How LEGO Group rediscovered its magic

Knudstorp and his team embarked on a three-phase, seven-year plan: stabilize the company and generate cash, build a defensible set of core products and position for new growth. The key: returning to the company’s core differentiation, shedding most of the unrelated businesses and renewing the original LEGO model. "We needed a new repeatable business model to evolve," adds Knudstorp.

What LEGO created illustrates the power of our third principle of Great Repeatable Models: The company built robust learning systems to ensure that its model continued to adapt and stay relevant to customers. For example: 

  • LEGO collects Net Promoter® scores at each customer touch point (shops, online, consumer services, etc.) and for each major product category. It distributes the scores throughout the company every month, and employees follow up on negative responses. Scores have improved 26% since 2005. 
  • The Kids Inner Circle is an online community of five thousand children, by invitation only, who love to interact with LEGO concerning new products in process.
  • A “quick poll” system helps LEGO learn customers’ reactions to specific themes, features and stories as LEGO Group works on new products.
  • 135 company-sponsored LEGO shows have drawn 2.6 million visitors and spawned user groups totaling 65,000 members. The company launched more than 80 cocreation projects with these groups in 2009.

Thanks to its renewed model, LEGO’s core business has snapped back into place. In 2009, net profits increased 63% and pretax profit margin rose to 24%—a far cry from the enormous losses of the previous decade. Meanwhile, revenues grew 22% while industry sales were flat, pushing up LEGO’s global market share. Beyond the financial results lie a more customer-oriented culture, a shortened distance between the CEO and the front line, a 50% faster product development time and an outpouring of innovative products such as a virtual LEGO world and a Disney licensing agreement to create Toy Story LEGO sets.