When product innovation fails what business can do? Ask LEGO

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

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

How Old Spice got a new lease of life from product repositioning?

Famous for theme song “ O Fortuna “Old Spice is with us since 1938 when it was originally launched as men’s deodorant. As years passed by the brand could not escape the proverbial product life cycle. It was losing heavily to its competitor brand “Axe”. A reversal of its fortune was necessary. And repositioning was a must.

Original owners Shulton Company sold the brand Old Spice and associated products to Proctor & Gamble in 1990. After purchase this brand encompassed deodorant, antiperspirant, shampoo, body wash and soaps under a group “male grooming products”. Proctor & Gamble continued the tradition of nautical theme and sailing ship. The packaging remained as legendary buoy shaped white colour bottle.

By 2008, Old Spice brand was falling in sales. So the original Old Spice perfume was repackaged as "Classic Scent", both in the after shave and cologne versions. The white glass bottles gave way to red colour plastic ones. But none of these could lift the sales figure. There was a marked reluctance of young men to perch on Old Spice especially “glacial fall’ deodorant as it was old indeed without giving much of a kick to the present generation.

Old Spice required a makeover. On the heal of stiff competition, the need for repositioning tactics became compulsory. But this repositioning as business tactics required two limbs: one it needs a catchy name by way of rebranding; two the message that goes with the name change must resonance with the male ego. Proctor & Gamble therefore introduced rebrand “Old Spice Swagger” with an advert slogan “I am on the horse”.

Wisely the company never abandoned the trade mark sailing ship. Old spice Swagger kit sold at US$ 20 has taken the market by storm. Needless to say, rebranding business tactics has worked marvellously well because of the synergy of rebranding and advert theme!

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

Five essentials for victory, apply the wisdom of Sun Tzu in your business

As a master of strategy Sun Tzu has given so many pearls of wisdom. One relates to the five essentials necessary for the military leader to achieve victory. These essentials can be easily incorporated in your business strategy while facing market competition:

I have given my interpretation as a business strategist under each of the five essentials so that you can get a knack of it and implement it right away:

1. He will win who knows when to fight and when not to fight

Business cannot go on fighting on the same track forever. It was reported that CEO of Pepsi Cola voicing that their competition with Coca Cola need to be tempered with choosing when to fight and when to collaborate.

2.  He will win who knows how to handle both superior and inferior forces

Google made a policy decision not to engage in total war with every search engine operators. Allowing fair play is good for health of internet domain. They took it a level higher when they agreed to collaborate with Bing Web Master Tools where a one click can download details from Google Console to Bing, of course with permission granted by the authorised user.

3. He will win whose army is animated by the same spirit throughout all its ranks

Everyone in a firm must be a marketer. This slogan is often heard in staff training. Gaining and retaining customers is the job of everyone in successful companies. So most corporate leaders as well as small & medium business owners subscribe to this philosophy. Gone are the days when marketing was an exclusive fiefdom of sale guys.

4. He will win who, prepared himself, waits to take the enemy unprepared

Being patient and still more important, being prepared to meet any eventuality is a sign of success of any firm regardless of its size and the intensity of competition it faces in the market place. In business strategy the bold move is always made when a firm is ready while the competitors taking it easy. When Huawei rolled out its pioneering 5G and started to give licenses to many operators worldwide it not only wiped out other Telco operators but added fat in the form of revenue of US$ 27 Billion in the first quarter 2019.

5. He will win who has military capacity and is not interfered with by the sovereign

Corporate leaders need unfettered authority to handle production and marketing function, which is all about value creation value delivery that brings out value capture. If the board of a company interferes with management on every conceivable action contemplated it amounts to pouring cold water on the enthusiasm of the staff. Sometimes the board splits the function of Chairman of board and CEO as Boeing did recently that has solicited negative response not only from the management but by the investing public too.

 

Cheers!

  

 

Muthu Ashraff 

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

Before making tactical withdrawal, do the risk analysis

Tactical withdrawal is one of the risky business tactics that can be resorted to by firms amidst severe competition. The sole objective is to preserve the current position to be ready for future prospect. But this action is fraught with extreme danger because seasoned competitors would know how the game is being played. Therefore, it is vital to undertake thorough risk analysis before attempting any tactical withdrawal.

Business does not quit at all when implementing tactical withdrawal. It may be time bound before re-entering the market with new or improved product. Here is the catch: time is in essence in effecting tactical withdrawal as well as the duration of dis-engagement from the market.  The following issues must be fully debated to get a global picture of how business tactics of tactical withdrawal might play out:

1. The risk of re-entry is paramount. Before quitting temporarily, firm must assess when re-entry could take place and at the time of re-entry how strong will be the competitors and how weak will be the internal competency of the firm. A longer disengagement sets in lethargy amongst the staff manning operations. This is acute in the marketing department where most of the actions that took place earlier has now disappeared and the agility has suffered enormously

2.  The line of communication set up with key partners such as suppliers of materials on the production side and dealership in the distribution side might fall silent for considerable time bringing some form of disquiet or disinterest in their minds that has bearing on the frim when it readies for re-entry

3. The question that props up immediately is what happens to the overall defensive mechanism the firm built-up earlier in meeting with challenges of competition. If these systems degrade it would affect the firm very badly

4. Unless everything works round the clock, reconstitution of men & material for the production and operation of new line of product might suffer serious set-back

5. What happens when competitors are not deceived at all by this tactical withdrawal and they draw their own conclusions about the firm, its mind-set and the ulterior motives and are more than ready to meet the firm in any new battle ground as and when firm comes back to the market?

6. The last issue is what happens when all hell breaks down in the market place regarding the firm and its intentions. Competitors seize the opportunity to conspire against the firm by bringing out a major campaign to delegitimise it altogether. This could be a fatal blow that is!

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist