In 2017, Lego was named the most powerful brand in the world, beating the likes of Apple and Ferrari. Profits were over a billion dollars and the company had a steady stream of movies and new products to be released. Today, it’s as popular as ever and profits continue to rise.
It wasn’t always like this though, in 2003 the company was six months away from bankruptcy and was $800 million in debt.
Sales were down 30% year-on-year and Lego had no idea about their costs, with some products costing more to make than they were being sold for.
Lego also wasn’t taking the time to understand their market. They were creating product after product with no research or understanding of what consumers wanted. In 2002, 40% of stock remained unsold.
Lego risked going the way of the Dodo unless they turned it around.Lego brought in ex-McKinsey consultant and kindergarten teacher, Jorgen Vig Knudstorp, who put a plan in place to save the business.
Lego had a recruitment model of hiring the best designers in Europe, while this may seem like a good idea, the designers weren’t necessarily huge fans of the product. Under their oversight, LEGO became more complex and at one point there were nearly 13,000 unique pieces.
Knudstorp stopped this practise and instead hired a team of LEGO superfans. The team include child-focused design graduates and AFOLs (adult fans of LEGO).
Knudstorpalso knew the company needed to do a better job of listening to its key users, children. He commissioned a series of deep ethnographic studies into how kids around the world really play.
ethnographic – relating to the scientific description of peoples and cultures with their customs, habits, and mutual differences.
Alongside a better understanding of the product and a new team of designers, Knudstorp removed unprofitable business arms like the LEGO video games, made redundancies and brought a more fiscally responsible attitude to the business.
Knudstorp’s plan worked. The combination of a new design team and a deeper understanding of the market led to brick numbers being reduced to 7,000 and a new focus on their core products; construction kits.
The new fiscal attitude led to design being directly correlated with manufacturing costs (which was a first for the business).
Last year, the company sold over 75bn bricks and it is estimated that there are more LEGO figurines than people on Earth.
In the final words of Knudstorp, “We need to constantly become better, or otherwise there will be someone out there who will catch up to us.”
What you can take away from Knudstorp:
1) Your biggest fans can also be your biggest help
2) There is more than one way of understanding your market
3) Take the time to really look at your books, you might be surprised what you find (or what you aren’t being told)