Learning from LEGO's brand rebuilding

Co-founder and director of AMFORCE & CEO of Simultek, Evan Shellshear discusses the innovations lessons we can learn from LEGO
Fighting a $300 million loss in 2004, and in a masterstroke of innovation, LEGO hired ‘adult fans’ of the brand as their design team and began to crowdsource.
By Kay Marham
Tue 02 Jan 2018 03:27 PM

LEGO has earned the right to celebrate. For a company that was on the brink of bankruptcy in 2004, the toymaker has made an amazing turnaround.

They restructured, hired a new CEO, and forged more licensing partnerships than ever before. Most importantly, they discovered the secret to some of the world’s most successful, low risk innovation strategies.

These strategies helped LEGO create a powerful brand envied by every other company in the world. However, successes like these are not, and need not be, restricted to global companies with billions in revenue.

The point of low risk innovation tools is that you can use them to test ideas in any setting and with any budget. Whether you are a cash-strapped start-up or a Forbes 500 firm, sustainable innovation can be your ticket to success.

Out of LEGO’s lessons and that of hundreds of other companies, successful techniques to innovate cheaply and effectively have been distilled. So what strategies have been used by companies like LEGO for companies to turn around from looming bankruptcy to industry leading success?

When LEGO restructured and returned to their core business to climb out of a $300 million loss in 2004, they realised innovation as usual was not an option. The first step in the toy maker’s journey was to embrace their loyal and creative fan base. They hired so-called ‘adults fans of LEGO’ for their design team and began to crowdsource new toy kits.

A typical engineering mistake is wanting to invent all the things the product might consist of in one go…

As the crowdsourcing venture proved successful, the block manufacturer turned this into a full blown open innovation policy by opening up the LEGO Ideas portal.

Through user input, this online platform generates hundreds of new product suggestions each year and uses some subtle and powerful open innovation techniques, employing everything from social media to peer selection, to entice fans into contributing new designs.

Within its factories, LEGO has also embraced a philosophy of rapid prototyping, even to the dismay of its older engineers.

David Gram, Head of Marketing at LEGO’s Future Lab, stated: “We only develop the few key features that are really needed. A typical engineering mistake is wanting to invent all the things the product might consist of in one go … we throw that into the market and get feedback from consumers.” This is a technique blossoming all over the world in Maker Faires, Hackerspaces, and Makerspaces.

$300m the lego losses in 2004 that were tackled through innovation

As big and successful as LEGO is, they could still benefit from the many other innovative strategies employed by other industry leaders. For example, there are powerful forces driving both the creation and dissemination of knowledge to the world. As many technical discoveries are driven by access to the latest information, this will be a game changer for businesses. For start-ups or large companies pursuing numerous risky ventures, information is power, and risk mitigation is the name of the game.

Another powerful shift disrupting traditional industries is the new way software is delivered around the world. Products are now able to be delivered in smaller parts, requiring less commitment from a consumer and turning the decision to use a tool into a ‘no-brainier.’ This is even affecting industries with business models based on completely unrelated ways of delivering their services such as medicine.

For start-ups or large companies pursuing numerous risky ventures, information is power, and risk mitigation is the name of the game.

Another important piece of the innovation puzzle is you - the entrepreneur. In the end, it is up to you to make the innovation decisions, but how do you decide what to innovate? This question can be answered by one of the most exciting developments of the 21st century, according to Shellshear: the relationship between two powerful branches of science, behavioural economics and innovation.

Although these tools are important for a company and entrepreneurial day-to-day work, you also need to see why innovation even matters. What could happen when you innovate cheaper? What benefits are there to simply lowering your innovation risk beyond the obvious?

Understanding the basics of these techniques and integrating them into your innovation strategy is what differentiates the disruptors from the disrupted. Up until now, it has been difficult to find them all collected in one place with enough details to be able to successfully use these innovation tools.

Competition never sleeps and LEGO is continuously being challenged by new disruptive innovators attacking their market side-on, such as Minecraft. Although the block manufacturer has a license to produce Minecraft styled pieces, challenges can come from anywhere. Full throttle up the innovation curve requires low risk tools to balance the innovation and fiscal imperatives.

The lesson from LEGO is that we need to keep on innovating without risking financial ruin. A simple case of employing clever thinking - innovation - can not only turn any company growth curve upward, but can also supercharge any business or entrepreneur wanting to develop the next unicorn enterprise.

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Last Updated: Tue 02 Jan 2018 03:32 PM GST

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