LEGO’s Rise from the Rubble
LEGO is one of those brands most brand zealots use as an example of a brand that others aspire to be. With its iconic look, non-stop line of innovation success and its ability to capture the imagination with figures built stories high, LEGO has Disney-like magic surrounding it. In fact, next years’ The Lego Movie, with Will Ferrell, Jonah Hill, Morgan Freeman and Channing Tatum is one of the most anticipated movies of 2014.
With all of this success, you would never have thought that LEGO actually provides one of the great examples on how not to innovate, living on the brink of self-destruction just a decade ago.
You hear the success stories. But you hardly ever hear the precautionary tales. Even if you did, you’d never expect that LEGO – the venerable children’s toy company that built an empire around a simple, yet ingenious plastic brick – would have an important one to share.
It’s hard to escape a prevalent theory that businesses intending to grow and succeed should aggressively sharpen their innovative edge. Among the best practices that abound: Foster an innovative culture. Be customer driven. Look to disrupt. Make sure you practice “open innovation.” LEGO had none of this. LEGO is a fascinating story about innovation run rampant. And it very nearly paid the price with failure. But instead, LEGO used the experience to figure out where it went wrong, change course and transform itself in the process.
It’s all laid out in Brick by Brick by David C. Robertson, an entrepreneur and professor of innovation and technology management at IMD in Lausanne, Switzerland. Not so coincidentally, he was also named the LEGO professor at IMD in 2008. It gave him unique access and insights for a fascinating book that should give any business pause as they set a course for innovation-led growth. He lays out how botching the execution of the “seven truths of innovation” nearly brought LEGO to its knees under the leadership team headed by Poul Plougmann between 1998 and 2003.
While he spends the majority of the book exploring how the company corrected its problems under the new team, led by JØrgen Vig Knudstorp, it’s important to understand the mistakes that were made. He underscores how very challenging it is to adopt the kind of thinking and encourage the kind of culture that successfully transforms a staid organization to and innovative and thriving culture.
LEGO had always had been customer-driven, well-attuned to the mind of a 7-year-old boy or girl who liked to build. In one example of its faltering, Robertson shares how slowing sales and research led LEGO to target kids who wanted “darker” tech, with gratification delivered faster and easier. So, LEGO changed its drive to a “new” consumer that wasn’t actually a customer and, as it turned out, was never likely to be.
As Robertson recounts, one of the moves to entice this new set of customers was a character-driven product line – less buildable and more playable. Think GI Joe instead of bricks. Jack Stone, an oversized minifigure, stepped out in 2001 as LEGO’s new world hero…and failed miserably. The majority of kids didn’t care about a fabricated character without history or context. The pieces comprising the toy sets required expensive new injection molds, making it unprofitable to turn out. But the most egregious error? It alienated its core fans – adults and parents who grew up with LEGO bricks – for abandoning its classic play values: “Joy of building, pride of creation.”
Explore the Full Spectrum of Innovation
LEGO took this truth to heart. But it forgot, Robertson writes, “that when it comes to igniting a range of ambitious innovations, you reduce the risk by taking a stepwise, learn-as-you-go approach.”
This was exemplified by the Galidor line of sci-fi action figures that totally omitted LEGO’s iconic brick. It was a bid to capture a piece of the red-hot action figure craze. It would be “propagated” by its own television series. Fired up by its potential, the leadership team pushed for higher sales forecasts and heavily frontloaded sales channels. But it didn’t take. The television show – essentially a product pitch – flatlined. And so did sales. It was too soon after LEGO’s highly successful science fantasy line, Bionicle, and couldn’t measure up. It was killed in a year, LEGO’s “worst-selling” theme ever.
Meanwhile, LEGO was also exploring and expanding the customer experience with LEGOLAND theme parks and LEGO branded stores. Highly ambitious plans called for a new park to be unveiled every two to three years, and for 300 stores to open. Both taxed management know-how and drained an already precarious balance sheet.
“Crazy or not, LEGO did explore the full spectrum of innovation. But [it] was too myopic to spot the ominous warnings that it was dangerous to bet a priority product on an untested TV show and delusional to think that managers could master the retail and theme park businesses all at the same time,” writes Robertson.
Build an Innovation Culture
It wasn’t the culture that was at fault, as Robertson outlines. It was in LEGO’s management – marked by half measures and lack of proper support.
For example, the challenges of attracting top design talent to LEGO’s headquarters in remote Billund, Denmark resulted in the creation of small project teams around the world. But those teams were never connected with the core product development teams, so their ventures went nowhere.
While top management insisted on risk-taking, there was little tolerance for the number of failures being experienced. They were swept under the rug, not learned from. And while exhorting people to “think different” when management was challenged – as happened with its decision to discard its mainstay subbrand DUPLO for pre-schoolers – dissenters were told in no uncertain terms to fall in line.
It took new leadership to correct the half measures of its predecessors and bring new management rigor to the company. In the process, the team has taken this iconic brand to new heights as it has found ways to properly harness innovation’s possibilities to drive business growth, with the foundational brick at its core.
In Brick by Brick, Robertson uncovers and shares a rare inside exploration of innovation-led transformation at its worst – and best. Any manager can learn from these lessons.
This post originally appeared on the Forbes CMO Network on Scott Davis’s blog, The Shift. To read related thinking from Scott on Forbes, follow his blog here.