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Kisses Joy Sia

on 28 October 2014

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Transcript of Lego

Innovation almost bankrupted
The Lego Story
Lego's Response:
Ole Kirk Christiansen bought a
woodworking shop in
Billund, Denmark
Almost went bankrupt due to the Great Depression
Started making wooden toys because of the lack of normal carpentry jobs
The name "LEGO" was coined
from Danish phrase "leg godt" meaning "play well"
Christiansen bought
the first plastic
injection molding machine
to start manufacturing
plastic bricks for
building-block toys
Warehouse fire destroyed most of the wooden toys
Decided to focus on plastic
Introduced their most popular wooden toys
surge in popularity
started in 1978
Over the next decade...
Developed building bricks with circular studs on top as inspired by a Kiddicraft design
LEGO further improved on the design of the plastic bricks, as well as on the materials
Appealed to "baby boomers" and the next generation
Produced more and more themed building sets and expanded its markets
Started targeting girls in 1970s
Sales slowed to a crawl
Many cheaper alternatives
Emergence of video games
"Kids were getting older younger"
thus reducing Lego's market
Lego posted its first ever loss of
£23 million
Added hollow tubes in the underside of the bricks to improve locking ability
At this time, Godtfred has already inherited Lego after Ole's death
Innovation became a focus of every aspect of the company, with the goal of turning it into the world’s strongest brand among families by 2005
“LEGO followed all the advice of the experts"
Entered relatively competition-free markets
Hired a diverse and creative staff
Sought the participation of a number of different constituencies from both inside and outside the firm
Tried to create new products that disrupted existing markets
Listened to customer feedback
binge of innovation
LEGO-branded electronics,
amusement parks,
interactive video games,
jewelry, education centers,
and alliances with the Harry Potter
franchise and the Star Wars movies.
Lost $300 Million
or £174 Million
Lego was innovating but did not ask or answer questions to financially sustain its growth.
Where do you want to go?
Where are you now?
How will you get there?
Lego innovated but did not control or direct it well
Although the partnership with both Harry Potter and Star Wars gained popularity, majority of the customers only buy them during the year the movies were released.
Some of the new products only captured a niche market
Kids became less and less interested with Legos, or toys in general
Kirk Christiansen decided to step down as CEO
Jorgen Vig Knudstorp became CEO, the first non-family member to take that role
Created a more organized structure for innovation
To generate cash
Sold 70% stake in Legoland themeparks for $460 M
Closed the Danish headquarters building -- moving management to a nearby factory
Outsourced overwhelming majority of its plastic brick production to cheaper facilities
Any innovation had to prove to be consistent with the company goal:

To be recognized as the best company for family products
Found value in innovating in "red oceans,' contrary to the general expert suggestion of moving toward "blue oceans"
Controlled Innovation results:
Sales went up by an average of 24% annually
Profits have grown 41%
Now the second largest manufacturer of play materials after it has overtaken Hasbro in 2013
LEGO can be found in over 130 countries
Lessons Learned
Don't blindly follow rules and guidelines
Have a vision and direction
Controlled innovation is key
Also means "put together" in Latin
Lego duplo for toddlers
regular lego bricks for older kids
caters to the whole family
Focused on its core product:
the bricks
Lego bricks
brought success back
they are iconic and has nostalgic value
they are educational
they are of high quality
Outstanding customer service and relationship-building
"We don't stop playing because we grow old; we grow old because we stop playing." - George Bernard Shaw
Full transcript