Lego Innovation Lessons

The company created in the 1930s learned to change its innovation style to remain as one of the most popular toys. Companies of all sizes can learn a lot from David Robertson’s explanation of Lego. In his new book Brick by Brick, professor at the University of Pennsylvania Wharton School tells the story of this family business that began by creating wooden toys in the 1930s.

He experimented with plastic blocks in the 40s and in 1958 patented his greatest creation: that these blocks could be put together. The company became one of the most popular toys of all time.

See saw.

Lego enjoyed a steady growth for decades, with sales doubling every five years from the late 1970s to the early 1990s. Then, as with many mature companies, things started to be encouraged. In the late 1990s, increasing children’s interest in television, along with the computer (as well as the expiration of their patents) made Lego take drastic measures to stay relevant. The company gave itself license to innovate, and that’s when it almost went down.

Adhering to the innovation “truth” (hiring diverse and creative people, and directed by customers) Lego opened theme parks, hired Italian designers to produce new lines in electronics, video games and television.

Between 1994 and 1998, the company tripled the number of toys produced, creating on average five new major product issues per year. But instead of encouraging growth, these initiatives almost killed Lego. In 2003, the company saw its biggest loss in history and was on the brink of bankruptcy, with most of its products without generating profits.

Lego Comeback.

But Lego managed to save himself and move on to achieve great results. Between 2007 and 2011, when many companies were failing, their earnings quadrupled. In 2012 saw a 27% increase in sales and a 36% increase in profits.

To achieve these results, the company reduced its workforce and corporate offices, as well as they eliminated about a third of its product line. But the real results came when Lego changed its innovation philosophy.

Lego’s new thinking can be summarized in three points:

Innovation does not only happen at product level.

Too often, companies focus all their innovation efforts on their products. As in the case of Lego, this can result in seeing too far away from the important thing. When Lego reversed the damage, he did in the late 1990s and early 2000s, it was looking for areas of improvement throughout the company.

Innovation does not need to be large-scale.

In Lego’s failed attempt to encourage new growth bet on what they called “Me,” like opening theme parks, an expensive business of which they knew nothing, or moving away from what made them popular. But innovation does not need to be done in massive proportions (like Apple revolutionizing the cell phone industry). Most companies can expect big changes every five years.

Innovation emerges by setting limits.

Perhaps Lego’s biggest mistake was to give its designers license to create new products with few parameters. Thus, between 1997 and 2004, the number of elements on the company stock went from 6.000 to 14.000. the same happened with the costs.

In early 2004, Lego began to give its designers cost parameters; they could design whatever they wanted if they adjusted to those limitations. Being forced to work with those boundaries, the designers became more creative.