With a market value of $9.28 billion, the LEGO Group saw a revenue jump of 17% in 2022. In fact, the Danish toymaker has continued to outperform both the industry and its competitors. It is astounding to think of the fan following these tiny pieces of plastic bricks have garnered the world over, age notwithstanding.
But the story of their success is not that simple after all. In the early 2000s, Lego was on the brink of collapse. Plagued by mismanagement and financial troubles, it faced the very real threat of bankruptcy.
Fast forward to today, and Lego stands tall as one of the world’s most successful and profitable toy companies. How did they turn the tide and rebuild their empire? It is a case study that is still being discussed at Ivy League schools to date.
Let’s go back to 1932, when Ole Kirk Christiansen founded the company in Denmark. The name ‘Lego’ is derived from the Danish word “leg godt,” which means “play well.” The foundation of Lego’s success was its interlocking plastic bricks, introduced in 1958. These bricks allowed for endless creativity and innovation, giving birth to a world of imaginative play.
Revolutionizing the brick
In the late 1970s, under the leadership of Kjeld Kirk Kristiansen, the third generation of his family to run the business, the brand revolutionized its approach. He introduced the Technic sub-brand aimed at older kids, including action sets with mini figures and more elaborate building models. Lego’s popularity surged with the success of its trademark building sets through new stories, games, and experiences.
All was well until the early 1990s, when Lego’s patent to exclusively manufacture the Lego brick expired, allowing several cheaper brands and Chinese replicas to flood the market. Suddenly, their sales started to plummet. Struggling to find its footing in the market, Lego went on an innovation binge. The company hired top-notch designers and let them come up with new ideas. While some sets received a good response, most of them did not. It came to a point where the cost of producing these innovations was higher than the price they were sold at.
Soon the brand started to dilute from the original brand into more glitzy action figures, fashion lines, theme parks, and jewelry. This sent the brand into a downward spiral. By 2003, sales hit a new low, and the company was mired in US$800 million in debt and facing bankruptcy.
It may have seemed like the end of the story, but it wasn’t. David Robertson’s book “Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry” clearly elucidates the steps the company undertook to radically transform itself from the brink of closure.
Rebuilding the Foundation
Lego underwent a massive transformation. The first crucial step was a change in leadership. In 2004, Jørgen Vig Knudstorp took the reins as CEO and quickly implemented a series of bold initiatives. He refocused the company on its core product, the beloved Lego brick.
Streamlining operations and slashing costs were necessary to stabilize the ship. Lego divested non-core businesses, closed unprofitable theme parks, and outsourced certain production processes. These measures helped the company reduce its massive debt and re-establish financial stability.
One of the cornerstones of Lego’s resurgence was an unwavering commitment to quality. The company invested heavily in research and development, ensuring that each brick met the highest standards. This dedication to excellence not only restored consumer trust but also elevated Lego’s reputation as a premium toy brand.
Innovative Partnerships and Expanding Horizons
Lego’s revival was also driven by strategic partnerships. The company collaborated with popular franchises like Star Wars, Harry Potter, and Marvel to create themed sets. These partnerships opened new markets and brought fresh excitement to Lego’s offerings.
Additionally, Lego embraced the digital age, developing video games and expanding its online presence. The Lego Ideas platform allowed fans to submit their own designs, giving rise to community-driven sets that became highly sought-after. Listening to the voice of the customer became a guiding principle for Lego. The company actively sought feedback and engaged with its community, both online and offline. This led to valuable insights that shaped product development and marketing strategies.
Lego’s success was not confined to physical bricks alone. The company ventured into animated movies, starting with “The Lego Movie” in 2014. These films not only entertained audiences but also boosted Lego’s brand recognition worldwide. zach bryan merch
Furthermore, Lego expanded its footprint in emerging markets, particularly in Asia. This move tapped into a vast, untapped consumer base and solidified Lego’s position as the global powerhouse that we know of today. zachbryanmerchandise
Lego’s journey from bankruptcy to world dominance is a testament to the power of resilience, innovation, and a deep connection with its audience. Through strategic partnerships, a commitment to quality, and a renewed focus on its core product, Lego not only saved itself but also thrived in an ever-evolving market.