A toy that transcended age and gender barriers
When someone mentions toys, a lot of us instantly think of Legos. A toy that has managed to find its way into households all over the world, Lego saw humble beginnings in a workshop in Denmark. Throughout decades that have seen immense changes, this brand has seen product innovation like no other.
Lego started with wooden toys and slowly expanded to the now famous building bricks
The year was 1932, and Ole Kirk Christiansen was making wooden toys in his workshop in Billund, Denmark. His carpentry and joinery business wasn’t going very well, and he had just lost his wife. To concentrate on his toy production, he named his company Lego; derived from two Danish words ‘Leg Godt’ which translates to play well. It was named so with the intention of supporting children’s right to enjoyable and quality play.
Ole Kirk Kristiansen writes later about devoting his life to the manufacture of toys:
“It wasn’t until the day I told myself ‘you’ll either have to drop your old craft or put toys out of your head’ that I began to see the long-term consequences. And the decision turned out to be the right one.”
Quality was so strictly imposed in their factory that Ole once sent back a wooden duck that had two coats of varnish instead of the mandated three. A wooden sign that read “Only the best is good enough” hung in their factory to remind the employees about the company’s attitude. Ole’s interest in new forms of technology that would improve quality and rate of production saw him invest in numerous machines despite high amounts of investments, and the company grew.
In 1947, Lego began producing plastic toys, despite a prevailing notion that plastic would never replace wood when it came to children’s toys. They released the first model of the now familiar interlocking bricks in 1949, with studs on top and tubes on the bottom. This was patented in 1958 by Godtfred Kirk, who replaced his father as the head of the company.
The 90s were a rough patch for Lego with the rise of video games and a couple of misguided innovations
By 1951, the Lego bricks caught on throughout Europe and the blocks contributed to more than half of Lego’s sales. In 1968 the first Lego-themed park, Legoland, opened in Billund, Denmark (there are currently 8 Lego Lands around the world), and by the 1980s, they were doubling their profit every five years. In the late 90s however, their market share began to drop. Video games and other toys enjoyed more popularity amongst kids, and Lego, which couldn’t provide them with the same instant gratification, didn’t seem all that cool anymore. A series of attempts to rectify this were seen as a series of misguided innovations.
A Power Rangers line of action figures, a Lego TV series, and a clothing line were a few amongst many of their releases at the time that didn’t see success. Furthermore, they were releasing increasingly intricate sets that didn’t have a demand at the time, which only led to inventory that was harder to manage. Their innovations were only leading to increased costs and risks.
Lego was executing a plethora of ideas that didn’t add any value, and failed to understand consumer needs, as they were creating products based on assumptions and not consumer feedback. They also could not compete with the cheaper Chinese toys that were able to copy Lego’s concept and manufacture them at a much lower cost. As an effect of the crisis, the company laid off more than 1,000 employees and Kjeld Kristiansen (third generation of the Kristiansen family) stepped down after heading the company for 20 years. By 2003, Lego had lost $300 million.
Their turnaround was orchestrated by Jørgen Knudstorp, who was appointed CEO in 2004. In order to survive, he sold the majority stake in their Legoland theme parks (now owned and operated by the British theme park company Merlin Entertainments) for $640 million and moved their production out of Denmark to outsource the bricks from cheaper sources in Mexico and the Czech Republic.
To keep up with the changing trends, they still had to innovate; but this time, under the leadership of Knudstorp, Lego made conscious choices to maintain the company’s core ideals which were to provide toys that were family-friendly. Every idea went through numerous rounds of testing, they brought back the original Lego brick and created more of their original firetruck and police station sets. Lego developed a design process model called “Design for Business” (D4B), which heralded a shift in innovation strategy to being more ‘company-focused’ than ‘product-focused’.
The Lego Friends set met all their business goals but invited a lot of criticism
An example of a success story that was a product of Lego’s innovation is Lego Friends. The company spent 4 years doing research and testing prototypes for capturing the girl’s market. By 2011, 90% of the company’s sales came from boys. Lego Friends consists of five distinct little dolls with names like Andrea, Mia, Olivia, Stephanie, and Emma. The set encourages young girls to build numerous spaces for them like veterinary offices, karate studios, beauty parlors, etc. It was released in 2012, and Lego finally managed to bridge its gender gap by tripling its sales in the girls’ category in that year alone.
The launch however was met with a lot of criticism, as the figures were called out for gender-stereotyping through excessive use of pink, and slimmer figures as compared to their standard square shape.
How Lego dealt with saturated markets in Europe and US
After enjoying more than a decade of growing profits, Lego hit a slump once again in 2017. This time, the problem lay in their European and US markets reaching saturation point. Up until then, the brand invested massively in its workforce and product lines. Which ended up negatively affecting them in the form of stockpiling up in warehouses and stores running out of shelf space to display the products. This again led to job cuts and rethinking of the organization structure.
Lego identified the need to expand into growing markets like China. They set up a global factory in Jiaxing to supply to the Chinese market and other neighboring ones like Japan and South Korea.
“The fact that hundreds of millions of Chinese consumers will form an increasingly affluent middle class in the coming years is a huge opportunity for us,” said Lego spokesperson Roar Rude Trangbaek. “Lego products – the whole idea of creative play experiences – is something that resonates strongly with Chinese consumers.”
The strategy paid off as Lego saw a 5% increase in the first half of 2019, with double-digit growth in China. The store expansions in the area created experiences, built an emotional connection, and promoted Lego in areas that weren’t familiar with the brand.
A lot of Lego’s success can be owed to its marketing strategies. They’ve modified their voice to match the changing relationship with their consumers. Being a leading brand on social media sites, a 2020 analysis of YouTube showed Lego as the most trendy brand with 10.04 billion views. Their popularity on social media has inspired a host of fan-created pages and accounts like “Beyond the Brick”. Apart from their social digital presence, they’ve ideated a host of marketing strategies to aid awareness and loyalty:
Customer Experience: Lego has successfully identified different consumer segments that buy its products and caters to all of them by providing exclusive customer services. They encourage young users to engage through social platforms by creating Lego Life, a social network application for kids under 13. It encourages them to share pictures of their creations and other users to comment on them. Their adult community allows the users to contribute to the creative process by authorizing them to vote on ideas that the company is planning to produce.
Merchandising and Licensing: Lego diversifies from its toy sets by branching out through multiple mediums. Apart from the Lego-themed parks, The Lego movie franchise and The Lego Batman movie celebrated Lego’s philosophy of play. Their collaborations with Disney, Marvel, and DC Comics, saw a wide variety in their Lego figures. Lego also has a sandbox video game called Lego Worlds that allows users to create worlds using lego bricks.
Collaboration with the education sector: To empower children to be imaginative, engaged learners, Lego promotes its construction bricks as educational toys. In 2020, the LEGO Foundation committed $24 million in educational aid for schools, foundations, and educational programs in multiple countries. Beyond this, Lego Education is its own education company that offers building products to help students in the fields of Science, Math, Technology, Engineering, and Art. During the pandemic, they also offered distance learning resources. These offerings allow Lego to be ‘parent approved’ which keeps them incentivized to keep buying.
Beyond its obvious target audience of kids, Lego has also started to focus its attention on establishing its adult fan base. Although adults have been buying Lego products since its release, in 2020, they began to include sets that would appeal to adults like star wars, the F.R.I.E.N.D.S cafe, the Batmobile, and football stadiums. They also redid their instructions manual to engage adults. Building Lego sets is an activity that requires you to focus, while simultaneously helping you relax, and for those adults that are stressed out with their daily routines, Lego helps them unwind and remain mindful.
What is the future for Lego?
In march 2022, Lego opened its corporate headquarters in Billund, Denmark. A ‘mini-city’ with streets and courtyards, this office was designed to encourage productivity and play. For future expansions, Lego has identified India as a fast-growing market, similar to China, and plans to establish an office in Mumbai.“Within 10 years, there will be 100 million kids in India living in middle-class families.” They also plan to invest heavily in e-commerce and open more stores around the world. To keep pace with the growing emphasis on sustainability, Lego has pledged to use sustainable materials in its toys and packaging by 2030, by using sugarcane-based plastic.