Great Scott! What’s next for open innovation at LEGO?

Student comments on Great Scott! What’s next for open innovation at LEGO?

1. November 13, 2018 HeartyHarvard says:

   This is a very interesting article and raises some important questions about future sustainability of the toy industry, especially with the decrease in brick-and-mortar stores like Toys R Us. I think that LEGO will need to adapt to the changing environment and double down on their e-commerce platform. This will require additional advertising on their part since they will no longer have the physical presence acting as a promotion channel. Their current crowdsourcing efforts are a great start to promoting their product, as it gets the customer involved and excited about the product. While I do think the bankruptcy of Toys R Us and other toy stores will impact sales, LEGO can bounce back if they can successfully master e-commerce.
2. November 14, 2018 Brett Cantrell says:

   Natasha Romanoff – LEGO’s open source innovation is an appropriate and well-timed movement to try and get the consumer involved with their product development to ensure that their toys stay relevant. I especially like the point that you made around bringing in adult hobbyists with items such as the LEGO FORMA Moving Koi Fish Skins, because this may not be a product that would traditionally be bought by young children. In essence, I think this does a great job of expanding their reach to a wider variety of clients.

   However, one potential barrier to its success could be reaching the youngest children who are a key and large part of their market segment. I think LEGO should work to engage parents to ask their children about what toys they want LEGO to produce, and get the parents to either get their children to respond or respond themselves on behalf of their children to communicate this back to LEGO. Otherwise, I think it would be challenging to get children to respond to this on their own. This could be a key step in getting the small-scale ideas to reach their widest customer base (children), rather than a lot of these open source innovation products remaining in somewhat niche markets.
3. November 14, 2018 Jane Harvard says:

   LEGO’s application of open innovation is a fantastic example of using external brainpower to improve product development. I like the parallel that you drew to IDEO – this type of idea generation encouragement allows the company to truly identify what the customer wants, and ultimately both LEGO and the customer win.

   I agree that the target customer group going forward should be older, adult hobbyist who will appreciate the innovation. A full community of adult LEGO enthusiasts exists, and encouraging this community to be a part of the innovation process will help LEGO to build personal relationships with these people and have dialog with its fans. As loyalty is fostered and the community expands, the creative opportunities in innovation will be endless.
4. November 14, 2018 Pocahontas says:

   Nicely put thoughts! I was actually wondering who LEGO’s real target group is. A lot of our peers (20+ year old people) are buying LEGO for themselves or for their friends as Christmas gifts for example, although the box says that the toy is for kids between 4-9 year old. I have just bought a Millennium Falcon to my partner, who is 28 years old and he can’t wait to build it. I think LEGO should really extend its target group to older audience (maybe with more sophisticated toys) and then focus more on crowdsourcing. The future is in customer engagement and the best way for that is involving customers in product development. LEGO is on a good track for that, but could push it more.
5. November 14, 2018 ModiFace says:

   The future of LEGO is most certainly in e-commerce, but the tactile element of LEGO play is absolutely critical for continued creativity and success. Perhaps, in light of the shrinking physical footprint, LEGO should consider more of a showroom model through pop-up locations or smaller scale doors combined with a robust direct-to-consumer platform from which to order new toys. In today’s world, you often see consumer products being sold directly from company websites having a wider assortment of SKUs and better access to customization. LEGO would benefit enormously from letting customers design online (and share their ideas directly with LEGO through digital sketchbooks), but the creative experience needs to happen in some sort of ‘studio’ for kids or adults. I think the nostalgia of LEGO had stuck with the millennial / older Generation Z crowd, reinforced by adult-oriented pop culture references like The Lego Movie, etc.
6. November 14, 2018 John Doe says:

   I agreed with ModiFace above that the future existence of LEGO will depend on its ability to transform their downstream distribution network model from 3rd party brick-and-mortar retailers (e.g. Toys ‘R Us) to Direct-to-consumer (DTC) approach via e-commerce. The open innovation initiatives LEGO currently pursue is actually very aligned with the DTC approach: LEGO will be in better position to predict the future demand of its new product sets (through the votes/responses of the public) as it will reduce FG inventory holding cost from poor stock selection and write-off from obsolete products. Furthermore, it will require less marketing expense to promote the products as the buzz from the open competition already generates word-of-mouth effect within the community.
7. November 15, 2018 HBSstudent0918 says:

   Really interesting article! Crowdsourcing is certainly a great way for LEGO to garner ideas on product development, although I wonder if it goes far enough. Consumers may be able to contribute ideas related to things they’ve seen already and would like to experiment with, but I wonder how effective this channel is for spotting future trends. I’m worried that LEGO is relying too heavily on customers to inform future innovation, as oppose to investing resources into “defining the future” of toys and thinking up ideas independently. I could be convinced otherwise on this point, and I think it’s important to have a mix of crowdsourced ideas and internal R&D driving product development in order to ensure relevance and sustainability.
8. November 15, 2018 JK Rowling says:

   Natasha Romanoff – Lego’s use of crowdsourcing in product development is a fantastic example of how to react to consumer trends and make your customers feel personally invested in your brand. Despite, the attractiveness of this proposition, it seems to me that the majority of the products that come out of this experiment will be shorter run, limited edition toys particularly in the brick and mortar channel which likely imposes SKU proliferation controls on Lego.

   That said, the shift to online sales could actually help the company in this way given they will have greater control of their supply chain and greater ability to fully own their product set (though they will also have to hold the inventory themselves). Overall, crowdsourcing seems like an exciting opportunity to complement R&D at Lego.
9. November 15, 2018 Lorca says:

   Very interesting article.

   In regards to the question about the parallels and learnings Lego can establish looking at Toy’s ‘R’ us, I believe there are few reasons for concern. Although Toy’s ‘R’ us was a toy manufacturer, their main business was retail sales. Lego, on the other hand, mainly drives revenue from his product sales. While Lego will undoubtedly have to adapt his distribution model and route-to-market strategy, the internet does not threaten their business, bur rather, strengthens it. It allows Lego to reach a wider range of customers settled in a wider range of geographies.
10. November 15, 2018 Rio says:

    This is a really interesting example of open innovation, especially given the type of product creation and how engaged it can make customers. Following from one of the previous comments, it is interesting to understand what target customers they will be engaging, especially as some of the children in that market are less able to submit proposals. However, one point for targeted open innovation could be recruiting freelance designers to lower the barriers of proposals from the market, and still keep customers who may be less likely to submit proposals. This strategy is great to foster loyalty in these customers.
11. November 15, 2018 Phil Knight says:

    Overall, I think that crowd-sourcing ideas for LEGO products is a particularly effective way to stay relevant at a time where the toy industry / games in general are becoming more digital / online. I think that this is also an effective way to maintain a relationship with the older consumer, who might be more inclined to build as a family activity for a design that is more relevant to them.
12. November 15, 2018 Nick Van Exel says:

    This is very interesting – especially given its ability to keep users engaged while lowering the overall cost for the Company’s R&D efforts in a difficult toy environment (e.g. you note troubles at Toys R Us). I’d hypothesize there would be value in leveraging this model in two areas: (i) introduce educational aspect and (ii) electronic gaming element. Parents are increasingly focused on finding games for their children that can also deliver valuable education – LEGO can expand its open innovator base as well as its customer base with this approach. Secondly, with the increasing adoption and spend towards Ipads and other electronic devices, LEGO should expand into electronic simulations to increase their addressable market as well as improve the financial profile of a game/toy. Keeping the open innovation in an electronic environment will also keep the open innovation in an online setting and excite “gamers” and coders into the mix.
13. November 15, 2018 Rearden says:

    Lego’s were a core part of my life growing up, so I loved seeing this post. I would be interested in whether LEGO is considering transitioning completely into an open innovation model via the e-commerce platform. The uniquely modular nature of the set means that any set design could in theory be uploaded, and automatically priced and instructions generated. In addition, I would be interested in seeing these sets combined with electronics- in theory this same idea could result in custom consumer electronic lego toy sets, with the correct modularity.
14. November 15, 2018 Elon Musk says:

    Really interesting article! With the rise of e-commerce, I don’t think it’s a huge deal that LEGO is experiencing a loss in brick-and-mortar sales. I believe that e-commerce almost more easily facilitates crowdsourced ideas, because it acts as a repository to test and produce the best ideas rather than rolling out everything into stores. Crowdsourced ideas are also one way to validate the commercial viability of the products before they are even manufactured, which would help to bring overall inventory costs down and forecast demand.
15. November 15, 2018 Hermione says:

    I had no idea Lego was using open innovation! Now it all makes sense! I still purchase Legos every year for my younger brother (he’s not that young, but he loves Legos) and each time I go into the store, I see new playsets that appeal to all ages. I assume parents are also voting!

    While I do think that Lego’s original use of open innovation was truly a way to estimate demand, as you mentioned in the article, I do think that crowdsourcing could lead to ideas that might not be aligned with Lego’s core product. Given that Lego was founded in 1932 and it is still successful today, clearly the iconic bricks have some appeal. [1] I would caution Lego against moving too quickly into the digital space and forgetting their roots.

    [1] “What next for LEGO?” Robertson Innovation, robertsoninnovation.com/what-next-for-lego/.
16. November 15, 2018 cah says:

    The toy industry seems particularly well-suited to open innovation, since kids demand an unending stream of new stimulants and parents don’t want to ramp up on dozens of different brands as their children mature. Much easier to rely on the same brand to continually undergo radical but age-appropriate innovation. I wonder how else LEGO could incorporate this approach – could they look outside their existing set of materials (plastics, metals) for example and build soft toys using this model? Could they use the “crowd” to generate toys for difficult-to-crack segments, like “girls interested in science”, etc? Seems like the applications are endless and this could be a sustainable source of new ideas going into the future.
17. November 15, 2018 Triple E says:

    This is a great article. Toys ‘R’ Us bankruptcy doesn’t worry me. I believe LEGO can actually take advantage from the focus on e-commerce platforms, since the market is clearly moving towards that direction. It’s also a way for them to facilitate a larger expansion in the market. I also think LEGO Forma is great way to connect with their customer who grew up playing LEGO. “LEGO Forma says the aim of the product is to help users fight off stress and boost creativity. The kits “are designed to help you reconnect with your imagination and disconnect from the stress of life (and) discover the simple satisfaction of building with your hands,” LEGO Forma says on the site.” (https://www.usatoday.com/story/tech/talkingtech/2018/09/28/indiegogo-lego-forma-adults-build-koi-fish/1456364002/)

    (https://www.usatoday.com/story/tech/talkingtech/2018/09/28/indiegogo-lego-forma-adults-build-koi-fish/1456364002/)
18. November 15, 2018 Not Rahm Emanuel says:

    I think HBSStudent0918makes a really good point that this style of open innovation may not go far enough, though I think two small tweaks in their model could drive even greater innovation. First, rather than simply letting individuals pitch and vote on ideas, they could create an opportunity for the community to suggest incremental improvements to the top ideas, iterating to create an even more unique and interesting product. Second, users who have had their idea selected should be marked as a “power user” of some kind, which would give them additional resources and a platform to showcase their own idea and comment on others. These users would then be able to generate fresh ideas and move the market forward in ways that simple crowd sourcing cannot, as it plays on what is currently popular, but not what may become popular if consumers are educated properly.
19. November 15, 2018 Thomas T. Tommerson III says:

    Thanks for an entertaining read!

    I wonder how the shift in distribution channels away from brick and mortar stores might be a benefit since Lego is leaning on DTC for product design. While it’s true that Toys’R’Us is likely a large contributor to Lego’s sales, a digital storefront could be well positioned to track purchasing data in real time and best position their products alongside consumer preferences in tandem with the crowdsourced design / themes. I’d be curious to see what % of contributors to their crowdsourcing purchase Lego online, and if their forums or communities for fans are hosted on the same site as their online purchasing.
20. November 15, 2018 I'm not Mo says:

    The idea sourcing strategy is a super smart way for LEGO to continue growing. Many people have learned design thinking. This crowdsourcing makes the ideation process much easier and more effective. Next challenge would be how LEGO brand position. If the company allow thousands of idea from the crowd, it would be challenging to create one message and strongly communicate to end customers.
21. November 15, 2018 Jeffrey J Jefferson says:

    I agree crowd-sourcing ideas from avid fans for new products is a great way to keep LEGO’s most passionate fans engaged, while accelerating the new product development process. Additionally, open innovation aligns directly with the underlying idea of LEGOs (at least for me personally): fostering an open, creative, exploratory mindset by constructing plastic blocks in seemingly endless combinations.

    I do worry a bit that this concept is opening LEGO up for further competition in the toy space. By inspiring fans to become creators, you are fostering the development of the next “big thing,” however it is more likely than not that an inspired fan would try to develop this concept for personal gain, versus sharing with LEGO for free.
22. November 15, 2018 Michael Scott says:

    This is amazing! LEGO is just so cool. I think that e-commerce will only help LEGO, if they are able to maintain the majority of sales on their own platforms. I also think if they could drive traffic to their direct site, they could continue pushing this open innovation strategy. If anything else, I think it is an amazing marketing tactic to make customers feel like a part of the brand. Having a company that large, listen to customers’ ideas, is a great way to maintain interest in a company!
23. November 15, 2018 Camille says:

    This article is really interesting as I wonder if other creative jobs in the entertainment space will be outsourced more using open innovation. When thinking of a new movie, TV show, theme park, etc., using open innovation may be just as effective, if not more effective, in sparking ideas that can be converted into content/products as they are coming form the core customer. However, this open sourcing may not reach “fringe” customers who may be less likely to propose ideas online for a product they do interact with often. For this reason, I think open innovation in this context will lead to products enjoyed by the core consumer, but may not be a viable option when looking to expand into a new customer segment.

    In response to the brick and mortar vs. online debate, I don’t think that this will have a huge effect on Lego, although looking for a lighter material to build the legos with might be advisable. If Lego is able to continue licensing core IP that resonates with consumers (i.e., Star Wars, Harry Potter, Batman), I think customers will continue to seek out their products online. (See themes tab of Lego website: https://shop.lego.com/en-US/New-Sets)
24. November 15, 2018 Henry Ford says:

    A very interesting take on crowdsourcing – thank you. The crowdsourcing results that LEGO have experienced to date are truly remarkable! To pick up on a point raised by HBSStudent0918, I think a balance does need to be struck between relying too heavily on consumer feedback versus novel out-of-the-box innovations. Ultimately though, there needs to be a target market for the product, and market research is often done ahead of any product launch, anyway. With that in mind, who better to inform the future viability of the product and initial market receptivity than the consumers themselves? However, I fully agree they may know what they want today, but not what they want in the future, per se.

    On that note, I’d like to highlight a major concern with consumer-based crowdsourcing, given how we’ve seen mixed results with similar campaigns in the past by the likes of Mondelez, Lays, and Mountain Dew. There appears to be a clear distinction between something consumers find “novel and shiny” and something they’d actually truly buy. For example, the jury is still out on if the Cherry Cola Oreo contest winner will be a flavor that’s here to stay for the long term, or is just a fad[1]. Regardless, I am a big believer in the potential that crowdsourcing offers, because of how it can build brand equity, generate buzz, and allow consumers to feel empowered and engage with the brand in new ways.

    Regarding Natasha Romanoff’s concerns around channel dynamics, I fully agree that the toy space is a challenged arena in today’s paradigm. Increasingly, consumers are gravitating towards customizable products and experiences. For this reason, I think there is opportunity to reduce reliance on brick-and-mortar by investing in virtual marketplaces that allow for digital “out-of-store” interactions with toys prior to actually purchasing. Since the purchasing of toys is so tactile, this could help drive increased traffic online and improve accessibility by lowering the barrier to trial. Taking this one step further, LEGO could even leverage the crowdsourcing model and online voting to see which out-of-the-box concept would be of most interest to consumers. This way, they can avoid embarking on the path of prototyping and testing on ideas that consumers don’t necessarily find interesting in the first place.

    [1] Koman, Tess. “EXCLUSIVE: Oreo’s Newest Flavor Won Somebody $500,000.” Delish, Delish, 8 Aug. 2018, http://www.delish.com/food-news/a22662768/my-oreo-creation-winner-exlcusive/.
25. November 15, 2018 Publius says:

    As a huge fan of LEGO since childhood, I really enjoyed this post. I think LEGO’s idea is smart for several reasons. First, LEGO is able to effectively outsource its product development and its market research functions by letting consumers “control” (in a limited sense) both idea generation and idea selection (see also A. King and K. Lakhani’s article “Using Open Innovation to Identify the Best Ideas,” MIT Sloan Management Review, fall 2013, vol. 55 no. 1). Also, by giving consumers an interactive platform on which to develop / display designs and to vote, they have created an online user experience.

    Regarding the loss of brick and mortar sales, I tend to agree with Camille. As long as LEGO continues to make compelling products, I think they can generate sufficient sales through online channels, as the world continues to move towards digital. As demonstrated in the above post, part of their strategy for creating compelling content is open innovation.
26. November 15, 2018 Nancy Dong says:

    LEGO’s approach to OI is an incredibly clever way to remain relevant in parent and child purchasing behavior — however, I wonder if this is an opportunity to expand beyond the traditional “building blocks” of physical playsets to venture into digitally-delivered products (e.g., gaming). As the LEGO target market of youth today continue to evolve in next generations to become more savvy iPad and mobile phone users, it is critical to build on top of the platforms that their target consumers are using — even if that means cannibalizing the core form of their traditional playsets as we know it today.
27. November 15, 2018 hbs_tom_rc says:

    This is a really interesting view into the way an iconic company is trying to innovate to remain relevant. I think your question around Toys ‘R’ Us and the decline of brick and mortar sales is a good one and I personally think that Lego can thrive in an e-commerce environment as they already have a strong brand that could drive traffic to their sites and their package sizes lend themselves to manageable shipping. In fact, I would love to see Lego shift their physical footprint away from point-of-sale to point-of-build. Is there a future for Lego in which I contribute a Lego building my local online Lego City, vote on the various buildings in the city and then go to a Lego location near me to build the city with others one day? I think Lego’s shift into open innovation could promise not only new, customized product designs but more interesting ways in which young builders interact with each other and with the products.
28. November 15, 2018 Me says:

    This is a very interesting article, thank you for this Natasha Romanoff! I think Lego is a perfect use case for Open Innovation, as their entire goal is to keep their products interesting, innovative, and ahead of the curve as far as the toy industry goes. They have an uphill battle to stay relevant, so it’s important for their competitiveness as a firm to have a very effective product innovation process. However, how do they ensure that they stay in touch with what their customers truly want through this Open Innovation platform? It’s a fascinating way to source new projects, but how do they know they’re not developing something that customers don’t actually want or are willing to pay for? Fans always think they want something but might not actually want it when the time comes to purchase – a reason why surveys asking about willingness to purchase don’t really work.
29. November 15, 2018 Cantab says:

    Fortunately Toy R’Us will still be in business (for the time being at least)! LEGO has often dazzled us with its innovative creations and themes but a move into open innovation is truly key to remain dynamic in the toy industry. I think what is also essential is how to expand their open innovation ideas to other platforms like technology or media. The LEGO brand has evolved into one that moves across different mediums and its OI campaign should allow consumers to reflect that. As the company moves forward, I think the sources in which they collect inputs will be critical to their future strategy. Should LEGO look into surveying customers at the movie theater about toy designs? These questions will expand the “talent pool” and draw more consumers into the innovation process.
30. November 15, 2018 Jane Doe says:

    Great article, thanks for posting an interesting perspective on Open Innovation! I believe LEGO has taken the right approach in response to the decline of the toy industry since the rise of technology has hit the younger generations. By allowing children and adults to vote on new playsets, LEGO is staying relevant in the age of technology and is getting more customers involved in the design phase.
    I wouldn’t be too worried about Toys ‘R’ Us’ bankruptcy, as the transition in buying habits has shifted towards e-commerce (like Amazon), on which LEGO is already a prominent figure.
31. November 15, 2018 Hypatia says:

    Legos are a product which doesn’t require or even encourage previous use before buying. Lego would be smart to move almost all of their product on-line to cut costs. I can envision a time in the future where a user can submit their own innovative idea and it can be produced solely for the client and anyone else who wishes to build a lego set based on that idea. Lastly, Lego could also push open innovation by not only creating new designs, but also creating new types of LEGO pieces, thus reinvigorating and envisioning the brand all together.
32. November 15, 2018 Tom Thompson says:

    Great article. You likely have already considered this, but I think addictive manufacturing may have a great financial impact for LEGO given the nature of its products (plastic, easier to build, blueprint/design is highly scalable). Re: open innovation, I think Brett’s point is spot-on: the approach works if the idea contributors have a good sense of what the end customers want — i.e. do parents know what their children will like? The other thing Lego should consider, in my opinion, is how to efficiently pick winning ideas out of a large pool of ideas. It could be very costly for LEGO to manually review all submissions by contributors and evaluate the ideas individually. One way they could accomplish this is to invest in data science capabilities to capture key words from each individual idea, and rank ideas based on popularity (for example, 10% of users submitted ideas containing word Batman). This allows LEGO to prioritize building toys based on potential audience size, and help them obtain a higher level of ROI for their R&D efforts. Lastly, I actually think online is a great channel to combine with the Open Innovation project. Nike is allowing customers to customize their shoes when purchasing online — something they could not have achieved in-store with fixed inventories. LEGO could use the online channel to more effectively source ideas throughout the customer purchase journey and deliver more customized products for end consumers.
33. November 15, 2018 Mr. Crimson says:

    A well-written piece very much enjoyed reading it. Open innovation or crowd-sourcing, in my opinion, can be helpful in most of the time, but also dangerous I would argue. As it may take the company in a different direction that may end-up very costly. Also, one question I have, is how can a company attract people to participate and share their ideas? This is very important especially for the toy/game industry that is losing demand recently.
34. November 15, 2018 Scipio says:

    I like the idea to use crowd sourcing and open innovation to provide new products to customers but I am not sure how useful it is with legos. As someone who has logged in thousands of hours playing with legos as a kid, most of the legos were simply based off of new movies that came out or classic toy concepts such as castles and knights or dinosaurs and explorers. I am not sure that children playing with legos need that much innovation to keep legos relevant, especially since there is a constant churn of customers — noting that kids will abandon legos once they go into middle or high school, so there is not a huge concern about customers getting bored of the product. I am not sure crowd sourcing ideas from 10 year old, who I would assume are legos target demographic is that possible anyway. I think brand positioning is more important than actual product innovation here.
35. November 15, 2018 Ashima_Singh says:

    It was great reading this article. I believe for Lego to stay ‘alive and relevant’ in today’s virtual world it is extremely important to shift to open innovation. If Lego let’s it’s customers design products in addition to it’s current offerings, it will skyrocket the growth. Additionally, identifying right customer group and pushing targeted crowdsourcing will also give them more precise vision.
36. November 15, 2018 Chrissy Pringle says:

    Love that you chose this essay topic! Open innovation in the space of more creative products, particularly, has incredible applications. The world of LEGO is built upon imagination, and many of the product users come up with fantastic ideas for what the product (and brand) can do with no limitations. Tapping into the power of this network, and leveraging their creative opinions and experience with the product is a win-win: the company saves money on R&D and the customers get a product they want.
37. November 15, 2018 Eve says:

    I do believe that crowdsourcing has been and will continue to be beneficial to Lego’s past, present and future strategy. Lego has struggled to stay relevant in the past, and thus has had limited success in its own creativity – therefore they have little to lose leveraging upon the people. However, I believe the problem with Lego’s crowdsourcing is that it will source ideas from those that are already interested in Lego rather than from a new customer base, and thus they will not discover how to reach into new target audiences on a larger scale.

    I am open to the fact that, as mentioned in the article, the Lego Forma pilot can grow the customer base slightly to include creative adult hobbyists – if it markets itself appropriately. However, this is likely a fairly limited group, which makes me question whether it is enough for Lego to continue to stay relevant? Further, even if such group is sufficiently large, they have the benefit that the adult hobbyist today is from a generation which has a high awareness of Lego from childhood and is thus more prone to buying Lego. In the future, with such limited awareness among the younger generations, will Lego be successful in targeting these adult hobbyists they are trying to reach or will they look to other brands that they already recognize?
38. November 15, 2018 dook says:

    Thanks for sharing this interesting development at LEGO. As a child, I was always astounded by the creative variety of options that the LEGO playsets offer, and I look forward to how crowdsourcing will continue to expand upon this. But what I thought was very critical and timely was how LEGO can leverage the collective ideas of its customer base to redefine their core product – there will be limitations to be creative in any given category (in this case LEGO playsets) and thus as LEGO strives to survive in a traditionally static industry challenged by new competition in the digital space, open innovation may bring forth new ideas that the company may not have existing competency in. I’m curious about how IP laws play a factor in this process, and whether LEGO can develop a more cost-efficient licensing platform as it continues to implement ideas from public sources.