What Product Managers can learn from LEGO?
Lego is a Danish company that was founded in 1932 and became famous for producing plastic building blocks that can be snapped together to create various structures. Despite its early success, Lego faced financial difficulties in the late 1990s and early 2000s, which nearly bankrupted the company.
The company had expanded its product offerings and moved into video games and clothing, which were not as successful as its core building block business. Lego also faced stiff competition from other toy manufacturers and struggled to adapt to changing consumer preferences.
In 2004, Lego hired a new CEO, Jorgen Vig Knudstorp, who implemented a turnaround strategy that focused on three key areas: simplification, innovation, and customer-centricity.
1. Simplification: Back to Basics
First up, they simplified their operations. In 2004, Lego’s revenue had dropped by 29% compared to the previous year, and the company was on the verge of bankruptcy. Lego had expanded into new product lines that just weren’t working out, so they decided to get back to their roots and focus on what they did best — building blocks!
By reducing the number of product lines they produced, Lego was able to reduce costs and improve its profit margins. They also cut down on their workforce, reducing their staff by 25%, and sold off non-core businesses to focus solely on their core toy business. This back-to-basics approach helped Lego stabilize their financial situation and set the foundation for their future success.
2. Innovation: Building New Horizons
They got creative! Lego invested heavily in new product development and introduced more interactive products, such as the Lego Mindstorms robotics kit. These new products helped Lego appeal to a broader audience and helped the company differentiate itself from other toy manufacturers.
By 2008, Lego’s revenue had increased by 20%, and their profits had tripled from the previous year, thanks in part to the success of their new products. Lego’s commitment to innovation was not just about creating new products, but about creating new horizons for the company to explore.
3. Customer-Centricity: Listening and Engaging
Finally, Lego listened to its customers. Lego has always been a company that listens to its customers, but they realized they had lost touch with their core audience. So they started listening more closely to their customers and incorporated their feedback into product development.
They also leveraged the power of social media and user-generated content to connect with their fans and create a community around their brand. This approach helped Lego build a strong and loyal customer base that has continued to support the company through its ups and downs. In 2010, Lego was named the world’s most powerful brand by Brand Finance, thanks in part to their strong customer engagement.
Lessons for Product Managers?
Product managers can learn a lot from Lego’s revival story. By focusing on what you do best, staying curious and innovative, and listening to your customers, you can drive growth and success for your company. And by using data and analytics to inform your decisions, you can stay ahead of the competition and meet the evolving needs of your customers.
1. Focus on What You Do Best
- Stick to your core competencies and never forget your roots.
- Don’t be afraid to cut back on things that aren’t working out.
- Keep your focus on your strengths and build on them.
2. Always Be on the Lookout for New Ideas
- Stay curious and explore new horizons for your company.
- Look for new opportunities to innovate and differentiate your products.
- Keep an eye on the latest trends and technologies that could impact your industry.
3. Listen to Your Customers
- Your customers are the lifeblood of your business.
- Engage with them on social media and other platforms.
- Ask for their feedback and incorporate their ideas into your product development process.
- Use data and analytics to better understand their needs and preferences.
Some Metrics from Lego’s Revival Story:
- Lego’s revenue increased from $1.4 billion in 2003 to $5.2 billion in 2015.
- Lego became the world’s largest toy maker in 2014, surpassing Mattel.
- The company’s net profit margin increased from 10% in 2007 to 25% in 2015.
Are you a Lego fan? Comment :)
