic Danish toy brand, has inspired creativity and imagination in children and adults alike since its inception in 1932. The company’s signature interlocking bricks have become a global phenomenon, transcending cultural and generational boundaries. However, in the early 2000s, they faced significant challenges threatening its existence. Our LEGO case study will explore how they revitalized its brand by refocusing on its core product. Then, they expanded into new markets and leveraged digital and content marketing.

The Challenges LEGO Faced

In the early 2000s, LEGO grappled with several issues that put its brand at risk. Declining sales, increased competition from digital entertainment, and a loss of brand focus due to excessive product diversification left the company struggling to find its footing. These factors created a sense of urgency within their leadership. They recognized the need for a fundamental shift in strategy to revitalize the brand and secure its future.

Recognizing the need for change

LEGO’s management understood they needed to reassess their business approach to overcome these challenges. They initiated a comprehensive review of the company’s operations, product portfolio, and marketing strategies. This process led to several critical insights informing the company’s revitalization efforts.

Refocusing on the Core Product

One key realization was that LEGO had drifted too far from its core product—the iconic interlocking bricks. The company had diversified its product line to include action figures, clothing, and various themed sets, diluting the brand’s identity. They decided to streamline its product portfolio and return to the essence of its brand: the simple yet versatile building blocks that had captivated generations of fans.

Simplifying the Product Range

LEGO reduced the number of individual brick types, making it easier for customers to build with the product while maintaining its versatility. The company also reemphasized classic themes, such as City, Castle, and Space, which resonated strongly with its core audience. This refocusing allowed the company to reestablish its identity as a brand that fosters creativity and learning through play.

Expanding into New Markets

At the heart of the LEGO case study is a revitalization strategy that involved expanding its market reach. The company identified untapped potential in emerging markets, such as China and India, and developed targeted marketing and distribution strategies to cater to these new audiences. The company recognized the importance of engaging adult fans. They began creating sophisticated sets with intricate designs and higher price points.

Building a Global Presence

LEGO invested in building a strong presence in emerging markets, opening new offices, retail stores, and production facilities. This expansion allowed the company to establish a local presence and better understand customers’ unique needs and preferences in these regions. By adapting its products and marketing strategies to cater to local tastes, the brand grew its brand and increased sales significantly.

Leveraging digital and content marketing

LEGO understood that the rise of digital technology and social media presented both challenges and opportunities for the brand. To capitalize on these new avenues, the company embraced digital and content marketing as essential components of its overall brand strategy.

Engaging with Fans Online

LEGO created an extensive online presence through social media platforms, directly engaging with fans and customers. They share behind-the-scenes content, hosting contests, and showcasing user-generated creations. This allows the brand to foster a sense of community and loyalty among its audience. This approach helped the company maintain relevance in an increasingly digital world.

The LEGO Ideas Platform

LEGO launched the LEGO Ideas platform, a crowdsourcing initiative allowing fans to submit their designs for production as official LEGO sets. This innovative approach provided valuable product ideas and deepened the brand’s and its fans’ connection.  By involving their most cherished customers in the creative process, LEGO fostered a sense of ownership and loyalty, further strengthening its brand identity. To illustrate our LEGO case study, click on the video below that explains how the Ideas program works. 

To view, click on the  IDEAS video as part of our LEGO case study. 

Engaging your customers

In 2021, there were 57 submitted ideas that made the Lego review stage. What a great example for engaging your most loyal brand fans. To illustrate our LEGO case study, click on on the examples of the ideas below.

To illustrate, click on the  IDEAS examples above as part of our LEGO case study. 

Creating Immersive Digital Experiences

In addition to engaging with fans on social media, LEGO explored new ways to create immersive digital experiences. The company developed video games, mobile apps, and virtual reality experiences. This allowed users to build and interact with LEGO bricks in digital environments. By extending the play experience beyond the physical product, LEGO demonstrated its adaptability and commitment to embracing new technologies. 

To illustrate the LEGO case study, an example of one of their more immersive experiences is below. This allows their customers to go deeper into each of their product lines. 

To illustrate, click on the  digital example as part of our LEGO case study. 

The Impact of LEGO's Revitalization Strategy

Refocusing on the core product, expanding into new markets, and leveraging digital and content marketing proved to be a winning formula for LEGO. The company’s sales and profits surged, and it reclaimed its position as a leader in the toy industry. Moreover, they revitalized the brand image, resonating strongly with new and existing fans, securing the brand’s future for generations to come.

Our LEGO case study showcases the magnitude of the company’s financial growth over the last 15 years. With revenues skyrocketing from $1 billion to an impressive $8.4 billion, they have achieved an 8x increase, a testament to their financial stability and success. 

Moreover, it shows they have achieved a profit margin of nearly 25% and a profit of $2 billion, indicating exceptionally strong performance.

To illustrate, click on the financial performance metrics of our LEGO case study. 

Lessons Learned from the LEGO Case Study

Our remarkable case study offers valuable insights for brand management:

• Stay true to your brand’s core identity. Maintaining a clear focus on the essence of your brand is crucial for long-term success.
• Understand and adapt to market dynamics.  Continuously assess market conditions and adapt your strategies to stay relevant and competitive.
• Engage with your audience. You can foster a sense of community and loyalty by including your audience in the creative process and maintaining open lines of communication.
• Embrace new technologies. Leverage digital marketing and emerging technologies to create immersive experiences and reach new audiences.

LEGO customer service story

This customer story involves a 7-year-old boy who lost his LEGO when he took it on a family trip to the mall. Kids always lose toys, but this boy was so upset that he wrote a letter to LEGO, telling them the story and asking for a replacement. He lost just one figure in his kit (Jay ZX), but to him, it’s the most important thing in his life. Read how they dealt with the letter. 

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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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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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Lego Change Management Case Study

Lego, the Danish company known for its colorful plastic bricks, has been a beloved toy brand for over eight decades.

 However, in the late 90s and early 2000s, Lego experienced a significant decline in sales and profitability due to poor decision-making and failure to adapt to the changing market. 

To address these challenges, Lego had to undergo a significant transformation in its business model, manufacturing process, and organizational structure. 

This transformation was achieved through a successful Change Management strategy that involved collaboration, communication, and innovation. 

In this blog post, we will explore Lego’s Change Management Case Study and discuss the lessons learned from this transformation.

Brief History and Growth of Lego   

Lego is a Danish company that was founded in 1932 by Ole Kirk Christiansen. The name “Lego” is derived from the Danish words “leg godt,” which mean “play well.” The company originally produced wooden toys, but in 1949 it began producing plastic interlocking bricks.

The Lego brick was invented by Ole Kirk’s son, Godtfred Kirk Christiansen. The brick design was perfected over several years and was introduced in its modern form in 1958. The bricks were designed to be versatile and durable, and they quickly became popular among children and adults alike.

Over the years, Lego has continued to innovate and grow. In the 1960s, the company expanded its product line to include a wider variety of building sets and play themes, such as the famous Lego Space sets. In the 1970s and 1980s, Lego introduced its first licensed products, such as sets based on popular TV shows and movies.

In the 1990s, Lego experienced a period of financial difficulty, as the company had expanded too rapidly and faced increased competition from other toy manufacturers. In response, the company underwent a restructuring and refocused on its core products and values.

In the 2000s, Lego experienced a resurgence in popularity, as the company introduced new product lines, such as Lego Star Wars and Lego Harry Potter, which were based on popular movies and franchises. Lego also expanded its business into theme parks and other entertainment ventures.

Today, Lego is one of the world’s largest toy companies, with a wide range of products and a strong global presence. The company continues to innovate and evolve, as it seeks to provide children and adults with creative and engaging play experiences.

External factors that led to organizational changes at Lego 

Lego has undergone a number of organizational changes over the years, in response to various external factors. Some of the key external factors that have led to these changes include:

• Changes in the toy industry: The toy industry is constantly evolving, with new technologies and trends emerging all the time. In order to stay competitive, Lego has had to adapt its product offerings and business model to keep up with these changes.
• Economic conditions: Economic conditions can have a significant impact on consumer spending, and as a result, on toy sales. During periods of economic downturn, for example, consumers may be less likely to spend money on non-essential items like toys. In response, Lego may need to adjust its pricing or marketing strategies to maintain sales.
• Competition: Lego faces competition from a wide range of other toy manufacturers, some of whom may offer similar products at lower prices. In order to stay competitive, Lego may need to innovate and differentiate its products from those of its competitors.
• Changing demographics: Changes in demographics can also have an impact on toy sales. For example, as the population ages, there may be a shift away from toys and towards other types of products. In response, Lego may need to adjust its product offerings or marketing strategies to appeal to different age groups.
• Technological advancements: Advances in technology can have a significant impact on the toy industry. For example, the rise of video games and digital entertainment has led to a decline in traditional toy sales in some markets. In response, Lego has developed its own digital products and integrated technology into its traditional brick sets.
• Societal trends and attitudes: Societal trends and attitudes can also impact toy sales. For example, as concerns about the environment and sustainability have grown, there has been increased interest in eco-friendly products. In response, Lego has introduced a line of sustainable bricks made from plant-based materials.

Internal factors that led to organizational changes at Lego 

There were several internal factors that led to organizational change at Lego, including:

• Poor Financial Performance: Lego’s financial performance had declined significantly in the late 90s and early 2000s. This was due to several factors, including a lack of innovation, failure to adapt to changing consumer preferences, and over-expansion.
• Lack of Collaboration: Lego’s organizational structure was siloed, and there was a lack of collaboration between different departments. This led to inefficiencies, duplication of efforts, and a lack of innovation.
• Inefficient Manufacturing Process: Lego’s manufacturing process was outdated and inefficient, which led to longer lead times, higher costs, and lower quality products.
• Complexity of Product Lines: Lego’s product lines had become overly complex, which made it challenging to manage inventory, production, and sales effectively.
• Leadership Issues: Lego had experienced several leadership changes in a short period, which led to a lack of strategic direction and a disconnect between the company’s goals and its actions

05 biggest changes implemented by Lego

Here are the 5 biggest changes implemented by Lego:

• Simplified Product Lines: Lego streamlined its product lines by reducing the number of themes and sets it offered. This helped the company focus on its core offerings and improve its manufacturing process and inventory management.
• Agile Manufacturing Process: Lego introduced an agile manufacturing process that allowed for greater flexibility and responsiveness to changing market demands. This helped reduce lead times and costs, and improved the quality of its products.
• Collaborative Organizational Structure: Lego implemented a more collaborative organizational structure, which encouraged cross-functional teams to work together and share information. This led to greater innovation, more efficient decision-making, and better alignment with the company’s strategic goals.
• Customer-Centric Approach: Lego shifted its focus to a customer-centric approach, which involved listening to customer feedback and using it to inform product development and marketing decisions. This helped the company create products that better aligned with customer preferences, resulting in increased sales and profitability.
• Brand Expansion: Lego expanded its brand beyond traditional building sets to include video games, movies, and theme parks. This helped the company reach new audiences and diversify its revenue streams, making it less dependent on the success of its core products

05 Positive outcome and impact of change management implemented at Lego 

The successful implementation of changes by Lego led to several positive outcomes, including:

• Increased Revenue: Lego’s revenue grew significantly following the implementation of changes. In 2020, the company reported revenue of $6.5 billion, up from $1.4 billion in 2004.
• Improved Profitability: Lego’s profitability also improved, with the company reporting a net profit of $1.6 billion in 2020, up from a loss of $300 million in 2004.
• Increased Market Share: Lego’s market share in the toy industry grew from 4% in 2004 to 7.7% in 2020, making it one of the largest toy manufacturers in the world.
• Strong Brand Identity: Lego’s successful transformation helped establish it as a leading brand in the toy industry, known for its high-quality products, innovative designs, and commitment to sustainability.
• Diversified Product Line: Lego’s expansion beyond traditional building sets helped the company diversify its product line and revenue streams. This made it less dependent on the success of its core products, resulting in greater stability and sustainability for the company.

Final Words

The successful implementation of change management at Lego serves as a valuable case study for businesses looking to achieve sustainable growth and success in a rapidly changing market. Lego’s transformation was not easy, and it required a significant commitment to collaboration, communication, and innovation. However, the positive outcomes of the transformation demonstrate the importance of effective change management in achieving long-term success.

Lego’s successful transformation was achieved through a combination of strategic changes to its business model, organizational structure, and manufacturing process, as well as a focus on customer-centricity and brand expansion. By simplifying its product lines, implementing an agile manufacturing process, and creating a more collaborative organizational structure, Lego was able to improve its efficiency and responsiveness to market demands. This, in turn, led to increased revenue, improved profitability, and a stronger brand identity.

About The Author

Tahir Abbas

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• The LEGO Group leadership playground: Energizing everybody every day (A)

In 2018, the LEGO Group defined a new way of leading to enable the company to move more quickly, to make the right decisions, to deliver its mission and the commercial momentum that sustained it, and to shape the LEGO® culture in a positive way. This new way of leading would need to be modeled at the top of the organization. That was certain. But CEO, Niels Christiansen, and Chief People Officer, Loren Shuster, believed that the task of defining the new way of leading should not be done by the Executive Leadership Team or by HR. It should be developed bottom up. The LEGO Group was no longer the patriarchy it had once been under its founder, but Shuster saw that patriarchal assumptions about leadership lingered in its culture. If the LEGO Group was going to move towards a balanced system where leadership responsibility was more distributed and less hierarchical, it would be ironic to impose this top down. A better way to start would be to invite people from different levels and different functions of the organization to answer the question: What kind of leadership do we need in the LEGO Group and how can we embed the new way of leading into the fabric of the organization so that it can be self-generative? Case A describes the process that the LEGO Group used to create what they called The Leadership Playground and bring it to life in the company.

• How to create a leadership model to change the culture of the LEGO Group in a bottom-up way.

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LEGO (A): The Crisis

• Format: Print
• | Language: English
• | Pages: 11

About The Authors

Jan W. Rivkin

Stefan H. Thomke

Related work.

• January 2014
• Faculty Research

Jørgen Vig Knudstorp: Reflections on LEGO's Transformation

• LEGO (A): The Crisis  By: Jan W. Rivkin and Stefan Thomke
• Jørgen Vig Knudstorp: Reflections on LEGO's Transformation  By: Stefan H. Thomke

Lego Case Study: The Lego Group Competitive Advantage & Strategy

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

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. (2019, May 14). Lego Case Study: The Lego Group Competitive Advantage & Strategy. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/

"Lego Case Study: The Lego Group Competitive Advantage & Strategy." IvyPanda , 14 May 2019, ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/.

IvyPanda . (2019) 'Lego Case Study: The Lego Group Competitive Advantage & Strategy'. 14 May.

IvyPanda . 2019. "Lego Case Study: The Lego Group Competitive Advantage & Strategy." May 14, 2019. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/.

1. IvyPanda . "Lego Case Study: The Lego Group Competitive Advantage & Strategy." May 14, 2019. 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." May 14, 2019. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/.

MIT Technology Review

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Lego bricks are making science more accessible

Scientists use the iconic colorful bricks to build everything from bioprinters to microscopes—increasing the accessibility of science in the process.

• Elizabeth Fernandez archive page

Etienne Boulter walked into his lab at the Université Côte d’Azur in Nice, France, one morning with a Lego Technic excavator set tucked under his arm. His plan was simple yet ambitious: to use the pieces of the set to build a mechanical cell stretcher. 

Boulter and his colleagues study mechanobiology—the way mechanical forces, such as stretching and compression, affect cells—and this piece of equipment is essential for his research. Commercial cell stretchers cost over $50,000. But one day, after playing with the Lego set, Boulter and his colleagues found a way to build one out of its components for only a little over $200. Their Lego system stretches a silicone plate where cells are growing. This process causes the cells to deform and mimics how our own skin cells stretch.

Sets like these are ideal to repurpose, says Boulter: “If you go to Lego Technic, you have the motors, you have the wheels, you have the axles—you have everything you need to build such a system.” Their model was so successful that 10 different labs around the world contacted him for the plans to build their own low-cost Lego stretchers. 

Boulter is one of many researchers turning to Lego components to build inexpensive yet extremely effective lab equipment. The bricks themselves are durable and manufactured with tight tolerances. Lego’s offerings include sensors that can detect various colors, perceive rotational motion, and measure the distance to an object. These DIY tools are a creative and affordable solution for working scientists who are trying to keep costs down. 

Take, for example, the Lego chromatographer designed by Cassandra Quave and her husband, Marco Caputo, both at Emory University. Quave is an ethnobotanist who leads a research group dedicated to documenting traditional medicines. Her team travels deep into forests and jungles around the world, collecting samples of leaves, berries, and seeds that they evaluate for their potential pharmaceutical value. To isolate chemical compounds from the plant samples, Quave makes use of a meticulous process called chromatography, in which liquid distilled from the plant is passed over a tube filled with a material such as a silica gel. 

Timing in chromatography needs to be very exact, with small amounts of liquid being added at precise moments. Waiting for these moments is not the best use of a graduate student’s time. This is exactly what Quave thought when she walked into the lab one day and saw her PhD student Huaqiao Tang holding a test tube and watching the clock. “This is crazy!” Quave said, laughing. “We can come up with a better solution!” 

When Quave told Caputo of her problem, he brought in Legos culled from their four children’s massive collection and had his students see what they could do with them. They came up with a robotic arm that could make repeated precise movements, gradually adding small fractions of liquid to test tubes in order to isolate compounds within the plant tissue. The device was so accurate in its movements, Quave says, that spontaneous crystals formed, something that occurs only in very pure substances. 

Ethnobotanist Cassandra Quave distills molecules from plants using a Lego chromatographer that she designed with her husband, researcher Marco Caputo.

At Cardiff University in Wales, Christopher Thomas, Oliver Castell, and Sion Coulman had similar success building an instrument capable of printing cells. The researchers study skin diseases, lipids (fatty compounds) in the body, and wound healing. Ethically obtained samples are hard to find, so they created a 3D bioprinter out of Lego pieces that is capable of “printing” a human skin analogue, laying down layers of bio-ink that contains living cells. These printers normally cost over a quarter of a million dollars, but they built their version for a mere $550. At first, their colleagues were skeptical that components typically treated as toys could be used in such a professional setting, but after seeing the printer at work, they were quickly convinced. The team made national news, and other groups replicated the model in their own labs. 

Some scientists are devising tools to take into the classroom. Timo Betz of the University of Göttingen in Germany came up with the idea of building a Lego microscope one day while watching his son, Emil, then eight, play. Betz was scheduled to speak about science at a local school that afternoon but was reluctant to take his own lab-grade microscope into the classroom. His son was immediately on board. “Let’s do this!” he told his dad. Together with Bart Vos, a colleague at the university, they built a microscope that consisted entirely of Lego pieces, with the exception of two optical lenses. Their plans, which they’ve made available to the public, can be used by students as young as 12 to learn the basic concepts of optics.

Many of these scientists make their models open source, providing them to interested groups or publishing the plans on GitHub or in papers or so that other labs can make their own versions. This is great for researchers the world over, especially those with limited funding—whether they’re new faculty members, scientists at smaller universities, or people working in low-income countries. It’s how a small plastic brick is making science more accessible to all. 

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Google rejected me 7 times before finally hiring me as a software engineer. Looking back, I'm deeply grateful for not giving up.

• Qingyue(Annie) Wang is a software engineer at Google.
• Prior to landing her job, she was rejected by Google seven times.
• Persistence and adapting her approach were key to finally achieving her dream job.

My journey to finally landing a job at Google was an emotional roller coaster. I went through seven rounds of rejections before finally achieving my goal.

But I'm glad I didn't give up.

I was sad to be rejected but understood why

In college, I double majored in computer science and math. I first became interested in applying to Google because I was intrigued by the cool products and good culture . I'd heard great things about the company and really wanted to experience it for myself.

In 2018, I applied to be a Google intern but was rejected twice . The first time, I failed the online assessment . Then, a recruiter reached out to me to give me a second chance. Unfortunately, I didn't pass on this attempt either.

I was sad but felt the rejections were reasonable; I lacked prior experience, had only solved a few technical problems before, and hadn't thoroughly prepared for the assessment . I regretted not properly preparing and wanted to be better equipped when the next opportunity came.

Preparation was lonely

The summer before my final year of college, I managed to land an internship at another company. When I returned from the summer break, I vowed to study harder for my post-graduation job search. Every day, after finishing my coursework and classes, I'd work on interview preparation.

It was a lonely journey. Most days, after my evening studies, I'd take the last bus home and walk through the long, dark neighborhood streets. Looking up at the stars on my walk home, I'd remember why I was working for my goal, grit my teeth, and do one more round of practice.

That fall, I applied to three different full-time roles at Google. Unfortunately, my résumé didn't make it past the initial screening process.

The experience made me understand rejection more deeply, but I never considered giving up. I knew my abilities could be improved over time.

The role I applied for was canceled

As I was about to graduate in early 2020, I finally secured an interview for a new grad position at Google . This role specifically required C++ knowledge. As part of my interview preparation, I studied a C++ book and worked on several projects to improve my C++ skills.

After the interview, I kept analyzing how everything had gone. The interviewer seemed pleased with my answers and gave me some positive feedback, which gave me some hope that I might've passed, but I wasn't completely sure.

I awaited the results with bated breath.

When I received an email from the recruiter to schedule a phone call, I was very nervous. I tried to guess from his tone in the email whether he was going to share good news or bad news. I felt vaguely uneasy, but I held onto hope as I answered his call.

"I received positive feedback from every round," he began. Hearing this, I was filled with joy. But when I heard him say "but…" my heart sank.

He delivered the news: the role had been canceled due to the COVID-19 pandemic .

I felt like collapsing and tears flowed down my face. I don't remember what the recruiter said to me after that; I only remember trying my best to stay professional and make my voice sound calm.

Once I hung up, I couldn't hold it in anymore and started to cry out loud.

My rejection was not a reflection of my ability

Eventually, I calmed down. I remembered an ancient Chinese saying, "The times create heroes," which speaks to the profound impact current events have on individuals. I realized the fate of an individual, like myself at that moment, is inevitably influenced by the larger environment — in this case, a pandemic.

Not receiving an offer didn't reflect my abilities, bravery, hard work, or willingness to learn.

Related stories

Despite my positive mindset, things didn't seem to improve. Later in 2020, I got another chance to interview for a Google role, but I didn't manage to pass the phone interview round because I failed to provide the optimal solution to a question they'd asked me.

Disappointed, I accepted this reality check; my understanding of basic algorithms needed improvement. I decided to focus on strengthening this area and prepare thoroughly for the next opportunity.

I intentionally practiced and addressed my weaknesses in algorithms, which helped me secure a job at Amazon .

My final attempt

While I valued my experience at Amazon, Google still felt like an elusive dream to me.

In 2022, a Google recruiter reached out again, reigniting the curiosity that had been suppressed in my heart for so long.

I decided to try again.

I realized that I had been too passive with job opportunities. I'd been using the same résumé and preparation for different types of interviews, without customizing my approach for each company. I felt like I was putting in a lot of effort to prepare, but I wasn't spending enough time reflecting and adjusting to fit the specific company.

This time, I learned my lesson and did things differently.

I set up a meticulous study plan , outlining daily tasks and review points. I repeatedly addressed complex problems and used any spare time to mentally revisit the problem-solving process. This helped me to quickly identify unfamiliar points and practice them deliberately. During technical question practice, I prioritized depth of understanding over quantity.

Of course, I still occasionally had doubts and thought, Is it worth spending so much time? How will I face myself if I don't pass this interview? But I knew that if I didn't try my best, I'd regret even more that I gave up.

During this period, I also landed an interview for a role at Apple , which would've required a completely different assessment to prepare for. Since I was working full-time at Amazon, my time was limited, so I decided to forgo the Apple interview — even if that meant burning that bridge — and fully devote myself to my Google prep.

I finally landed the job

I still remember the day I received the phone call. "Congratulations!" the recruiter said this time.

I immediately told my friends the news. Surprisingly, I was calmer than they were. My mind was completely blank because I couldn't believe it, but my friends were so emotional, even crying.

One of my longtime friends recalled how I'd struggled to finish my homework in college, how hard I worked to get my first internship, and how my family didn't support my job search after graduation.

While awaiting the official letter from Google, I received a gift: a white hat with the Google logo. It came with a congratulatory note. Holding the paper, I felt a wave of emotion and a strong sense of the power of persistence.

I have the job of my dreams

It's been two years since I got the news that I'd finally landed a job at my dream company . I'm grateful to have had the opportunity to finally experience Google's culture and even become an internal career coach to support other Googlers in their career growth.

Although my career journey didn't unfold as I had expected, I'm glad I had the chance to experience different company cultures, learn a variety of technologies, and engage with many cool projects.

I've come to view everything as a journey; the journey itself is what's important. Whether the outcome is good or bad, it's fleeting and will pass; the process is long-lasting.

Looking back, I am deeply grateful for not giving up. When I feel confused, I can remember those times when I showed strength and persistence.

Despite moving apartments three times in the past two years, I still keep the welcome letter from Google on my shelf and look at it every day. It reminds me of my tenacity and inspires me to keep pursuing my goals.

Qingyue(Annie) Wang is a software engineer and internal career coach at Google who is passionate about helping people achieve their career goals.

If you have an interesting journey to landing a Big Tech job and want to share your story, email Jane Zhang at [email protected] .

Watch: Marketing leaders from Amazon, LinkedIn, Lego Group and more tell Insider what pandemic-fueled business changes are likely to stick around

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