Innovation Almost Bankrupted Lego — Until It Rebuilt with a Better Blueprint
A redefined purpose at Lego — to become the world’s strongest brand among families — has helped the company to innovate in a constructive way
By KNOWLEDGE@WHARTON | July 23, 2012
It was 2003, exactly 56 years after Ole Kirk Christiansen bought the first plastic-injection molding machine in Denmark to start manufacturing plastic bricks for building-block toys. On the surface, or so it seemed, the Lego Group had done everything right over that time period.
The company was an iconic name in the toy business — plastic building-block toys were Legos in customers’ minds, just like all tissues were Kleenex and all flavored ice pops were Popsicles. Lego was also rare among big companies in that the firm was still run by the founding family, with Christiansen’s grandson Kjeld Kirk serving as CEO. While Lego had always looked for new products, after a sales slump in 1993, the firm tripled its offerings and in 2000 went on a binge of innovation, adding on Lego-branded electronics, amusement parks, interactive video games, jewelry, education centers and alliances with the Harry Potter franchise and the Star Wars movies.
Speaking at a recent conference on innovation at Wharton’s William and Phyllis Mack Center, Wharton practice professor of operations and information management David Robertson said Kjeld Kirk Christiansen and his leadership team adhered to nearly every one of the major principles that are widely prescribed by experts in launching its spate of innovation in 2000: the firm found relatively competition-free markets where Lego could dominate; management sought the participation of a number of different constituencies from both inside and outside the firm and hired a diverse and creative staff; it tried to create new products that disrupted existing markets; and it listened to customer feedback. Innovation became a focus of every aspect of the company, with the goal of turning it into the world’s strongest brand among families by 2005.