The ingenious toy—the LEGO—was invented in the 1950s, allowing children to create anything they wanted using little bricks that were strong enough to lock together yet not too strong so that a child couldn’t connect them. In 2003, the company’s executives were certain that the Danish company was headed for demise. 

At the moment he was needed most, a new CEO came onto the scene for a business reinvention that many declare the greatest corporate turnaround of all time, an inspiration for the world’s foremost innovative companies.

When the Bricks Nearly Broke: LEGO’s Early 2000s Crisis

This Danish company took the world so much by storm that it was dubbed the Apple of toys. Sadly, in this modern world, there isn’t much that stands the test of time, as by 2003, the world’s children had been sucked in by digital wonders: video games, iPods, Bop Its, and even Game Boys that kids could play anywhere. The pride of this company was bruised. It found itself bleeding a million dollars a day and stuck in nearly a billion dollars of debt. The year and the following year were the first time the company went into the red. 

Initially, LEGO scrambled to jump into all sorts of new business reinventions in which it had no expertise:

• An aggressive theme park expansion, LEGOLAND;
• Lifestyle products like branded clothing, watches, and even home decor; 
• Action figures, like the unpopular Galidor, also launched as a flop of a TV show meant to compete with the Power Rangers;
• Media licensing initially didn’t pay dividends;
• Video games like BIONICLE went out with a whimper due to poor design.

Many LEGO sets and toys cost more money to make than their sales prices. It turned out that the company’s execs with design backgrounds didn’t keep track of individual set revenues.

Reinvention Blueprint: Back to Core, Forward with Imagination

Business reinvention meant trashing unpopular products and doubling down on the ones that worked.

The crisis caused Kjeld Kirk Kristiansen, the grandson of LEGO’s founder, to step down. His successor, Jorgen Vig Knudstorp, came in with a different view of the company’s woes. Here is the innovation strategy he put in place for LEGO.

1. Refocusing on Core Competence

He believed that the new company reinvention strategy had diluted the powerful, robust identity it was known for. The die-hard fans would’ve resented if the company abandoned its core identity. Figures like Jack Stone used pre-molded parts that could not be repurposed, defeating the LEGO’s purpose. 

Instead of abandoning these Legos, Knudstorp decided to get rid of the merchandise that didn’t sell, and rather than veer away from the familiar bricks. His LEGO reinvention substantially expanded on the number of colors they used. The end of the family leadership symbolized a theme of business reinvention.

2. Listening to the Customer

Legos decided to focus more intently on the audience. Although LEGO had to win over new kids coming around every year, it did not forget the Adult Fans of LEGO (AFOL), as previous management had. These now adults were given modifying sets, shared MOCs, and organized events on their own. They also launched LEGO Ideas, a company reinvention strategy for fans to submit their own set ideas or vote on others. If a project got 10,000 votes, LEGO would consider turning it into a real product. 

And that’s precisely what happened in the LEGO reinvention with a number of big hits, including:

• Yellow Submarine
• Ship in a Bottle;
• Saturn V. Ship
• Central Park

LEGO even conducted profound ethnographic research with kids and families. They noticed that kids enjoyed slow, methodical building more than fast, flashy play. Based on user feedback, they scrapped poorly performing themes and allowed classical themes like LEGO City to guide their brand transformation.

3. Embracing Digital without Losing Identity

Ironically, in this new era of screens and digital entertainment, LEGO saw an opportunity for a digital leap despite being a physical building toy. Its corporate turnaround benefitted from platforms like LEGO Life and LEGO Digital Designer, giving users tools to share creations and ideas. LEGO launched popular video games and hit big home runs with extremely popular movies. Many people loved the LEGO Batman more than they loved Ben Affleck. 

LEGO Star Wars in 2005 was huge for the brand transformation. LEGO Life, meanwhile, allowed kids to create custom avatars and build their identities, not just with physical models but also through gamification, such as digital achievements and profiles.

4. Cultural and Leadership Renewal

The business reinvention that the LEGO reinvention enjoyed after its near collapse owed massively to its cultural and leadership renewal. It wasn’t just about fixing their business. It was about changing the way they thought, operated, and led. 

5. Ecosystem Expansion and Sustainability

LEGO realized it could no longer rely on just bricks. It had to expand into an ecosystem of experiences, touchpoints, and platforms revolving around the brand. Its partnerships with big-time movie names facilitated that, as did its explosive presence on a wide variety of shows and movies, above all—The Lego Movie. 

Even the durability of the brick was improved. In the process, LEGO started measuring and reducing its carbon footprint, using more sustainable energy in its manufacturing and joining the UN Global Compact to that end. Furthermore, LEGO Education and partnerships with NASA further expanded its presence and inspired children with science.

LEGO’s Reinvention at a Glance

Here is the rundown on the LEGO reinvention case study.

The Reinvention Lens on LEGO

This businesswoman and author loves to bring up this fantastic business reinvention case study, as it reflects her worldview on change. She notes that in the 20th century, the average company lasted 75 years. Now, however, it’s a paltry 7, and therefore a business must be ready to change once every 3.5 years, all the while holding onto only its very best qualities and always staying ready to shed everything else that it sees as its identity. 

She states that achieving success involves unlearning what no longer serves a company under the new reality of the day and acquiring better-adapted qualities, which can be consolidated for more resilient ecosystems. She believes that business reinvention should stand as a cultural phenomenon, not a jerk reaction in this fluid, unpredictable world. She says that the LEGO reinvention during those trying times illustrated a beautiful, natural, permanent phenomenon—the shedding of outer layers of identity.

5 Reinvention Lessons from LEGO for Business Leaders

Businesses like Google actually give their employees LEGOs to play around with at work, as the business reinvention case study represents an adaptable way of living. 

Here are some of the biggest takeaways entrepreneurs highlight from this business reinvention story.

1. Cut the fat and give a company the mobility for business reinvention.
2. Don’t let any cash continue to bleed if it just isn’t resonating.
3. Always be ready to expand your company’s identity.
4. Do not wait in the past to wither, but do not abandon what makes you great either.
5. Always be looking to express new sides of yourself and gain exposure to new audiences.

Final Click: Why LEGO Reinvention Still Inspires

Everyone should be able to take a profound lesson and aspire to emulate the success that the LEGO reinvention enjoyed. One must always stick to what they and everyone else loves about them without getting dragged down by attachment to the past and the way things used to be. There is always a greater innovation strategy out there waiting to be found that can dazzle audiences in more ways than one can imagine.