Ironically, this cautionary tale comes from the recently published business book Brick by Brick, by David Robertson and Bill Breen, Wharton lecturer and Fast Company stalwart respectively.
The book’s cover puff is a bit misleading. No doubt written to appeal to the airport crowd’s limitless appetite for innovation stories, it shouts ‘How Lego rewrote the rules of innovation and conquered the global toy industry’.
It would be more accurate to describe the book’s content as ‘How Lego succumbed to trendy management theory and nearly paid the ultimate price’.
Brick by Brick is an entertaining read, though whether much of the humour is intended is open to debate. As well as his Wharton gig, Robertson has been Lego professor of innovation at a Swiss business school, and he has obviously spent an unhealthy amount of time immersed in the product.
Unlikely phrases such as ‘What was stupid was doing Bionicle and Galidor in parallel’, jostle for space with more conventional observations about return on sales and distribution management.
The cautionary tale begins in the 1990s with the arrival at Lego of a new chief executive. Determined to make Lego the world’s biggest toy brand by 2005, he embarked on a series of initiatives borrowed straight from the pages of that decade’s leading management books. Hiring diverse talent was one. Disruptive innovation was another. And co-creation was still a third. (There were others, but time is short.)
In the early 1990s, Lego looked like an insular and rather self-contented culture. So the idea of bringing in people from the outside looked attractive. But tragically, the newcomers ignored the obvious, namely, that the heart of Lego’s appeal to children was creative play, and the heart of its profitability was the brick; a product that costs peanuts to make but has massive play value for a child.
Given such a precious set of corporate assets, the boundaries of disruptive innovation should have been clear. But not to the incomers. Determined to turn Lego into a media property, they ventured into the creation of the aforementioned Galidor line of action figures (Defenders of the outer dimension), which came with its own universally derided TV series and video game.
The Galidor crew, and their hunky successor Jack Stone, lacked any backstory or mythos, and so failed to ignite children’s imaginations. More worryingly, their manufacture required a host of limited-run mouldings, a catastrophic diversion from the commercial genius of the ubiquitous yet cheap-as-chips Lego brick.
Lego’s foray into the virtual world was even more bizarre. At the urging of its new management, the company ‘invested’ millions in creating software that enabled users to assemble models on their computer using virtual bricks. It is difficult to imagine a more pointless innovation, although virtual bricks hurt a lot less when you step on them in bare feet.
Finally, there was Lego’s flirtation with co-creation, an online ‘factory’ that allowed users to upload and order real-life models of their virtual creations. In the event, only 0.2 per cent of uploaders converted into real-life purchasers, further compounding the company’s by-then perilous financial situation.
Needless to say, the incomers were swept aside by a ‘new’ old management, much in the way that Steve Jobs returned to Apple to replace the chief executive who had fired him. They abandoned the business book thinking and adopted an organic and insight-driven approach to innovation, rooted in the fundamental strengths of the business and the brand.
Brick by Brick follows the familiar story arc of the successful turnaround, but its conclusions are by no means conventional. If you only read one business book this summer, let it be Brick by Brick. If only to imbue you with a healthy scepticism about all the others.
Richard Madden is chief strategy officer at Kitcatt Nohr Digitas