From Blocks to Blockbusters
We are all familiar with Lego, the acclaimed block-building game containing hundreds of colourful bricks and a how-to guide for your dream city. Remember bargaining with your parents for the more expensive 800+ Battleship set, moving furniture everywhere in a desperate attempt to find that grey 3*2 piece or the death cry of stepping into another lego while finding that piece. Lego has surely given us some beautiful childhood memories. However not much is known about how the biggest toy brand was on the brink of bankruptcy back in 2003.
The concept of connecting blocks first came in 1962 but it didn’t catch much attention until 1967 when it was released as a complete set. Finally, in 1969 the iconic lego block was released, the exact design which is used in modern day lego! Despite the initial disapproval from the public, Lego saw the potential in its product and kept improving till it became a massive hit. With the rising sales and popularity, Lego decided to diversify with video games and theme parks. But as we’ll see it didn’t turn out the way they expected.
Once upon a time, the Lego kingdom was a sprawling empire, stretching across the toy shelves of the world. But as with all empires, the kingdom began to show cracks, and before long, it was tumbling down like a poorly constructed tower of blocks. The root of the problem was a series of missteps, each one chipping away at the foundation of the company.
Dispelling the myth: growth ≠ success
To put it simply, Lego got a little too big for its bricks. The company was so enamoured with its own success that it overreached, spreading its reach across the globe like wildfire. But just like wildfire, this over-expansion consumed everything in its path, leaving the company with too many products, too many lines, and a brand identity that was starting to look like a jumbled mess.
The company had taken reinvention a bit too seriously, in the 1990s. They started venturing into the production of not just their signature bricks but included a lot of different lines of products. They got into the making of merchandise, publishing books, and launching their theme park, Legoland, in the UK (1996) and the US (1999). And this was all in a bid to capture the trends they thought children were now interested in. They overreacted to trends and started over-diversifying. And they did what many other brands did – they expanded from their core, and like many other brands, they lost their heart. What may have seemed like a logical and necessary expansion, was mainly a result of the fear of being outdone.
In the early 2000s, the Lego kingdom was facing some serious internal problems. It was like trying to build a castle without knowing how many bricks you had - not exactly the foundation for success. The chief marketing officer, Mads Nipper, admitted that the company was in the dark when it came to their costs, which is a problem when you're dealing with building blocks. It turns out, they had been relying on top graduates from design schools in Europe, who were great at designing but didn't have much experience with the little plastic bricks. The result was that certain sets were costing more to make than they were selling for.
It was a perfect storm of mismanagement and poor decisions, but the crazy part was that no one actually knew just how bad it was. It was like a house of cards, but instead of cards, it was made of blocks, and instead of falling down, it was losing money.
Missed the tech train
The world was rapidly changing, with new technologies transforming the way people played. But while its competitors were jumping on board and exploring the digital world, Lego was still relying on traditional methods, as if playing with blocks was enough to keep the kids of the new millennium entertained.
The above mishaps shattered the castle built by the lego masters. The once booming company was now in humungous debt of around 800 million dollars; the future was looking pretty bleak for the Danish toy company.
Building a Better Future: The Resurgence of Lego
"Simplicity is the silent symphony of solutions."
Despite these negative developments, at the heart of things, Lego is a straightforward company that achieved success thanks to its innovative and imaginative product, coupled with outstanding marketing strategies. While expanding in other areas they not only lacked a satisfactory USP but also lost sight of their fundamental product. To make a successful turnaround, Lego simply had to focus on improving its core strengths while eliminating distractions that were not essential.
Change In Management
Jørgen Vig Knudstorp was appointed as the first CEO of Lego outside the family after serving as the Director of Strategy for three years. Despite the challenges that the company was facing during this time, Knudstorp accepted the challenge and transformed Lego into what it is today. He reorganised the company's structure, streamlined the supply chain, simplified the product line, and introduced five-year plans. He also reduced unnecessary variations and placed a strong emphasis on the power of the Lego brick, which ultimately became a key factor in the company's successful comeback.
A well-known saying goes: “If you keep doing the same things, you’ll keep getting the same results.”
However, in Lego’s case the opposite is true. Despite their initial success Lego lost focus and got distracted by diversification. Thus in order to be successful again they switched back to their tried and tested methods and got rid of unnecessary distractions. First, the company sold all four of its Legoland theme parks, which not only brought in additional cash but also reduced their maintenance costs. In addition, the company simplified its product line by eliminating unnecessary variations, which had previously only added to its expenses. Finally, Lego temporarily discontinued its video games program in an effort to focus on its core business. Thanks to all these changes Lego regained focus and quickly became profitable once again.
Marketing & Collaborations
Throughout history, we have witnessed several traditional business giants go bankrupt because they failed to recognize the impact of modern technology. Despite the evolution in the gaming and entertainment industry, Lego not only managed to survive but also continued to grow at a remarkable rate. By collaborating with video games and movie franchises, Lego leveraged technology as a catalyst for growth rather than resisting it. The comparison between Star Wars and Lego is often made to that of peanut butter and jelly. With each new Star Wars movie, the sales of Lego Star Wars sets increase significantly. But this is not limited to Star Wars alone. Over the years, Lego has partnered with a wide range of franchises, from Whimsical animes all the way to Classic James Bond. If there's a franchise you enjoy, chances are that there's a Lego set dedicated to it!
Most games are categorised as being for either boys or girls, but Lego has shattered these gender and age barriers. Thanks to its numerous partnerships, Lego has been able to build its sets in all genres; be it Marvel, or Frozen, or Harry Potter. Lego sets are also available in a range of difficulties, from sets with fewer than 10 pieces to the challenging 11,695-piece Lego Art World Map or the Lego Titanic containing 9,090 pieces. The latter being sophisticated enough to captivate even adult audiences. In fact, Lego has an entire community of adult fans, known as AFOLs (Adult Fans of Lego). So, no matter your age or gender, there is always a Lego set for you.
Happy Ending to the Toy Story
Lego's downfall was like a game of Jenga gone wrong—every time they pulled out a brick, the tower seemed to crumble more. But, like any true game master, Lego wasn't ready to concede defeat. They took a deep breath, gathered their pieces, and set out to rebuild. Slowly but surely, brick by brick, they pieced their company back together. Now, Lego is back in the game, ready to take on new challenges and reach new heights. So, here's to Lego, the company that proves that even the greatest of towers can be rebuilt and restored.
Author: Esshan Wadhawan, Palak Bansal
Illustration By: Ramya Sehgal