Lego - Turnaround through Disciplined Innovation

Case Code: BSTR454 Case Length: 14 Pages Period: 1993-2013 Pub Date: 2014 Teaching Note: Available

Price: Rs.400 Organization: Lego A/S Industry: Toys, Games Countries: Global Themes: Business Strategy

Abstract Case Intro 1 Case Intro 2 Excerpts

Background Note

In 1916, Ole Kirk Christiansen (Ole), a carpenter by profession, purchased a woodworking business in Billund, Denmark. In 1932, he began making wood-based toys that included houses, cars, trucks, pull-along toys, and piggy banks. In the same year, Ole's 12-year-old son, Godtfred Kirk Christiansen (Godtfred) joined him in the business. In 1934, Ole named his company "Lego". In 1946, Lego became the first Danish company to purchase a plastic injection molding machine, to make plastic toys. It spent two years' worth of profits on the purchase. In 1949, based on a patented design of another toy company, Kiddicraft, Lego began producing a set of interlocking bricks called "Automatic Binding Bricks". These bricks, made of cellulose acetate, had a hollow rectangular bottom, with studs on the top that enabled them to be locked together and, if needed, easily detached.

In 1953, an improved version of the bricks was introduced in the market under the name "Lego Bricks". However, the bricks had problems in bonding and fell apart after a short period. In addition, there was a preference for wooden and metal toys in the market. The bricks had poor sales and accounted for only 5-7% of the company's total sales. In the 1950s, Godtfred, after discussions with toy retailers, realized that there was a demand for a "Toy System", wherein newer toys would be compatible with the older version. This was expected to create unlimited play opportunities, which would encourage customers to buy newer versions of the toys....

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