22nd Jan 21
Do you know what changes Lego made to become the success they are today?
I love a good turnaround story, and this is a great one – Lego didn’t just focus on cost savings, but also worked on creating new product lines, expanding customer reach, creating new customers AND leveraged the trend for customer content on social media.
Started in 1932 but by the late 1990s Lego was struggling through a serious financial crisis, which gave CEO Jorgen Vig Knudstorp some major challenges when he started there in 2004.
What did he do?
Knudstorp went back to the basics of business principles – tracking costs and ensuring that expenses are covered by sales. Company designer Mark Stafford explained that “The company reorganized and analysed all costs; design was finally linked to manufacturing cost and re-focused on the core business of making construction sets.”
What does that mean in practical terms?
Well, Knudstorp moved non-core Lego ventures such as theme parks, clothes and computer games to companies that had the capability to successfully execute them.
They also streamlined and halved Lego’s 13,000 parts pattern book, including removing products that had individual production costs actually above the sale price of each Lego set featuring them. Now, designers consider how they can re-use parts across sets.
And they lowered development time by 50%, with some new products moving from idea to product in a box in as little as a year.
Knudstorp and his team also moved some manufacturing and distributing to cheaper locations in Central Europe and Mexico.
And that was all they needed to do?
Not quite. They also worked hard to re-engage with their customers through partnering with other well known brands that their fans were into.
They already had tie-ins with Star Wars, but they added Lego sets based on Disney Movies, the Marvel comic universe, and Harry Potter.
OK, so that’s the whole story then?
Nope! They had their own Lego Movies, featuring Lego figures talking and singing that made x profit.
They also then came up with Lego centric sets, including hits like the Lego Friends series aimed at girls, Lego Architecture recreations of real-world buildings like the Empire State Building and a line of incredibly detailed Lego versions of such space-exploration hardware as the International Space Station and the Saturn V Rocket.
Great, so the kids are happy!
Well yes but did you know that adults love Lego too? There’s a large community of adults that treat Lego as an art form not just a toy, which Lego has tapped into.
They designed a Lego Certified Professionals program which, according to their website “is made up of adult LEGO entrepreneurs who have turned their passion for the LEGO brick and system into a full-time or part-time profession.”
They also engage with adult fans who maintain thousands of Web sites and blogs all Lego centric and even Lego conventions.
Covid must have been good for sales with everyone stuck at home?
Well, according to a report by the BBC in September 2020 last year, Lego had “revenues of £1.8bn for the first half of that year, up 7% while operating profit grew by 11%.” Lego also announced that they were going ahead with opening 120 new stores (they have 612 stores globally and 14 in the UK).
But the big change seen by Lego since the start of the crisis was that more adults were getting involved in building Lego kits. As reported in the BBC article “"We saw a very positive development during the coronavirus lockdown when families began playing and building Lego sets together."
“Sales of the more complicated - and more expensive - big Lego sets grew by two and a half times in the first half of the year, he said, as families looked for big projects to make together during lockdown.”
AND visits to their website had doubled to 100 million in the first half of 2020.
Well, that is a great story BUT do they give back?
They do actually!
They have launched a digital initiative, ‘Let’s Build Together’, designed to bring learning through play to children whose education was disrupted due to the pandemic. Described on their website as “Around 90 percent of school aged children were outside of their usual learning environments during the first half of the year. ‘Let’s Build Together’ saw thousands of hours of online content and play ideas reach more than 80 million unique users around the world.”
“In partnership with the LEGO Foundation, it donated USD 50 million to a range of organisations that provide emergency relief to families and support for children in learning through play. It also donated more than 250,000 LEGO sets to children in need of play.”
“The Group re-purposed moulding machines in its factories in Denmark, Czech Republic, Hungary and Mexico to manufacture more than half a million visors for frontline health professionals who required personal protective equipment (PPE).”
I was raised on Lego! And I have a not so long ago memory of being with my sister and nephew and opening up a brand new Lego train set to put together. Unfortunately, my nephew barely got a look in as my sister and I were so excited to play!
If I was in marketing…….”Lego the game you never grow out of!” (OK, yes you can see why I’m not in marketing!).