How Lego became the Apple of toys
As Legoland Dubai opens its doors, EDGAR charts how the biggest toy company in the world was built.Frank Ronson November 6, 2016
Brad Pitt does it in between takes, David Beckham does it when his kids aren’t around, and Larry Page does it when he’s concocting ideas at Google. Even Britney Spears lists it as one of her hobbies.
In a quiet room, with little to no distraction, swarms of rich folk are playing with their bricks. They’re building replicas of famous stadiums, fighter jets, dinosaurs, people, villages, superheroes, and basically anything else your imagination can conjure up.
If you can think it, you can build it. And that’s the beauty of Lego: the humblest formula creates the most fascinating results. It’s one of those rare equations that seem so simple, so obvious, that they’re genius.
This system has built Lego into a true toy behemoth – rivaling Mattel as the biggest toy manufacturer in the world. However, there are a couple of key differences that keep the head scratchers busy. Firstly, Lego, to this day, is still owned by the family that created it. It’s one of the most successful family-run businesses on earth. It may not be Facebook successful, but for a firm that builds colourful bricks it’s doing rather well. Secondly, it focuses on one simple product, whereas Mattel produces Hot Wheels, Barbie, Mega Blocks, and a whole other range of goodies.
Even its name is simple. Lego is a hybrid of two words: leg godt – which means ‘play well’ in Danish. In an age of virtual reality, humanoids and self-driving cars, Lego’s simplicity continues to defy market logic.
This approach, logic and longevity contributed to Lego’s dominant presence around the world in the last decade. During 2007 and 2011, its profit grew faster than Apple’s, and by 2019, according to Bloomberg, there will be more Lego people than real people on earth.
But what makes Lego’s success even more astonishing is its resurrection from apparent demise in the face of technology and innovation. In the early 2000s, following years of failed side-products, the rise of the Internet, and a dwindling homegrown market, the company was facing near bankruptcy. In a state of panic, Lego discarded its core business model and pushed a number of weak and shortlived ideas into the market.
Things got so bad in its headquarters in Billund, a Danish village that’s housed Lego since its inception in the 1930s, that the company employed a turnaround specialist in 1998 to save it from going under.
Nothing worked. But in 2001, Lego introduced Jørgen Vig Knudstorp, who would become CEO three years later, replacing the founder’s grandson, Kjeld Kirk Kristiansen. His objective was to rediscover the simplicity and magic of Lego, and apply that to its products. After extended time in its innovation labs (a giant play-pen, essentially), Knudstrop, Kristiansen, and CFO Jesper Ovesen cracked it.
“I wouldn’t say there was one magic moment,” says Charlotte Simonsen, Senior Director, Head of Corporate Communications. “The key to the turnaround was focusing on the core... the core product, competencies and markets. We realised we had spread our activities and focus to too many things, and we needed to get back to what we are really good at – which is anything related to the Lego brick.”
This isn’t to suggest that Lego has completely neglected the digital market. In actual fact, it took full advantage of digital trends, without having to sidestep from its core offering. In the past decade, Lego has released successful video games, and a critically-acclaimed animated film The Lego Movie that grossed $468 million – all of which revolve around the little coloured bricks. This has produced a beautiful and seamless integration between the physical and digital world.
“Children don’t care about the difference between the two,” Simonsen adds. “They jump with ease from one to the other. We have a strong belief that people will never stop playing with Lego bricks.”
The digital era hasn’t defined Lego like it has many modern companies. Instead, it has merely complimented its product, and further demonstrated the brilliance of the brick. Though many physical games and objects can feel finite in their abilities, Lego doesn’t. And it doesn’t require software updates to achieve this. In fact, if you have just six 2x4 Lego bricks of the same colour, you can combine them in 915,103,765 different ways, according to the company.
Perhaps the most beloved characteristic of Lego is its ability to scale generations, something that other toys struggle to do. The idea of being able to compare and contrast Lego sculptures built by your son and your grandfather 50 years apart is truly unique to the company. It remains a timeless, nostalgic product that isn’t influenced by trends or markets.
The recent growth of the product does owe itself to some fancy business acumen, though. The company doesn’t simply build bricks, box them and sell them. There’s an incredibly intricate research culture embedded in Lego that focuses on cultural differences between children and parents in different markets, how they play, when they play, why they play, and what they play. The accuracy with which a Lego researcher can describe your play tendencies is astonishing. And this information plays neatly into the company’s ultimate, long-term goal: continue to create better play experiences, reaching more children every day.
This objective has led them into new markets with gusto in recent years, with Asia and the US both flying the flag for Lego. Moreover, the company has broken down the barriers between male and female, with more girls playing with Lego than ever before, thanks to the advent of female-focused products such as Lego Friends.
This expansion has also seen the company land feet first in the Middle East, which houses a huge fan base across all ages. In fact, its AFOL (Adult Fans of Lego) following in the Middle East is extremely strong, with multiple groups and clubs available for people to join to discuss, view, build and sell Lego models.
Residents in Dubai can see this for themselves with the enormous new Legoland Dubai theme park. In late October, the first ever Middle East edition of the Stack event arrived, a four-day celebration of all things Lego. The occasion even offered a dedicated adult fan creation zone.
The Dubai theme park is one of seven parks around the world, all of which have a unique focus on their home. Dubai will be no different, says Siegfried Boerst, general manager of Legoland Dubai.
“Dubai is the centre of entertainment and tourism in the Middle East, and is now one of the most attractive countries for tourists and investors from all over the world,” he says. “The park is built with the UAE in mind. For example, Dubai’s Miniland will become the world’s first indoor and air-conditioned Miniland in a Legoland park.”
In Miniland, 20 million Lego bricks have been used to recreate famous landmarks from the UAE, GCC and Middle East, including the Burj Khalifa, and the Sheikh Zayed Grand Mosque in Abu Dhabi.
The park represents another chapter in an already incredible story for a company that has now produced more than 560 billion individual pieces of intellectual property in the shape of tiny bricks.
Since 2009, the company has almost doubled its revenue, its fulltime employee numbers, and its R&D investment. The effect of this is felt during an annual meeting between the company’s top minds, in a secret location in Spain.
During a week-long period, a bunch of geeks take a pile of Lego bricks and play. The objective is to discover new ways of playing and a deeper understanding of the experience children seek when they interact with Lego. Never has this been more important for Lego, as research shows the interest in its core product continues to decline as children are presented with more and more innovative and exciting things to play with. “We need to stay on our toes,” says Simonsen. “We need to ensure we are developing the most fun and appealing products to the next generation of children.”
This, she says, can only be achieved by adhering to the company’s strict set of values: imagination, creativity, fun, learning, caring, and quality. Perhaps building bricks can help build a better, brighter future for us all.