LEGO: The Rise and Fall. And Rise

As gutsy branders and brand strategists, we go a bit nuts when we see a large corporation making serious brand strategy mistakes. The reason being we know it leads to, at best, stagnant revenue, and at worst, fired employees. And, to us, that kind of ignorance is inexcusable.

This blog entry, however, isn’t about that at all. It’s about the rebound of that little brick we all had as kids, and a few of us have stepped on as adults. This blog’s about the fall, and rise, of the world’s favorite building brick: LEGO. So if you wanna know how to be all Phoenix-like, read on as we regale you with this tale of non-woe entitled LEGO: The Rise and Fall. And Rise.

The Rise

The more I read about LEGO, the more fascinated I become with its history. LEGO was started by a carpenter during the 1930s, who was low on money because of the depression. He and his wife had four sons, and when his wife died, he knew he had to find a way to take care of them. It’s a remarkable story, born out of unspeakable tragedy. The carpenter’s name was Ole Kirk Christiansen, and his family retains control of LEGO to this day.

The Fall

In the 1990s, LEGO had fallen on tough times, prompting Ole’s grandson, Kjeld Kirk Kristiansen, to bring in a “turnaround expert” to right the LEGO ship. This “expert” immediately started looking for ways to cut costs, innovate, and create brand diversification.

Cutting costs is fine. Innovating’s a good idea, as long as one innovates in their wheelhouse. But brand diversification? As branding and brand strategy consultants, the idea of that is a scary one. It’s a lot like Michael Myers – it won’t die no matter how many holes we put in it!

Read The Dangers of Bad Brand Strategy

The results were predictable. LEGO began losing a ton of money because they expanded their lines to include things that had little to do with building. Things like Jack Stone, who was a G.I. Joe wannabe, and Galidor, who was a buildable action figure. They tied that line into all kinds of media, such as cartoons and even Happy Meal toys. Galidor was an enormous flop.

And Rise

Fortunately, in 2004, a real expert was brought in. He took the reins and began re-focusing the LEGO brand to being, well, the LEGO brand! LEGO had lost sight of the one thing that propelled it to success in the first place: the basic LEGO building brick. This new expert, Jørgen Knudstorp, knew it, and brought back the brick in a big way. They cut divisions that didn’t make sense for LEGO to have, made sure all their media tie-ins had “building” as the focus, and drastically cut down on the types of brick shapes being produced.

Focus Is Only a Big Deal for Real Brands

Another move we were especially proud to see, as brand strategists, was setting limits on – and re-focusing – their designers. The designers used to innovate too much because they’d be told things like, “Come up with something really cool that kids will like!” and “We need you to come up with new bricks for these specialty sets!” To re-focus the designers, they were told things more like, “Create a really cool police car, using these specific bricks.” Some designers didn’t like that, but the brand was re-focused, in part, because of it. A quote from David Robertson, who wrote Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry, sums this up perfectly. “…what to take away from LEGO is that it’s not enough just to boost innovation. As you boost the amount of creativity and innovation, you’ve also got to boost the amount of focus and control.”

You may be wondering why I’ve spent all this time talking about LEGO. Well, if you’ve been reading the stuff we post all over our website and social media accounts, you’ll see that focus and staying in your wheelhouse is paramount to a quality brand. And just how quality is the LEGO brand?

Read Focus: A Brand Strategy Assignment

How LEGO Stacks up to its Competition

Hasbro is LEGO’s number two competitor, and they produce a whole lot of toys you’ve heard of: My Little Pony, Transformers, Star Wars, that creepy little Furby (I added “that creepy little,” because it’s true), Monopoly, Battleship, etc.

Mattel is LEGO’s number one competitor. They produce a whole lot of toys you’ve heard of, too: Barbie, Hot Wheels, Disney Princesses, Polly Pocket, and Fisher Price, etc.

So, how quality is the LEGO brand? This year (2014) LEGO passed Mattel to become the number one toy-maker in the world. And how did they do it? Well, I pretty much just told you: one little brick at a time.

You’re welcome for your eyeroll.

The Lesson

Diversification can be done well, but only by building separate brands. What almost bankrupted LEGO, in essence, was a poor diversification strategy. In the minds of customers, LEGO is those little bricks. Rather than trying to allow their other brands to succeed on their own, LEGO put their logo all over products that had nothing to do with those little bricks, which caused a lot of confusion. And confusion’s bad.

As for Hasbro and Mattel, my gut feeling is they need to re-focus each brand under their umbrellas. And definitely take their logos off the individual brands’ packaging.

And Hasbro should definitely kill that creepy little Furby.

Stay gutsy, gang!

The world is broken, and we believe only entrepreneurs can fix it. But they’ll never get that chance if no one cares about their brands. So, with a little bit o’ nuttiness, a little bit o’ research, and a lotta bit o’ guts, it’s our job to make people care.

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References
Harvard Business School
Knowledge@Wharton
Bloomberg