Lego, the Danish company known for its colorful plastic bricks, has been a beloved toy brand for over eight decades.
However, in the late 90s and early 2000s, Lego experienced a significant decline in sales and profitability due to poor decision-making and failure to adapt to the changing market.
To address these challenges, Lego had to undergo a significant transformation in its business model, manufacturing process, and organizational structure.
This transformation was achieved through a successful Change Management strategy that involved collaboration, communication, and innovation.
In this blog post, we will explore Lego’s Change Management Case Study and discuss the lessons learned from this transformation.
Brief History and Growth of Lego
Lego is a Danish company that was founded in 1932 by Ole Kirk Christiansen. The name “Lego” is derived from the Danish words “leg godt,” which mean “play well.” The company originally produced wooden toys, but in 1949 it began producing plastic interlocking bricks.
The Lego brick was invented by Ole Kirk’s son, Godtfred Kirk Christiansen. The brick design was perfected over several years and was introduced in its modern form in 1958. The bricks were designed to be versatile and durable, and they quickly became popular among children and adults alike.
Over the years, Lego has continued to innovate and grow. In the 1960s, the company expanded its product line to include a wider variety of building sets and play themes, such as the famous Lego Space sets. In the 1970s and 1980s, Lego introduced its first licensed products, such as sets based on popular TV shows and movies.
In the 1990s, Lego experienced a period of financial difficulty, as the company had expanded too rapidly and faced increased competition from other toy manufacturers. In response, the company underwent a restructuring and refocused on its core products and values.
In the 2000s, Lego experienced a resurgence in popularity, as the company introduced new product lines, such as Lego Star Wars and Lego Harry Potter, which were based on popular movies and franchises. Lego also expanded its business into theme parks and other entertainment ventures.
Today, Lego is one of the world’s largest toy companies, with a wide range of products and a strong global presence. The company continues to innovate and evolve, as it seeks to provide children and adults with creative and engaging play experiences.
External factors that led to organizational changes at Lego
Lego has undergone a number of organizational changes over the years, in response to various external factors. Some of the key external factors that have led to these changes include:
- Changes in the toy industry: The toy industry is constantly evolving, with new technologies and trends emerging all the time. In order to stay competitive, Lego has had to adapt its product offerings and business model to keep up with these changes.
- Economic conditions: Economic conditions can have a significant impact on consumer spending, and as a result, on toy sales. During periods of economic downturn, for example, consumers may be less likely to spend money on non-essential items like toys. In response, Lego may need to adjust its pricing or marketing strategies to maintain sales.
- Competition: Lego faces competition from a wide range of other toy manufacturers, some of whom may offer similar products at lower prices. In order to stay competitive, Lego may need to innovate and differentiate its products from those of its competitors.
- Changing demographics: Changes in demographics can also have an impact on toy sales. For example, as the population ages, there may be a shift away from toys and towards other types of products. In response, Lego may need to adjust its product offerings or marketing strategies to appeal to different age groups.
- Technological advancements: Advances in technology can have a significant impact on the toy industry. For example, the rise of video games and digital entertainment has led to a decline in traditional toy sales in some markets. In response, Lego has developed its own digital products and integrated technology into its traditional brick sets.
- Societal trends and attitudes: Societal trends and attitudes can also impact toy sales. For example, as concerns about the environment and sustainability have grown, there has been increased interest in eco-friendly products. In response, Lego has introduced a line of sustainable bricks made from plant-based materials.
Internal factors that led to organizational changes at Lego
There were several internal factors that led to organizational change at Lego, including:
- Poor Financial Performance: Lego’s financial performance had declined significantly in the late 90s and early 2000s. This was due to several factors, including a lack of innovation, failure to adapt to changing consumer preferences, and over-expansion.
- Lack of Collaboration: Lego’s organizational structure was siloed, and there was a lack of collaboration between different departments. This led to inefficiencies, duplication of efforts, and a lack of innovation.
- Inefficient Manufacturing Process: Lego’s manufacturing process was outdated and inefficient, which led to longer lead times, higher costs, and lower quality products.
- Complexity of Product Lines: Lego’s product lines had become overly complex, which made it challenging to manage inventory, production, and sales effectively.
- Leadership Issues: Lego had experienced several leadership changes in a short period, which led to a lack of strategic direction and a disconnect between the company’s goals and its actions
05 biggest changes implemented by Lego
Here are the 5 biggest changes implemented by Lego:
- Simplified Product Lines: Lego streamlined its product lines by reducing the number of themes and sets it offered. This helped the company focus on its core offerings and improve its manufacturing process and inventory management.
- Agile Manufacturing Process: Lego introduced an agile manufacturing process that allowed for greater flexibility and responsiveness to changing market demands. This helped reduce lead times and costs, and improved the quality of its products.
- Collaborative Organizational Structure: Lego implemented a more collaborative organizational structure, which encouraged cross-functional teams to work together and share information. This led to greater innovation, more efficient decision-making, and better alignment with the company’s strategic goals.
- Customer-Centric Approach: Lego shifted its focus to a customer-centric approach, which involved listening to customer feedback and using it to inform product development and marketing decisions. This helped the company create products that better aligned with customer preferences, resulting in increased sales and profitability.
- Brand Expansion: Lego expanded its brand beyond traditional building sets to include video games, movies, and theme parks. This helped the company reach new audiences and diversify its revenue streams, making it less dependent on the success of its core products
05 Positive outcome and impact of change management implemented at Lego
The successful implementation of changes by Lego led to several positive outcomes, including:
- Increased Revenue: Lego’s revenue grew significantly following the implementation of changes. In 2020, the company reported revenue of $6.5 billion, up from $1.4 billion in 2004.
- Improved Profitability: Lego’s profitability also improved, with the company reporting a net profit of $1.6 billion in 2020, up from a loss of $300 million in 2004.
- Increased Market Share: Lego’s market share in the toy industry grew from 4% in 2004 to 7.7% in 2020, making it one of the largest toy manufacturers in the world.
- Strong Brand Identity: Lego’s successful transformation helped establish it as a leading brand in the toy industry, known for its high-quality products, innovative designs, and commitment to sustainability.
- Diversified Product Line: Lego’s expansion beyond traditional building sets helped the company diversify its product line and revenue streams. This made it less dependent on the success of its core products, resulting in greater stability and sustainability for the company.
The successful implementation of change management at Lego serves as a valuable case study for businesses looking to achieve sustainable growth and success in a rapidly changing market. Lego’s transformation was not easy, and it required a significant commitment to collaboration, communication, and innovation. However, the positive outcomes of the transformation demonstrate the importance of effective change management in achieving long-term success.
Lego’s successful transformation was achieved through a combination of strategic changes to its business model, organizational structure, and manufacturing process, as well as a focus on customer-centricity and brand expansion. By simplifying its product lines, implementing an agile manufacturing process, and creating a more collaborative organizational structure, Lego was able to improve its efficiency and responsiveness to market demands. This, in turn, led to increased revenue, improved profitability, and a stronger brand identity.