David Robertson’s Brick by Brick: How LEGO Rewrote the Rules of Innovation, details what The Guardian calls “the greatest turnaround in corporate history.” Now it’s trying to pull off another, even greater turnaround. The man behind it, CEO Jørgen Vig Knudstorp of whom Robertson said, “In some ways, I think he’s a better model for innovation than Steve Jobs.”
Still, even Steve Jobs had his challenges—and the world’s #1 toy brand is facing challenges to its mainstay product, the brick, in a world ruled by mobile-savvy kids. On September 5th the company announced it’s cutting 1,400 positions (8% of its workforce) as it pivots to become more digital amid a drop in sales in the first half of 2017.
On October 1st, a new CEO will take the helm to lead that transformation: Niels B. Christiansen, who headed thermostat-maker Danfoss as CEO, will replace interim LEGO CEO Bali Padda.
“We will find more opportunities to engage with kids and parents including innovative ways to blend physical building and digital experiences, such as our successful LEGO Life social platform and LEGO Boost building and coding set,” Knudstorp said.
Knudstorp has already tried to cut costs by selling the Legoland parks (now owned by the UK’s Merlin Entertainments), slashing inventory (by 50% from 13,000 individual pieces to 6,500), and turned more attention to Lego’s fans.
“Lego has this incredible ability to engage with people and that has single-handedly enabled it to weather very, very difficult seas,” said Interbrand London’s Simon Cotterrell to The Guardian. “What’s made them successful over the past 10 years is their ability to create new entities, movies, TV shows, by partnering with brilliant people.”
It’s hoping that The LEGO Ninjago Movie being released on September 22nd will repeat the success The LEGO Movie in 2014 and its follow-up, The Lego Batman Movie. In fact, DC Comics now faces a genuine problem: audiences overwhelmingly prefer the Dark Knight in his pompous and plastic version voiced by Will Arnett, rather than Ben Affleck’s portrayal, notes The Guardian.
In 2016 LEGO sold 75 billion bricks; at its headquarters in Billund, Denmark, 120 million Lego bricks are manufactured daily. LEGO people, aka “Minifigures,” outnumber humans on the planet, and The British Toy Retailers Association voted LEGO the toy of the century.
Its defining system method for came in 1958 and a 1992 LEGO catalogue advertised, “We’ve got the bricks, you’ve got the ideas.”
As social media and electronics redefine play, LEGO has been reaching across the virtual divide with e-initiatives including LEGO Life, a social network for kids too young for Instagram; and Nexo Knights, a video game where scanning Lego’s unlocks hidden powers.
The company is looking into VR and AR but as William Thorogood, senior innovation director with LEGO’s creative play lab commented, “Some of the things we’re looking at are very near to being feasible now. Other things are very exciting, but probably not feasible for 10 years, depending on how mature the tech becomes.”
“The reality is that the last few years the growth has been supernatural,” Julia Goldin, LEGO’s chief marketing officer, told The Guardian. “When you look at the proportion of revenue that’s coming out of the mature markets it becomes more and more challenging with the level of penetration. But we look at every year starting at zero because you have to recruit every child again and make the brand exciting for them. That becomes a good challenge, of course.”
Still, the classic brick isn’t likely to go away any time soon. As The Telegraph puts it, “The deceptively simple Danish bricks are a timeless toy classic. The humble plastic brick is so much more than a toy or something for parents to painfully step on. It’s a catalyst for creative expression, a tool to teach physical dexterity and problem-solving.”