LEGO: BACK TO BASICS

LEGO builds its way out of crisis

You probably know the LEGO brick. But did you also know that it is Danish? The LEGO Group has just presented its best financial results for a long time, despite the financial crisis and a schrinking market for toys. The path to success is to listen to children themselves

By Charlotte Dahlsgaard

When a LEGO figure is dismantled, it does not die. It separates into hundreds of bricks, which can be built up again.

The same can be said about the LEGO Group. Since 1932, the world-famous toy manufacturer has been headquartered in Denmark, and year after year has increased sales of its toy bricks worldwide. The joy of putting LEGO bricks together, and doing it in a thousand different ways, has apparently been so great that it has appealed to children of all ages, on all continents. But around 2003 something started to go wrong. The market quickly changed and, left with a strategy that pointed in too many directions, the company started falling apart. Sales dived and over 1,000 staff were laid off.

But the company responded with a new strategy: Back to basics. The LEGO Group decided to concentrate on its core business again.

“We realised that we had spent lots of time on using the LEGO brand in other areas: clothes, watches, bags. There is something right about that. But we used too much energy on it. So we decided to concentrate on the core – the LEGO brick itself, and let others deal with the other things,” says head of communications of the LEGO Group, Charlotte Simonsen.

The LEGO Group got back on its feet again. In the first half of 2009, sales rose 23 per cent compared to the first half of 2008. And that is quite an achievement at a time where one company after another is succumbing to the financial crisis. In a new book “Ledelse i skrumpende markeder” [Management in shrinking markets], Anders Drejer, co-writer and professor of management and innovation at Aarhus School of Business, Aarhus University, sees LEGO’s management strategy as exemplary.

“The company is good at simultaneously striking the balance between efficiency and innovation. And it is loyal to its brand. In the beginning of the 2000’s LEGO forgot the consumer. They became slightly arrogant and focused solely on their brand, and wanted to open LEGO stores with LEGO clothes, and thought that everything happened by itself. They forgot that children had started playing with software. Today they include the market a lot more.”

A mini-figure is born

• 1978. The first mini-figures are launched including a knight, an astronaut and a policeman. Since then the figure has been produced in the shape of Harry Potter, Santa Claus, Spider Man, Darth Vader and many more.
  
  
  
• 1989: The mini-figure changes its facial expression. Now it can both be good and bad, and it can even have an eye patch. The pirates become the first LEGO product series that exceeds DKK 1 billion (EUR 134 million) in revenue.
  
  
  
• 1997: The mini-figure comes alive. In the computer game ’Panic on LEGO Island”, a live mini-figure appears for the first time. 1998: With the new Star Wars figures, the mini-figure appears for the first time in a specific role. This personification of the mini-figure is later expanded with LEGO Harry Potter and LEGO Indiana Jones.
  
  
  
• 2003-2004: For the first time in the history of the figure, the yellow face colour is replaced by more authentic skin colours. In LEGO Basketball, both dark and light skinned players appear.

Photo: The LEGO group

Bricks in the virtual world

As part of the new strategy, LEGO decided to forge closer ties with consumers, and started taking children’s suggestions for new products, and comments on new toys, even more seriously. Today, the company uses a panel of children chosen from among the greatest LEGO fans in the world, and has sociologists living-in with families with children to see how they live and - most importantly - play.

These studies have led to the LEGO brick acquiring a new life in the virtual world; LEGO has become a significant player on the digital games market. The company has achieved success with figures and universes from popular films such as Batman, Indiana Jones, Harry Potter and Star Wars. The LEGO Star Wars universe accounted for most of the increased sales in 2008. But the games must not become too bloody, and risk the LEGO brick losing its innocence.

“We take the view that children will always play ’goodies and baddies’. That is necessary for their development and should be allowed. But it must not become too scary. So most of our bad guys have an off-beat or ironic angle. The villains must have a humorous twist,” says Charlotte Simonsen.

No splatter, thanks

And no, LEGO blood does not exist. When a LEGO figure is hit in a game, it does not turn to dust but becomes LEGO bricks which reassemble themselves. Today, users can also build with LEGO bricks online. On LEGO’s website, you can upload bricks for models that you design yourself. Next year, a new online game similar to World of Warcraft will be launched, intended for the many players in the LEGO universe on the internet.

It was originally master carpenter Ole Kirk Kristiansen who founded the company in his workshop in the west of Denmark. The company has since passed from father to son, and today it is the founder’s grandson Kjeld Kirk Kristiansen, and his children, who own the LEGO Group.

The company has never made a big deal out of marketing itself as something Danish. Even so, the company’s head of communications thinks that the Danish roots are very important.

“We are a family-owned company, and have been so for four generations. We have our roots here in rural Jutland. I don’t know if one can say it is particularly Danish, but we would like to be known as a company that behaves properly. A company that treats its staff and other stakeholders with respect and consideration, and also contributes to charity with special focus on children’s development,” says Charlotte Simonsen.

Back to the future

The colourful plastic bricks are today available in more than 130 countries, and a product such as LEGO Star Wars is on the wish list of children the world over. But developments have sometimes been painful, and it has been necessary on occasions to substantially cut the number of staff, as in 2003-2004 when the company laid off over 1,000 people. In addition, the LEGO Group has outsourced part of its production to Eastern Europe and Mexico.

“It has been necessary for LEGO to trim itself for the future. The streamlining has been painful at times, but it has been essential to make it through the crisis. LEGO has implemented the management tool LEAN in an impressively structured way, and has gained from it, because every penny saved on a brick adds up to a large amount of money,” says Professor Anders Drejer.

The LEGO Group is now more than half way through implementing a seven year strategy, which has the aim of rebuilding the company and giving new life to the LEGO brand. There are many suggestions as to what children will play with in the future, and electronics is an indisputably tough competitor to conventional toys. The LEGO Group is in no doubt however that the brick will also be a hit in the future for children of all ages.

“Putting two LEGO bricks together is intuitive and provides the immediate joy of creation. That joy can be supplemented, but never replaced by electronic experiences,” says Charlotte Simonsen.

Five fun facts about LEGO

• LEGO produces 22 billion bricks annually – that’s 30,000 per minute
• More than 7 LEGO boxes are sold every second
• Some products are developed among adult fans. There are almost a quarter of a million adult people engaged in LEGO clubs worldwide
• About 40,000,000,000 LEGO bricks need to stacked one on top of another to reach the Moon
• The BBC reporter James May recently built a life-size two storey LEGO house with toilet, bath and bed, made of three million LEGO bricks

LEGO as a catalyst

• LEGO has generated lots of activity in Billund. The company has attracted a large part of the Danish plastics industry to Billund, and many consultancy and development companies have sprouted up in the town, of which some have been started by former LEGO people.
• Billund has also become a significant tourist town. In 1968, the first LEGOLAND opened next to the factory. In addition to Billund, there is a LEGOLAND in the UK, USA and Germany. In spring 2009, another amusement resort, Lalandia, opened a centre in Billund. More than 1 million tourists visit the municipality each year, a figure Billund municipality expects will increase in the coming years.
• LEGO has also had great influence on the cultural life. At the centre of the town lies the Billund Centre which comprises a theatre, exhibition halls, a music school and café. The centre is a gift to the citizens of Billund from the family which owns LEGO.
• A large export company needs an airport. In 1964, Billund Airport was inaugurated – and in the first two years passengers were attended to in LEGO’s own hangar, which until then had been used for LEGO’s private airport. Today Billund Airport is Denmark’s second largest.
• How much LEGO matters to the town is clearly visible on entry to the town. The visitor is welcomed by large LEGO bricks.

Crystal clear - sustainable mixed use commercial building for KLP, Oslo, designed by C. F. Møller Architects.

Photo: C. F. Møller Architects