Lessons to learn from the Lego success story
Ten years ago Lego was on the verge of bankruptcy but managed to pick up the pieces. As business owners, we can learn valuable lessons from the Lego story.
Although seven Lego sets are sold every second, 10 years ago, Lego was in pieces. The family-owned company had been heading closer to bankruptcy since 1999. In 2003, sales dropped 29 per cent globally. By January 2004, Lego announced a huge deficit, saying it was losing one million dollars a day.
In truth, the problem went much deeper than the balance sheet. Lego had forgotten its roots. Its products were moving further and further away from what people love about Lego.
But then the unexpected happened. Owner and CEO Kjeld Kirk Kristiansen, grandson of founder Ole Kirk Christiansen, stepped down and appointed Jorgen Vig Knudstorp as Lego’s new CEO. Knudstorp wasted no time in turning the company around.
His strategy boiled down to three core principles that can be applied to any business – big or small.
1. Really know your customers
Lego may have been honoured with the Best Toy of the Century award (twice) but it had committed the biggest business blunder of them all: it had completely lost touch with its core customers. Sure, the company had done lots of research on play, but it had failed to get out there amongst the families and kids who use its products. As a result, Lego quite simply failed to keep pace with the changes in kids’ lives and began sliding into irrelevance.
"One of the biggest problems Lego had was the fact that its top designers had the skills but not the real understanding of Lego’s appeal."
When Lego’s analysts did get out there and talk to the kids, they found the most meaningful play for children seemed to involve degrees of difficulty and skill acquisition – rather than a need for instant gratification from toys.
That was only one insight that led to a new generation of Lego products that were more in-tune with its customers.
No matter whether you’re the world’s leading toy manufacturer, a small retailer or a business to business (B2B) firm, you need to dig deep to understand your customers. Do the research, which can be as simple as getting feedback from your existing customers. Then, dig deeper and use the insights to create an offer your customers really want.
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2. Be true to your roots
Even though it has branched out into digital games, theme parks and movies, it is the core products – the little Lego man and the humble Lego bricks – that remain at the heart of the company.
When you buy Lego, you know exactly what you’re getting, which is more than can be said for the other major toy companies. The level of quality and brand message remains consistent.
The lesson here is simple: have a single strong message for your brand, and stick to it in all the channels you use.
3. Trust your most loyal fans
Knudstorp tried something different and a little bit daring – handing over creative control to hardcore Lego fans. One of the biggest problems Lego had was the fact that its top designers had the skills but not the real understanding of Lego’s appeal. In 2006, the first designer recruitment workshop was held and a number of AFOLs (adult fans of Lego) were taken on as Lego designers to help rethink the company’s products.
The results were kits that featured new parts and characters but never veered from the distinctive and much-loved Lego feel. But more than that, the result was a company that had become truly customer-centric.
The lesson here is to trust your most loyal customers. You don’t have to employ them like Lego did, but you should proactively get feedback from them. If they aren’t behind your product or service, it’s your job to find out why.
These are just three lessons that small businesses can learn from Lego, but as you can see, they’re very important.
Are these Lego lessons relevant to your business? Do you have any more to add?