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I came across a very interesting post on the Reveries blog this week about how Lego let innovation both drive the company and almost drive it into the ground. The post was discussing a review of a book about Lego, Brick by Brick, that chronicles how the company embraced theories of innovation with disastrous results. Lego rebounded by realizing that the growth mantra espoused in B-schools and corporate board rooms is not the only way to go. A return to a focus on committed customers and not chasing trends in the toy market brought Lego back from the brink of bankruptcy. The Lego story has a happy ending, but this mega-brand had lost its way at one point.
What Went Wrong?
The forces that contributed to Lego’s troubles are not surprising. Technology developments changed the toy industry as well as how young people engage in play. So, it was reasonable to think a firm would adapt to changes in the external marketing environment. If toys were going high tech, shouldn’t Lego be developing more technology-intensive toys? The video game generation is highly stimulated and has a short attention span, so developing more pre-constructed toys would address the potential threat of being irrelevant to young people who did not want to spend hours on a building project. Lego was wrong on both counts. The company was characterized as “innovating without discipline.” Generally, innovation is looked at favorably, an essential endeavor to fuel growth. But, it went horribly wrong for Lego.
The Lego story captured my attention for two reasons. First, it was a reminder that even the most astute companies can get it wrong when it comes to pursuing growth. Being wrong is a forgivable sin as long as you learn from it. Lego learned its lesson well. Second, conventional wisdom is not necessarily the strategy of choice. Disciplined innovation for Lego is adding new value to its passionate brand community made up of Lego lovers of all ages. One of the missteps Lego made was to follow the toy industry definition of the target market: Young males.
Innovate on your terms, not the industry norms. Lego regained its focus and brought new products to market that appealed to its customer base rather than continuing to chase prospective customers with products that did not always deliver against the Lego brand promise. While the external environment should not be ignored, keep your customers and brand advocates at the center of all innovation decisions.