The Secrets of a Toy Empire — LEGO, The World of Innovators

The Secrets of a Toy Empire — LEGO, The World of Innovators

In almost every retelling of the LEGO legend, one story from the company’s early days always appears: pressed for time, a LEGO employee delivered a toy duck that had been painted only twice. When the founder heard about it, he rushed to the train station to retrieve the toy so it could receive a third coat of paint. The story is meant to illustrate LEGO’s strict commitment to quality in its formative years, and it is indeed quite instructive. But to many listeners, it can sound as if LEGO’s success was built solely on this single story of careful painting.

Reality, of course, is not so simple. Quality was certainly one of the foundations on which LEGO established itself, but for a toy empire serving the most fickle and yet most loyal customers in the world—children—quality alone is not enough. Behind LEGO’s quality management, innovation was the company’s more powerful weapon. Children may happily spend an entire afternoon with a cheap toy, as long as it is fun. But they will never actively choose an expensive, well-made toy that is not fun to play with. The origin of the LEGO brand name itself comes from the Danish phrase leg godt, meaning “play well.”

To achieve that goal of “play well,” and to keep attracting generation after generation of children, LEGO had to keep innovating. Looking across the development of the entire LEGO empire, what we see is in fact a history of continuous innovation. Through successful and failed innovations alike, LEGO rose and fell, experiencing moments of extraordinary brilliance as well as times when its survival hung by a thread. Some of these ups and downs were caused by institutional factors; others came from the methods and paths of innovation themselves. LEGO, The World of Innovators offers a detailed introduction to and analysis of LEGO’s history and development, affirming its successful innovations while also examining the causes of the crises that nearly brought it down. As a company approaching a hundred years in age, many of the bottlenecks and mistakes LEGO encountered are, to a large extent, the same ones that every business—especially family businesses—must eventually face. Simply surviving one storm after another is a kind of success in itself. Most toy brands from LEGO’s era have already faded into obscurity, while LEGO has remained standing through its spirit of constant innovation. That is nothing short of remarkable. The lessons behind LEGO’s story are well worth studying for anyone involved in business operations or innovation management.

The book lists LEGO’s six early principles and seven rules of innovation. The six principles are: values are priceless; innovation requires constant experimentation; LEGO is a system, not a single product; focus on producing more creativity; strive for realism and faithful detail; and win over stores before winning over children. The seven rules of innovation are: bring in innovators from different cultural backgrounds; sail toward blue-ocean markets; put the customer at the center; practice disruptive innovation; cultivate open innovation; explore all-around innovation; and build an innovation-oriented corporate culture.

At the operational level, LEGO also had its own principles: limit size, but not imagination; keep products affordable for consumers; make them simple, durable, and varied; suitable for all ages and both genders; create classic toys that do not require constant updating; and maintain smooth distribution channels.

However, this book is not a blind endorsement or celebration of these principles and commitments. Instead, it carefully analyzes both LEGO’s successes and failures under the guidance of the very same ideas. Several crises in LEGO’s history stemmed from both natural disasters and human error: a fire at a LEGO factory destroyed all drawings and inventory; the expiration of LEGO’s patents led to a flood of low-cost competitors; reckless expansion and unchecked innovation resulted in insufficient growth and excessively high costs; and heavy investment in areas outside LEGO’s strengths—such as animation and video games—through inward-looking development caused serious losses. Some of these crises were caused by objective circumstances, while others emerged from the very principles LEGO claimed to follow. Written principles clearly cannot fully reflect an organization’s culture. Innovation may succeed, but it may also trigger even greater crises. Using LEGO’s story as a case study, LEGO, The World of Innovators becomes a kind of clinical lesson in the concept of innovation.

In an era of slowing economic growth, innovation may be one of the best tools for survival and development. But how to innovate correctly is the question that truly deserves attention. As the saying goes, “the overturned cart ahead is a warning to the carts behind.” To uncover the secrets of this toy empire may well be one of the best ways to understand the true meaning of innovation.