LEGO is one of the most recognizable brands in the world and has been a playtime staple
for children all over the word for more than 60 years.
LEGO has been crowned the toy industry’s most valuable brand for 2017 and 2018 with
a brand value of nearly $7.6 billion and a remarkably high AAA+ brand rating.
But LEGO has not had an easy journey to the top.
In the early 2000s they were heavily invested in a variety of ventures that were pulling
them down.
So how has LEGO managed to rebuild their success?
Let’s find out on this episode of The Infographics Show: How LEGO reinvented itself.
When The Great Depression hit Denmark in the 1930s, Ole Kirk Kristiansen, a master carpenter
struggled to provide for his wife and four sons, so he turned to making wooden toys and
other household items out of his workshop in Billund, Denmark.
In 1932, Ole’s 12 year old Godtfred Kirk Kristiansen began working with him and the
two expanded their line of toys.
Ole’s first wood toys were large and simple in construction and design yet they were immaculately
finished and built with the same quality that Ole made furniture.
By 1934, toys became the main focus of the business and they began operating under the
name LEGO from the Danish words “LEg GOdt” which means “play well”.
Later, it’s realized that Lego in Latin means “I put together.”
A more perfect name could not exist for this growing company.
They now had 6-7 employees.
After a fire burned down their workshop in 1942, Ole took out several loans and built
a new 24,757 square foot (2300 square meter) building on the same grounds as the old workshop.
It was their first factory designed for assembly line production.
In 1947 A salesman visited Ole in search of new markets for their injection molding equipment.
Against the advice of those around him, Ole bought one of the machines for just over $4600
($4638USD to be exact and 30,000 DKK – Danish Kroner).
The machine cost more than twice the previous year’s profits.
The machine came with some samples showing its capabilities, one of which was the Kiddicraft
brick, a toy brick made with injection moulding.
Inspired by this toy brick, Ole and his team got to work modifying the design.
After two years of development, in 1949 LEGO produced its first plastic toys including
the Automatic Binding Bricks, a forerunner of the LEGO bricks we know and love today.
At this time LEGO had produced around 200 different plastic and wooden toys sold exclusively
in Denmark.
By the 1950s, LEGO was making so many different wooden toys that today it would be difficult
for even the LEGO Group to catalog them all.
In 1955 After further development of the LEGO bricks, the company launched the “LEGO system
of play” and the first real export of LEGO begins.
In 1963 Godtfred Kirk Christiansen who was now the sole owner and managing director of
the company drew up a set of guidelines, a LEGO constitution if you will, which would
ensure systematic product development and consistent communication for shoppers and
retailers.
The 10 Characteristics are as follows: Unlimited play potential
For girls and for boys Fun for every age
Year-round play Healthy, quiet play
Long hours of play Development, imagination, creativity
The more LEGO, the greater the value Extra sets available
Quality in every detail
These 10 characteristics permeated the company culture to such an extent that they became
the very core of development of the LEGO product and determined how things were done from then
on.
During the 1970s, a generational change was in progress within the LEGO group.
Godtfred Kirk left the role of managing director to become chairman of the board of directors
and his son Kjeld Kirk Kristiansen took over as CEO in 1979.
Godtfred held the position of chairman of the board until April 1993.
The 1990s are when things started turning for the company.
In 1993 they introduced LEGO kidswear.
In 1998 they reported their first ever deficit however.
In 1999 LEGOLAND California opened and LEGO Group went through a restructuring that resulted
in the loss of 1,000 jobs.
In 2000-2001 they turned their deficit into a profit, but when they announced the results
of 2003, the LEGO Group reported another huge deficit.
In January 2004 owner and CEO at the time Kjeld Kirk Kristiansen headed up the building
of an action plan to turn the company around.
That same year Kjeld Kirk appointted Jørgen Vig Knudstorp as new CEO of the company, yet
the year ended with another huge deficit.
In 2005 the LEGOLAND parks were sold to Merlin Entertainments and the holding company of
the LEGO Group, KIRKBI, bought a share of Merlin Entertainments.
Today KIRKBI owns approximately one third of Merlin.
The sale of the LEGOLAND parks allowed for the company to refocus on its core business
which is of course, toys.
The LEGO Group posted a profit and the company was finally back on track.
CEO Knudstorp then launched a five-year strategy plan for the LEGO Group.
In order to rebuild profitability, LEGO had to restructure every aspect of its supply
chain.
They went to work eliminating inefficiencies, aligning its innovation capacity with the
market, and refocusing the company to compete in the new big-box world.
This was no small feat for the LEGO Group which by the time Knudstorp took the helm
as CEO in 2004, had grown to roughly 7,300 employees across two factories and three packaging
centers, turning out more than 10,000 variations of its products packaged in hundreds of different
configurations.
“From my perspective,” Knudstorp said, “the supply chain is the company’s circulation
system, you have to fix it to keep the blood flowing.”
“LEGO is a very mission-driven company.
The family is very clear about the mission to inspire and develop the builders of tomorrow,
to reach more kids, and they’re super dedicated to that” says chief marketing officer, Julia
Goldin.
“To inspire & develop the builders of tomorrow” is the company’s mission and a phrase you’ll
often hear repeated by staff at LEGO Group.
The culture at LEGO is very strong, everyone who works for the company can tell you what
their mission and vision are.
Being a private company has enabled them to remain true to their mission in good times
and bad.
At LEGO they have completely taken apart what it is to be an agency.
The company now uses a sprint methodology developed by Google Ventures, where people
from different departments clear their planners for a week to work on one task, to prototype
a communication idea.
Senior LEGO staff get to see ideas quickly and feedback happens almost instantly.
Marketing is a central part of how LEGO operates, so their success depends on it.
Chief marketing officer, Julia Goldin, and her team do the product portfolio, product
experience, communication, content, and social channels.
Their process for creating online content is to work on new content as a product launches,
rather than doing it far ahead.
They allow their people to have much more flexibility in terms of making decisions and
changes as necessary.
There is less hierarchy and fewer processes this way.
It allows them to free up their time in order to focus on what is at hand.
Finding out what children and their parents want is the secret to LEGO’s success.
Every year 25-30% of sales come from new products.
The company understands that the key to remaining competitive in the marketplace is to rely
on novelty.
If you were to ask a child what it is they want in a new toy, they don’t know until
they see it.
So LEGO’s success has come from inspiring innovation and producing novelty, that thing
you don’t know you want, until you see it.
Digitalization has been a massive opportunity for LEGO to draw a connection between the
physical and digital world.
The nature of play has evolved with the rise of digitalization and competition comes in
many forms.
Not just from products but in how kids decide to spend their time and how lifestyles have
changed.
The LEGO LIFE online community has 6 million members.
The most popular thing members do online is upload and share pictures of their LEGO creations.
A product launched in 2017 called LEGO BOOST lets kids as young as seven attach their LEGO
toy to sensors so they can be programmed to respond to movement and even talk.
LEGO has come a long way over the past nearly 80 years.
From their humble beginnings as a small carpenter’s workshop to the modern global enterprise it
is today, LEGO is one of the largest toy manufacturers in the world.
They’ve been named “Toy of the Century” twice, and the LEGO brick is still their most
important product.
Their commitment to innovation and inspiring the builders of tomorrow has allowed them
to stay relevant as the world moves in a more technologically-driven direction.
Do you think LEGO has what it takes to stay on top?
And be sure to check out our other video Spend $1 Billion Dollars In 24 Hours or LOSE IT
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