Danish based toy manufacturer Lego is around the
corner for almost a century now. It had a great stride through the toy markets
despite few bumps here and there. But a major crisis flared up when Lego went
on board for product innovation. Did it succeed?
Experimentation can be dangerous for a conservative
company. Lego started “LEGOLAND” amusement parks in the 1970s. Quite a number
of these were closed as time went by prompting the company to disinvest by
selling the remaining ones to a private investment company. In 1990s Lego had
the gumption for further experimentation, this time in its home turf.
Toying with the idea of product innovation, Lego
replaced its patented inter-locking plastic brick system toys by new pre-built
colourful pieces. Thousands of such pieces were brought out jacking the price
of average toy set to unimaginable high. The biting on the purse of parents
footing the bill was marginal compared to the total rejection of the toys by
the kids themselves.
The product innovation strategy failed miserably
such that beginning 2000 Lego felt the pinch on sales and its losses started to
mount leaving the company in red for the best time to the tune of half a
billion US Dollars. Consequently, the company started to evaluate it product
innovation failure.
The findings revealed three aspects. One classic
inter-locking bricks system is easy to play with and allowed the kids to bring
their creativity in building different type of structure. Second, in doing so
the kids were happy and tried to show their inventions to friends and parents
with pride. Third point is that in marketing toys not only you listen to the
parents but equally to the kids themselves.
Repositioning as business tactics was found to be
the best answer to the ills of Lego. So in late 2000 it went back to the old
classical plastic brick system with modifications in tonal colour, shadow
effects and a fair degree of complexity in-built in the pieces so that the kids
can develop their imagination while playing with the pieces. The improved
product also helped in two ways to prop up kids’ interest: creativity and curiosity.
This business tactics of repositioning had positive
quantitative effects on the company too.
1. In 2018 the Lego brand was listed by Forbes as
one of the top 100 world’s most valuable brands
2. Lego raked in revenue stream of about 5 Billion
US Dollars
3. Corporate valuation of Lego is 15 Billion US$
ahead of its closest competition Mattel
4. Lego is the second largest toy manufacturer in
the world.
Cheers!
Muthu
Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business
Strategist
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