Case Study: Lego Group

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LEGO Group, the world’s fifth-largest manufacturer of toys (Mortensen, 2015), having creativity, quality and fun as their brand values. In 2004 LEGO confronted important annual losses and a decrease in brand recognition, mainly because of their unsuccessful brand/product diversification strategies in the early 90’s. Changes were introduced cutting production costs, involving customers in product developments and integrating digitalization. The cost-reduction strategy recovered growth and stability; many jobs were outsourced to Flextronics while headquarters and key production lines stayed in Billund, Denmark. The procurement organization had more than 11,000 suppliers, with no room for competition amongst them neither economies of scale tools.…show more content…
What did they learn in the process of innovating? The Group put in place new organizational forms: opening up their boundaries, creating a new mindset around closer collaboration and engagement with partners and customers. LEGO learnt that customer interaction stimulates a better design process by balancing in-house/external flow. The design and development of products became more collaborative. This interaction was promoted via social and IT networks, with rewards for the best ideas or solutions. The Group made extensive use of competitions amongst the customers, normally based on unfinished or partially completed products, to encourage innovation penetration into the development processes. Which management innovations were taken further during the turnaround? As part of their turnaround in LEGO’s process of innovation, they realized that creativity and originality was essential to success while keeping brand values unchanged. LEGO agreed that channeling external developments through an open innovation model would be beneficial. LEGO Group changed their product developing practices to funnel-in external contributions; also the shift to a networked business model was taken to its further…show more content…
LEGO has to analyse if the final product matches the initial values and current direction. This is achieved through an iterative process, where new developments are sent back for further improvement if the LEGO team decides that the product is not satisfying the end customers’ expectations or is contrary to the LEGO ethics. 4. Looking at the development of the digitalization of LEGO play and the growing importance of the social media, which areas of management innovation could be envisioned for the LEGO Group in the future? Judging by the speed of growth rate of the digitalisation of LEGO play and their online presence in social media, an extensive future full of innovations in LEGO is anticipated. Although LEGO has announced that they will stay focused on the physical world (core business), innovations in the digital side are unavoidable. An open-source software further development where fans and customers are provided with source codes to be developed is predictable, thus customers would be able to customize and experiment according to their wishes. Equally, the organisation’s biggest difficulty would be to turn this digital play and more importantly the open-source software development into a profitable
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