Lego - Turnaround through Disciplined Innovation
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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
Introduction
In September 2013, Lego A/S announced that in the first six months of 2013, its sales had reached US$ 1.84 billion; an increase of 13% compared to the first half of 2012. Lego attributed its success to its innovative new product lines, especially "Legends of Chima", which had emerged as one of its largest product lines.
Established in 1932, Lego was popular for its construction toys, which enabled a player to use his/her creativity to build vehicles, buildings, and even people. The company grew to become a leading global toymaker and showed a steady annual growth. However, after the expiry of the patent on the "Lego Brick" in 1987 and the rise of the video game industry, Lego's sales began to stagnate. The company then introduced a range of new toys to attract customers and revive its sales. However, the products failed to take off, causing Lego to make its first ever loss in 1998.
Lego then brought in a turnaround expert, Poul Plougmann (Plougmann), as Chief Operating Officer (COO) to give a new direction to the company. Plougmann focused on innovation to replace several iconic Lego sets with new offerings. He also ensured that new sets could be built more easily and that they used components with new shapes and colors. In addition, he diversified the company's business line by entering the publishing arena, expanding its retail footprint, and opening new Legoland theme parks. Though these efforts bore fruit early on, the success was short-lived. By 2003, the company began to make massive losses...
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