In 2004, LEGO Group (LEGO) was in the midst of a crisis. On the verge of bankruptcy, the iconic company had produced a series of new products that failed to excite customers. In addition, LEGO was facing fierce competition from other toymakers, and, increasingly, their core customers – boys aged five to nine – were turning to video games and online activities at earlier ages. To survive, LEGO realized that it needed to improve the effectiveness of its product development process. Only by radically reimagining and speeding up the process could LEGO hope to create breakthrough new toy ideas and save the company.
LEGO soon realized that it had an untapped resource – its adult customers. Adult fans of LEGO were passionate about the products. For example, after LEGO released a brick-based robotics kit called Mindstorms aimed at children, adult fans hacked the software code and made their own modifications. Within LEGO, there were diverse opinions about how to react to customers changing products without permission. In the end, the company decided to embrace open innovation and collaborate with customers on new products.
For the next iteration of Mindstorm called Mindstorm NXT, LEGO incorporated fans with expertise in sensors and software into the product development process. After Mindstorm NXT launched, the company credited its success to the involvement of its fans.3 To increase fans’ involvement, LEGO also introduced an Ambassador program that provided a direct way for the company to access new ideas from its community. A new platform named LEGO Cuusoo was also launched to allow fans to upload product designs. If a design received 10,000 votes from community members, LEGO agreed to consider it for possible production. This process maximized the possibility that a new product would have mass appeal.
Accessing customers through open innovation provided a number of benefits for LEGO. The company gained access to external knowledge and expertise not available internally. As new products often fail, collaborating with customers helped the company to increase the chances that a new product would appeal to customers and, therefore, limited risk. New products created with users also expanded the LEGO play experience by exposing the company to possibilities that had not previously been conceived internally.
LEGO continues to foster open innovation by testing ideas and concept experiences through pilot projects. The company recently launched its first pilot to test a new product called LEGO FORMA “designed for adults looking for looking for creative activities” on Indiegogo, the crowdfunding platform. Through the pilot, LEGO hopes to determine whether there is an appetite and market for a new kind of product that allows customers to “create artistic interpretations of plants and animals.” In the medium-term, LEGO will run various pilots in different locations and formats to crowdsource new ideas and get feedback from its community on whether product concepts should be developed and scaled. LEGO hopes that “this more transparent approach to product development” will limit risk, “accelerate innovation by validating and iterating new ideas,” decrease the time it takes products to go to market, help the company create distinctive product launches, and access new markets.
Despite a decade of impressive growth, LEGO has faced declining sales in the last year, reporting a drop of 7% in 2017, which forced the company to cut 8% of its global workforce. Since 60% of its product line changes every year, LEGO needs to focus on creating innovative products now more than ever. As trends in toys change rapidly, LEGO must find new ways to identify “the themes that are cool and right for kids,” as the new CEO remarked recently. Open innovation at LEGO to-date has focused on harnessing the creativity and enthusiasm of adult fans. In the short and medium term, the company will need to learn how to collaborate with children and their parents to understand what they want in their play experiences. LEGO may need to explore the creation of new platforms to engage children in their product development process. The company may also wish to consider a design thinking approach that involves interviewing children and their parents as well as observing them as they play with LEGOs and other toys from competitors.
Currently, LEGO faces challenges navigating the worlds of digital and physical play, especially as children increasingly turns to smartphones and tablets. How might LEGO harness the power of its community to address these challenges? How can LEGO stay true to its identity as a toymaker of physical bricks while also expanding that experience into digital worlds? As LEGO moves into new geographic markets, particularly in Asia, how should the company engage and collaborate with new customers? Does LEGO need to reimagine any of its current open innovation processes to reach new fans and create products that appeal to children in these markets?
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2. Henry Cherbourgh, “Bringing Open Innovation to Services,” MIT Sloan Management Review (Winter 2011, Vol. 52 No. 2): 88
3. Karim R. Lakhani, Hila Lifshitz-Assaf and Michael L. Tushman, “Open innovation and organizational boundaries: task decomposition, knowledge distribution and the locus of innovation” in Handbook of Economic Organization: Integrating Economic and Organizational Theory, edited by Anna Grandori (Northampton, MA: Edward Elgar Publishing Limited 2013) 386 – 371
4. Yun Mi Antorini, Albert M. Muñiz, Jr. “The Benefits and Challenges of Collaborating with User Communities,” Research Technology Management (May-June 2013): 22
5. Yun Mi Antorini, Albert M. Muñiz, Jr. and Tormod Askildsen, “Collaborating with Customer Communities,” MIT Sloan Management Review (Spring 2012)
6. “LEGO Creative Play Lab Takes Pilot Project to Indiegogo for Open Innovation” LEGO Press Release on LEGO website, September 27, 2018, [https://www.lego.com/cs-cz/aboutus/news-room/2018/september/lego-forma], accessed November 11, 2018.
7. “LEGO Creative Play Lab Takes Pilot Project to Indiegogo for Open Innovation” LEGO Press Release on LEGO website, September 27, 2018, [https://www.lego.com/cs-cz/aboutus/news-room/2018/september/lego-forma], accessed November 11, 2018.
8. “LEGO Creative Play Lab Takes Pilot Project to Indiegogo for Open Innovation” LEGO Press Release on LEGO website, September 27, 2018, [https://www.lego.com/cs-cz/aboutus/news-room/2018/september/lego-forma], accessed November 11, 2018.
9. James F. Peltz, “New LEGO CEO takes on rebuilding the battered toy company, brick by brick,” The Los Angeles Times, June 13, 2018 [http://www.latimes.com/business/la-fi-lego-toy-troubles-20180613-htmlstory.html], accessed November 11, 2018.
10. James F. Peltz, “New LEGO CEO takes on rebuilding the battered toy company, brick by brick,” The Los Angeles Times, June 13, 2018 [http://www.latimes.com/business/la-fi-lego-toy-troubles-20180613-htmlstory.html], accessed November 11, 2018.