How an 11 year old boys sneakers brought LEGO back to greatness

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Context of LEGO’s challenges and the various problems it faced.

  • Big data studies. By focusing on big data, Lego concluded that digital natives (people born after 1980) expected instant gratification and would lack the patience to properly engage with lego products.
  • Technology disruption. Lego struggled to innovate and follow trends, with the rise of video games in the 1990’s.
  • Targeting segment who didn’t use LEGO. Lego lacked understanding of the female market and were unable to effectively reach them.
  • Rapid vertical expansion. Investing in theme parks, retail lines (clothing and accessories).

What was the strategy?

  • Visiting an 11-year-old German boy’s home. The fabled ethnographic visit to the home of an 11-year-old German boy led to the discovery of a core motivation of children. Lego learned that children are driven by achieving a high level of mastery at a chosen skill which then translates to higher social status.  This finding challenged the preconceived notion that children suffered from ‘time-compression’ and needed instant gratification.
    • To meet the expectations of children and provide the opportunity for showcasing mastery, Lego reintroduced more complex builds and large scale sets.
    • Lego then transformed their manufacturing strategy from creating sets which required many unique pieces which couldn’t be reused in other sets, to establishing a standard requirement of uniform parts across Lego sets.
    • ‘Moments of truth’/ core decision filters from Lego CEO Jorgen Vig Knudstorp:
      1. When it’s advertised, does it make a child say ‘I want this’?
      2. Once he opens the box, does it make him go ‘I want more of this’?
      3. One month later, does he come back to the toy, rebuild it and still play with it? Or does he put it on the shelf and forget about it?
  • Streamlining, cost-cutting and a major re-focus on driving the core value proposition.
    Since 2004, Lego has shed 1,000 employees & outsourcing various processes (less complex manufacturing work done in Mexico and the Czech Republic). Lego Universe was also shut down (31st Jan, 2012) only after being launched in October 2010 due to an insufficient number of players converting to full paying subscription members.
  • 120 strong team of designers to maintain Lego’s ‘freshness’. Overseeing the entire process at every stage from initial storyboarding, to model-making and final package design with the utilisation of focus groups and child psychologists.
    • Key challenges in developing todays Lego:
      • Challenging to build
      • Robust to withstand play
      • Maintain alignment to Lego’s family friendly brand
  • Lego IDEAS platform.
    Allows customers to suggest new product ideas and see them become an official Lego product through a voting system.
  • Lego Video Games. Lego video games provide a bridge between the digital world and Lego sets. Partnering with Warner Brothers and movie franchises including Batman, Star Wars, and Marvel has allowed the gaming series to generate $2 billion in revenue (2014).
  • The Lego Movie. Combined success of the Lego Movie and sales of related merchandise resulted in:
    • 11% increase to total $4.4 billion in 2014, surpassing Mattel to become the world’s largest toy maker
    • All-time highest grossing movies worldwide $457,729,388
  • Reaching the young female demographic. Introduced in 2012, the Lego Friends line has been highly successful with girls and a strategic manoeuvre in helping Lego close in on industry leader Mattel. Although the revenue for the Lego Friends line is undisclosed, “the market for girls’ construction toys in the US and Europe ­tripled from $US 300m in 2011 to $US900 million in 2014.” – NPD Group
    This strategy to expand the Lego offering to girls is parallel to Peter Drucker’s focus of targeting ‘who’ isn’t buying from you and why.

Awesome lego statistics.

  • For every person in the world, there are 62 Lego pieces.
  • Lego people outnumber real people.

Applications to modern business

  1. Stay true to your main mission.
  2. Focus on the main revenue drivers that align with the company mission. Cut excess costs.
  3. Involve your crowd in co-creating products.
  4. Partner with powerful brands.
  5. Target the potential customers who aren’t buying from you. Figure out why they aren’t purchasing and create new niches.