Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry

Wharton professor David Robertson with Bill Breen have written an engaging book, which contains a real case study on innovation management. It follows the footsteps of the history of LEGO Corporation, which was innovating heavily, but was still at the brink of collapse in 2003. Very similar to Apple corporation at the verge of bankruptcy before the second coming of Steve Jobs, LEGO had essentially over-innovated. They had too many products, their production was too scattered and they had lost the understanding on what was the core what they were good at.

At the same time, they had fought a strong fight with electronic tools and computer games that had become much more interesting for children around the world. Children thought that LEGO was primarily thing of the past. They did not consider it cool to play. They also had to fight with a number of cheap copycats from developing world who were able to eat their market share.

The book focuses on what happened next. How a traditional family firm that was until that moment been managed solely by the family members brought in a young outsider – Jørgen Vig Knudstorp, a former McKinsey consultant who had previously received PhD from Aarhus University. Knudstorp started leading LEGO strategy department and was ultimately appointed as a CEO. Knudstorp reviewed the strategy, made a series of difficult decisions to cut back in costs to stop the company bleeding cash and thereafter managed to revamp the innovation activities to make sure that it would become the first choice of toys for parents and children around the world again.

While the other two global toy players on the market – Mattel and Hasbro have been virtually at a standstill over past 5 years, LEGO has managed growing its revenues 22 per cent and its profitability even 38 per cent. An interesting case study to read for everybody to think about innovation from a different angle.