From Bankruptcy to Industry Leading Success – The LEGO Story


LEGO has earned the right to celebrate. Not only are kids playing with more mini LEGO people than there are human beings on the planet (Delingpole J, 2009) but in 2015, they were nominated by Forbes as the most powerful brand in the world. For a company which was on the brink of bankruptcy in 2004, the toy maker has made an amazing turnaround. They restructured, hired a new CEO, and forged more licensing partnerships than ever before. Most importantly, they discovered the secret to some of the world’s most successful, low risk innovation strategies.

These strategies helped LEGO create a powerful brand envied by every other company in the world. However, successes like these are not, and need not be, restricted to global companies with billions in revenue. The point of low risk innovation tools is that one can use them to test ideas in any setting and with any budget. Whether you are a cash strapped startup or a Forbes 500 firm, sustainable innovation can be your ticket to success.

Out of LEGO’s lessons and that of hundreds of other companies, I have distilled the most successful techniques to innovate cheaply and effectively. They are all contained in the book Innovation Tools and, as an additional bonus, the readers of the Innovation Management community can get it for free this week. Among others, my book answers questions regarding how strategies used by companies like LEGO are able to turn companies around from looming bankruptcy to industry leading success.

Read the full blog about From Bankruptcy to Industry Leading Success – The LEGO Story at Innovation Management.

Innovation is not always nice to have. Unless you play-to-win!

Because of today’s business hype for innovation we encounter situations where there can be too much of a good thing going on and successful companies tend to be aware of this potential pitfall. As much as a complete lack of innovation will lead to failure in an organization, left unmanaged, too many innovative ideas can cloud the judgement on which ideas are truly great. Innovation management therefore is crucial in the success of any organisation.

Professor Everett Rogers, communications and journalism expert at the University of New Mexico, gives the classic definition of what characterizes an innovation in a book entitled ‘Diffusions of Innovations’. He argues that anything claiming to be innovative must first be relevant in its spread and impact on society. Put it another way, whom will benefit from it really? Take the example of the metric system: there has always been resistance to certain innovations like this one. As we already know not everybody around the world is using this system of measurement although for others it is the long ago accepted norm.

So what could make us choose a certain innovation? It could be that we choose the ideas that feel just about right for our needs. But that doesn’t necessarily mean that we can translate the same innovation to any group or market, or that implementing that idea will have the same positive effect everywhere. If you would have just invented the metric system how would you pitch it to a venture capitalist and would you even bother?

Just because it’s a great idea, it doesn’t mean that people will use it. The key is to pitch that idea to the right market at the right time. Context is everything if innovation is going to succeed. Once the key stakeholders have been identified it is then possible to elaborate a strategy by planning a process around the organization’s needs and culture and making sure that the right people are involved at the right stages to help the process flow in the right direction.

Play–to–win innovation strategy

The following case study of this innovation strategy at Procter & Gamble will reveal the imperative of a calculated, inclusive and flexible approach to solving a problem.

It was no secret that by the late 20th century, P&G had lost its originality. Previously a market-leading innovator across its flagship categories of detergents, dentifrices and diapers by the mid-1990s senior P&G management admitted that they had not had a breakthrough innovation since 1985, and the company’s continued market dominance in the years ahead was a question. Although P&G was still a formidable marketing machine, the organization had become slow moving and conservative. It was dominated by what competitors called the proctoids – bureaucrats in suits. In 1997, realizing these problems, there was a ‘think-in’ among a half-dozen senior executives.

The goal was to equip P&G to dominate the consumer goods industry in the 21st century as it had in the 20th. During that meeting, they developed a Play-to-Win strategy. They planned to create a more flexible organization and to increase the speed and quality of innovation. They also focused on increasing the speed of commercialization of new products. In addition they wanted to move the company’s focus to higher growth, higher margin business such as healthcare and personal care. Senior management was aware that they needed to overcome many obstacles to attain their goals. P&G’s new product commercialization process was painfully slow.

Disagreements between team members had frustrated previous attempts at significant collaboration and change. On top of that the working relationship between the brand managers and the technology development managers was often strained and painful. Despite the obstacles, senior management was determined to succeed. With the appointment of Durk Jager as CEO, a zealous pursuit of change followed. He changed the organization, the innovation processes, and the priority of innovation and almost every other facet of doing business at P&G.

The problem was that Jager tried to change too much too fast. As a result many staff at P&G became distracted by the changes and confused about the new way of doing business and had trouble performing. Growth slowed, leading to three profit warnings in three months. Several new product launches failed and the share price slumped along with morale. Within 18 months, Jager was forced out. With Jager’s departure, many felt that the drive for change would end and comfortable ‘business-as-usual’ status will return. They were wrong. P&G appointed A.G. Lafley as the new CEO, a well-respected employee of the company with 25 years of experience.

In contrast to Jager, Lafley paid a lot of attention to operational details, and used a collaborative approach to gain buy-in. He reduced the overly ambitious approach, scaling back aggressive goals from around 8% annual growth. But more importantly, he maintained the drive to change (innovation) but focused on priorities rather than inundating the organization. Lafley consolidated global business units from seven to four and fine-tuned the relationship between them and the market development organization.

He followed this by devolving decision-making power to the units. Restoring focus on leading brands he reminded everybody that the measure of success was not innovation per se, but the customers.

The lessons in innovation from Procter & Gamble

As we have seen in the P&G case study organizational structures can often be a barrier to innovation. The clear conclusion is that organizations need systems in place that provide the proper measurement, motivations, incentives and rewards to foster innovation that is aligned with the innovation strategy.

From our experience at Qmarkets, quality must come before quantity. A platform system allowing significant and meaningful stakeholder collaboration, evaluation and measurement of the best ideas could be the missing link to managing the strategy and delivering innovations that will actually benefit a large number of people.

Innovation consultants Davila, Epston and Shelton (2006) argue in their book “Making Innovation Work” that the primary unit of innovation is not the individual but the network that extends inside the company (R&D, marketing, manufacturing) and outside (including customers, suppliers, partners and others). Innovation requires developing and maintaining this network as an open and collaborative force, which is no easy task considering the complexity of relationships, motivations and objectives within these different groups of people.

The concept of innovation platforms, successfully used in various companies provides the required framework for the network. They can include networks of people inside and outside the company that have pertinent knowledge of the platform area, including customer insight, supply chain knowledge, and technical expertise. This enabling technology known by the name of idea management software, allows companies of all sizes to make innovation an integral part of their business without disrupting the overall organization.

The next important question is how to check the reliability of ideas at the different stages they go through within an innovation process, or workflow? Carl Franklin (2005) the author of Why Innovation Fails: Hard –won lessons for business mentioned the Delphi technique.

At Qmarkets we employ this technique along many others to improve the innovation process by making it easy for users of our innovation management platform to appoint the experts within the organization and within their particular field of expertise, and then involve them at key stages in the decision making process. The experts are required to give their opinion on a certain idea and encouraged to follow-up on discussions. The results of this process are then checked by managers who maintain a broad view of the strategy thus ensuring the viability of the ideas, which can be turned into innovations.

The results of applying the right innovation strategy re-inforced with the right toolkit at the right time, targeting the right audience and involving every stakeholder in the business can lead to an increased ROI, grateful customers and a good balance between the creative flow existent in the human potential of an organization and delivering market results.