Key Messages
Lessons Learned From Lego: How To Balance Innovation And Success
In today’s rapidly changing and hypercompetitive economy, the ability to intelligently manage innovation is essential for long-term success.
Without properly balanced innovation and focus, a business can quickly unravel when faced with market changes.
This was seen first hand by the renowned Danish toy company LEGO.
Seen as a cautionary tale, LEGO’s experience allows companies to observe how intelligent management of innovation is key to their longevity and stability in highly competitive markets.
Through various examples, it can be learned why it is sometimes better to think inside the box, and why hiring T-shaped individuals can pay off immensely in the long run.
The lessons learned from LEGO have become particularly useful not just in the world of toy-making but also in any other business model or venture that aims to produce controlled, measurable innovation.
Therefore it has become increasingly important for companies everywhere to draw inspiration from LEGO’s example while managing their own businesses and projects.
How Lego Revolutionized The Toy Industry With Its Innovative Interlocking Bricks
LEGO’s success began with Ole Kirk Christiansen’s shift in focus from individual toys to a system of play.
When one retailer suggested that he create an entire system rather than just build different products, Godtfred Kirk decided to abandon 90 percent of LEGO’s portfolio and focus on what eventually became what we know today as the iconic interlocking brick.
This unified toy-production system meant that bricks from any set were compatible with those from other sets, allowing children to combine different models and parts from different kits, creating their own imaginative designs without limitation.
Such comprehensive approach allowed LEGO to gain a competitive edge and helped them expand their market share even further.
In essence, LEGO was decades ahead of its time when it created a suite of connected toys which preceded Apple’s i-branded products.
By developing a system for its product portfolio, instead of individual products, LEGO achieved immense success that continues until today.
Lesson From Lego: Never Take Success For Granted And Be Prepared To Adapt In A Changing Environment
At the end of the 1990s, the LEGO company was a booming business – but it was facing a crisis.
It had reached its peak in 1991 with an 18 percent jump in sales, but growth had begun to plateau by 1993.
The analog style of play that was synonymous with LEGO wasn’t as popular anymore – kids were turning their attention to gaming systems, cable TV and computers for entertainment instead, and toys created by competitors posed a challenge to LEGO’s market share.
Additionally, patent protection had expired on its interlocking bricks, which allowed competitors to create cheap imitations of its classic product line.
LEGO’s iconic modular brick design made it successful in the 90s, so much so that they grew into 45 companies all over the world with nine thousand employees at one point, but this fast success lulled them into complacency and risk-aversion.
As a result of all these factors combined, the unique toy company faced a significant challenge: if it wanted to continue growing and thriving, it would have to branch out into uncharted territories beyond its iconic models.
The Dangers Of Unfocused Innovation: What Lego Taught Us About Management And Brand-Building
In the mid- to late-1990s, LEGO’s attempt at innovation severely backfired, leaving them on the brink of bankruptcy.
Although they were technically profitable from 1993 to 2002, their initiatives had not been successful – in fact, the once revered family fortune was depleting rapidly at the rate of $0.5 million per day!
One example is their LEGO Explore product line for toddlers – although an admirable effort to diversify, it lacked many distinctively LEGO features and ultimately alienated a lot of fans.
This effort was mirrored with LEGOLAND expansion as well; over the course of few years, LEGO expanded to four new locations – each location costing 1.5 billion Danish Krones and resulting in yearly losses of 300 million Danish Krones!
All these factors combined mean that LEGO was in trouble and needed to quickly restructure their company and direct innovative strategies if they wanted to prevent bankruptcy.
Fortunately they were able to pull themselves back from the brink and are now one of the biggest success stories around today.
How Lego Re-Positioned Its Brand With Innovative, Brand-Focused Strategies
As outlined in the Brick by Brick book summary, LEGO’s reorientation process shows that innovations ought to grow organically out of the culture and history of the company lest it risk alienating core customers and straying from its area of expertise.
After quickly realizing this, management took corrective steps and began scaling back their expansion into different industries.
The “everything-goes” mentality that was previously encouraged had led to the production of underdeveloped toys that lacked charm and sophistication.
One example of this was their Galidor line, a show and toy series which flopped due to their lack of understanding on how to run a television show.
In order to prioritize creativity while still upholding LEGO’s core identity, they created ‘Design Lab’ – a team comprised of experienced members who would ensure any new projects were infused with ‘LEGO DNA.
An excellent example is the LEGO Games range which merged traditional board games with building blocks; essential components in propelling LEGO forward while still respecting its traditional system of play.
How Resource Restrictions And Strict Profit Expectations Helped Lego To Be More Creative
The evidence points to the fact that a tighter focus allows for more productive innovation.
LEGO’s proof of this can be seen in their post-2003 restructuring, where they set up concrete goals of achieving 13.5 percent return on sales and had stricter budgets for product development.
Rather than abandon innovative ideas as soon as any hurdles presented themselves, LEGO managenment used these restrictions to inspire creativity with their developers and managed to obtain significantly greater returns on research and development spending.
Apple experienced something similar when Steve Jobs insisted that the iPhone should have only one control button – it required their designers to think ‘inside the box’ in order to produce what is now a highly profitable product.
In conclusion, it’s clear that no matter how passionate designers may be about new toys or products, tight standards are necessary in order to keep companies profitable while allowing developers to be creative within those strictures, leading to better quality iterations of existing products and designs that people really love.
The Ingredients Of Lego’S Success: A Three-Pronged Structure To Foster Innovation And Financial Stability
At LEGO, the success of innovation comes through a structured process that allows for development on multiple levels.
This process begins with Product and Market Development (PMD); this part of the business is responsible for creating small product innovations to their core line of bricks, such as expansion kits and thematic categories, which help lay a firm financial footing for LEGO’s brand.
For more remarkable concepts, the Concept Lab serves as an incubator for speculative development.
This is where all the “never-before-seen” ideas are created that move LEGOs products into interesting new directions.
Finally, Community, Education and Direct (CED) provides an avenue for LEGO to connect its fan base onto their marketing efforts and keep them involved in their company happenings.
How Lego Managed To Successfully Leverage Crowdsourcing For Open Innovation
When it comes to open innovation, LEGO sets a very clear direction and then allows for flexibility in the execution.
It’s proven a powerful strategy for them—and for other companies looking to crowdsource ideas and benefit from outside innovators.
To create their customisable robot line Mindstorms NXT, LEGO turned to their hard-core adult fans with robotics backgrounds, making sure that the robots stayed engaging and geared towards kids.
At the same time, boundaries were set so that the volunteer developers could adhere to quality, safety and cost standards while still having final authority on what they put forward as solutions.
By doing this, LEGO created a culture of co-ownership while limiting any potential risk or liability caused by their crowdsourcing efforts.
Whether you’re a company or looking to open innovate your own work, it’s essential to remember: When fostering open innovation, develop a set of direction-setting tools and then get out of the way!
Doing so opens up exciting new possibilities while ensuring that whatever is proposed is held to high standards of excellence, safety and cost control.
What Can We Learn From Lego’S Restructuring Process?
Collecting a diversified team of “T-Shaped People” is essential for successful innovation.
The term T-Shaped Person refers to an individual who has both specialized expert knowledge in a certain field (the vertical leg of the T) as well as broader knowledge across different disciplines (the crossbar of the T).
LEGO hired highly creative “T-shaped people” due to their ability to think differently, challenge each other and bring broad-based ideas to the team.
Such examples include their Chief Designer of Games, Cephas Howard whose toy design expertise was supplemented by his knowledge in media, marketing and sales.
However, it is also important to counterbalance your highly creative “T-Shaped people” with strong managers that hold everyone accountable and ensure all is running smoothly subject to clear goals.
LEGO achieved this through product development teams which involve project managers, modelers, engineers, marketers, designers and communications personnel in the same room — thereby encouraging communication and thought exchange without sacrificing efficiency.
Lego Demonstrates That Innovation Comes In All Shapes And Sizes
At LEGO, they understand that radical and revolutionary ideas aren’t the only kinds of innovations worth pursuing.
Even small, everyday improvements to their products can have a huge impact on profitability.
For example, the company’s traditional products such as figurines, houses and bricks may not be revolutionary or flashy, but are nonetheless incredibly profitable for LEGO.
So alongside speculative projects like Mindstorm NXT and LEGO Games that aim to change the game or seize new markets, the company also places just as much focus on developing and improving upon its classic lines of business.
And this approach is baked into its corporate culture – managers are encouraged to use an ‘innovation matrix’ which outlines how much creativity developers bring to each project depending on their goals.
Plus with their three-part system for managing innovation at all levels it’s clear that LEGO values every innovation equally – small and large alike – as they understand differently sized innovations can make a real difference.
Don’T Think Outside The Box – Climb Back In: Lego Teaches Us To Think Inside The Box For Success
Sometimes, when a company is stuck in a rut and looking for new ways to grow, the best strategy may not be to think “outside the box.” LEGO provides a perfect example of this lesson: when they thought “outside the box” in the late 1990s, it was disastrous.
This misadventureshows us that there’s an inherent danger when you put all your focus on thinking outside of the box – you can easily lose sight of what made your company successful in the first place.
Rather than thinking “outside of the box,” LEGO switched their focus to thinking “inside it.” They implemented strict cost and profit standards and tight restrictions around quality, safety and cost, actually allowing creativity to flourish within these guidelines.
Knowing these boundaries or limits encourages people to come up with creative solutions while still making sure that projects remain profitable and successful.
So next time someone tells you to think outside of the box, take a moment to consider if it might be better for you to stay inside and use those restrictions as an opportunity for growth.
Wrap Up
The brick by brick book emphasizes the power of incremental, planned and disciplined innovation.
LEGO is an excellent example of this, showing us that even small changes can make a huge difference in the success of a company.
Their story proves that even when faced with near-bankruptcy, you can turn it around with creative thinking and structured approaches.
The key takeaway from this book is to have faith in yourself and your ability to come up with innovative solutions; don’t be afraid to experiment, but never lose sight of your core values.
