Back in 2017 I had the exciting opportunity to carry out design research for LEGO on a number of new products. My experience on those projects was amazing - rarely before had I come across a company that had such a strong commitment to ensuring their designs were based on well-run, extensive research with their customers (in this case, children who were very critical of my LEGO building skills!). I decided to find out where that commitment had come from and came across a book by David Robertson called Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry. That book gave a great insight into LEGO’s history and why research now plays a huge role in their design processes. Below is a potted version of that story, but I would highly recommend reading the book.
Today, LEGO is one of the most powerful brands in the world, recognised the world over, a staple of practically every childhood. But back in 2003, the company was on the brink of collapse.
The iconic LEGO brick with its ingenious ‘clutch power’ was patented in 1958. The simple and effective design, combined with interchangeable sets that appealed to children’s imaginations, brought slow but steady growth. By 1978 the company had transformed from a small, family owned business, founded in Denmark in 1932, into an established household name with a seemingly safe position in the market.
In 1988, the LEGO brick lost its patent, meaning that the company would now face direct competitors. In addition, the landscape of children’s play was evolving, with the introduction of more technology-based toys. The steady, incremental growth that LEGO had always relied on started to stall in the early 1990s. The company knew they would have to diversify and innovate in order to keep up.
LEGO pushed hard to break into new markets. Between 1994 and 1998, they tripled the number of toys in their portfolio. They opened their second theme park, in Windsor, in 1996 and in 2002 launched the Galidor theme, which included a tv show and a video game as well as a range of toys. While some lines, most notably LEGO Star Wars, brought success, many, such as the Scala range of dolls for girls and Galidor, were outright failures.
In 1998, LEGO posted its first ever loss. By 2003, losses were piling up and the prospects of recovery seemed bleak. Under the leadership of a new CEO, Jorgen Vig Knudstorp, the company’s focus shifted from growth to survival.
Knudstorp and his team soon realised that in striving for innovation and growth, LEGO had lost its way as a company. Many of the themes developed over the previous ten years had failed because they were designed based on assumptions about what children wanted, rather than any real knowledge of what modern, tech-savvy children enjoy. Products failed to attract new customers and confused and annoyed loyal fans. At the same time, many toys that had previously been successful had either been neglected or discontinued. Essentially, LEGO had disconnected from its own success and had forgotten all the key elements that had made the simple LEGO brick such a hit in the first place.
Knudstorp understood that in order to find its way again, LEGO needed to develop a deep understanding both of itself as a company and of its customers. Key to this process was to rediscover the core appeal of the LEGO brand and recapture the elements that had made it so successful during the twentieth century. The most powerful way to do that was to talk to LEGO’s legions of loyal fans, who remained devoted to the company regardless of its problems. To begin with, LEGO engaged tentatively with adult fans, an audience they had almost completely ignored in the past. Their feedback and insight proved to be so useful that the engagement was expanded, with the introduction of ambassador programmes to relay questions and requests from the fan community directly to LEGO executives. The company also enlisted two thousand children from across the globe to comment on and critique new designs on a secure web forum called Inner Circle.
At the same time, This research revealed that many of the company's basic assumptions about their core market were incorrect. Contrary to what they believed, children who liked LEGO weren’t particularly different to their peers - they were sociable and they enjoyed computer games as well as LEGO. They also discovered that LEGO was not the solitary toy they believed it to be - rather, children used LEGO as a source of connection and competition with their friends. Overall, their research showed that even though the landscape of toy development had changed, many of the fundamental things about how children play had not and that many of the things that had made LEGO popular in the first place - its quality, the ability to build anything you can imagine - still held the same appeal for both children and adults that it always had.
This research allowed LEGO to understand why so many of their previous innovations had failed. One of the main problems was that, rather than delivering what their core audience wanted, they had wasted a lot of time, money and energy on delivering products that simply didn’t have a market. To combat this problem, LEGO created a new development process that included ‘constant empathetic contact with customers’ - every new design would include customer insights as standard. This simple but significant change helped to ensure that investment focused on ideas that were shown to capture children’s imaginations.
As a result of this change, the 2005 City edition of construction and police sets more than tripled the line’s revenue. Within only two years, overall LEGO sales had risen by 15%. Constant engagement with customers, either through face-to-face interactions or via online forums, allowed designers and developers to test concepts early on, meaning that bad ideas could be ditched before money was wasted on them and good ideas could be identified and refined. When LEGO Mindstorms was revived in 2004 they went a step further and included fans as co-creators in the design process, a move that turned the line from a loved-but-neglected product into a huge cult hit with a devoted following.
They also looked closely at their own ways of working and realised that most teams had become siloed, with very little communication between different functions such as design and marketing. The lack of collaboration between teams slowed down the development process and meant that problems weren’t picked up until it was difficult and expensive to solve them. In addition, many teams lacked direction and focus. One notable exception was the highly successful Bionicle team. In this team, different functions worked closely together, passing ideas back and forth, sharing expertise. Knudstorp and his team set a Shared Vision, which set a plan for LEGO’s future, including targets for innovation and growth, which required teams to work more quickly and co operatively on projects, speeding up the design and development process while at the same time reducing the danger that problems would go unnoticed until it was too late.
When LEGO hit trouble in 2003, it could have sunk without a trace like so many other well known names that found themselves struggling to compete in a changed market. Instead, They rediscovered the source of their prior success so that they could recapture and nurture it and they also uncovered new directions for growth, ones that were indicated by the real needs and preferences of their customers, rather than by unfounded assumptions. This approach allowed LEGO to dramatically and decisively change its fortunes, from a company in dire straits to one of the most powerful brands in the world.
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