How Lego Reinvented Itself

Summary

LEGO, a household name since the 1930s, has seen its ups and downs. From a small Danish carpenter's workshop to a global toy giant, LEGO faced financial struggles in the early 2000s due to overexpansion. It turned things around by refocusing on its core business, streamlining its supply chain, and embracing digital innovation. With a mission to inspire creativity in children, LEGO continues to innovate, adapting to digital play trends and maintaining its status as one of the world's largest toy manufacturers.

Takeaways

• 🏭 LEGO is a globally recognized toy brand with a history dating back to the 1930s, starting as a carpenter's workshop in Denmark.
• 🔗 The name LEGO is derived from the Danish words 'LEg GOdt', meaning 'play well', and also translates to 'I put together' in Latin.
• 🔥 LEGO faced financial struggles in the early 2000s due to overinvestment in various ventures.
• 🛠️ After a factory fire in 1942, LEGO invested heavily in a new facility and machinery, leading to the production of plastic toys.
• 🌟 The 'LEGO system of play' was launched in the 1950s, marking the beginning of the company's international expansion.
• 📈 In the 1990s, LEGO introduced LEGO kidswear and faced its first deficit in 1998, leading to restructuring and job losses.
• 🔄 A significant turnaround strategy was initiated in 2004 under new CEO Jørgen Vig Knudstorp, focusing on streamlining operations.
• 🌐 The sale of LEGOLAND parks to Merlin Entertainments in 2005 allowed LEGO to concentrate on its core toy business.
• 💡 LEGO's mission is to 'inspire and develop the builders of tomorrow', which is central to their company culture and operations.
• 📈 LEGO's success is attributed to a strong focus on innovation, with 25-30% of annual sales coming from new products.
• 🌐 Digitalization has been key for LEGO, creating opportunities to connect the physical and digital play experiences.

Q & A

What was the original main focus of Ole Kirk Kristiansen's business before shifting to toys?

Before shifting to toys, Ole Kirk Kristiansen's business was focused on making wooden toys and other household items.

What does the name 'LEGO' derive from and what does it mean?

The name 'LEGO' derives from the Danish words 'LEg GOdt', which means 'play well'. It was later realized that 'Lego' in Latin means 'I put together'.

What significant event led to the creation of LEGO's first factory?

A fire that burned down their workshop in 1942 led Ole to build a new factory designed for assembly line production.

How did LEGO's first plastic toys come to be, and what was their name?

Inspired by the Kiddicraft brick, Ole and his team modified the design and in 1949 LEGO produced its first plastic toys called the Automatic Binding Bricks.

What was the 'LEGO system of play' launched in 1955?

The 'LEGO system of play' launched in 1955 was a significant development in LEGO bricks, marking the beginning of the company's first real export.

Who established the LEGO constitution and what were its main characteristics?

Godtfred Kirk Christiansen established the LEGO constitution in 1963, which outlined 10 characteristics to guide product development and communication, emphasizing play potential, gender neutrality, age inclusivity, and creativity.

What was the impact of the 1990s on LEGO's business strategy?

The 1990s saw LEGO introducing LEGO kidswear, reporting their first deficit in 1998, and undergoing restructuring that led to job losses. It was a period of significant change and challenge.

How did LEGO respond to the financial crisis in 2003, and what was the outcome?

In response to the financial crisis in 2003, LEGO appointed Jørgen Vig Knudstorp as CEO, sold the LEGOLAND parks to Merlin Entertainments, and refocused on its core business of toys, which eventually led to a return to profitability.

What is the core mission of the LEGO Group, and how does it influence the company's operations?

The core mission of the LEGO Group is 'to inspire and develop the builders of tomorrow'. This mission drives the company's dedication to innovation, product development, and maintaining a strong company culture.

How does LEGO approach marketing and innovation to stay competitive?

LEGO approaches marketing and innovation by using a sprint methodology for rapid prototyping of ideas, focusing on new product launches for a significant portion of their sales, and understanding the importance of novelty in the toy market.

What is the significance of digitalization for LEGO, and how has it adapted to the changing nature of play?

Digitalization has allowed LEGO to connect the physical and digital worlds of play, adapting to changing lifestyles and competition. Initiatives like the LEGO LIFE online community and products like LEGO BOOST demonstrate this adaptation.