Who Decided Which LEGO Ideas Survived?

Introduction

LEGO’s recovery from its early-2000s crisis depended on more than cutting costs or cancelling failed products. The deeper change was deciding who had the authority to judge innovation before it became expensive. The company had learned that creative ideas were not dangerous because they were new; they were dangerous when nobody could clearly decide whether they fit LEGO’s strategy, deserved resources, or should be stopped.

The Executive Innovation Governance Group, sometimes described as the Executive Innovation Group in accounts of the turnaround, was created to solve that problem. Instead of allowing separate divisions to pursue growth opportunities with limited coordination, the group made innovation answer to a common set of strategic and financial tests. That shift changed LEGO’s bets. Experiments became smaller, more connected to the core business, and easier to abandon when evidence turned against them. In antifragile terms, LEGO moved from absorbing large, uncontrolled shocks to learning from contained risks. [Harvard Business Review]hbr.orgHarvard Business ReviewInnovating a Turnaround at LEGOToday, as the overall toy market declines, LEGO's revenues and profits are climbing… [2designblog.uniandes.edu.co]designblog.uniandes.edu.cooducts but pricing plans, com- munity building, business processes, and channels to…Read more…

The Governance Gap Before the Turnaround

LEGO’s crisis revealed that its innovation problem was not a lack of ideas. It was a lack of governance over ideas.

Before the turnaround, different parts of the company pursued growth in multiple directions at once. Theme parks, media ventures, lifestyle products, digital projects and entirely new product categories were often justified by the belief that the LEGO brand could stretch into almost any market. Some initiatives generated excitement, but the organisation lacked a strong mechanism for comparing them against one another or against the company’s long-term strengths. [Harvard Business Review]hbr.orgHarvard Business ReviewInnovating a Turnaround at LEGOToday, as the overall toy market declines, LEGO's revenues and profits are climbing… [IMD Business School]imd.orgIMD Business SchoolInnovation at the LEGO Group (A) - IMD Business SchoolThe case tells the story of a company where innovation is tremen…

The result was that innovation became difficult to prioritise. A new venture could consume management attention, manufacturing resources and marketing investment without a clear process for determining whether it strengthened the broader LEGO system. Products such as Galidor and Clikits became symbols of this problem because they represented substantial commitments outside the traditional construction experience. Their struggles suggested that novelty alone was not a reliable guide for investment decisions. [Harvard Business Review]hbr.orgHarvard Business ReviewInnovating a Turnaround at LEGOToday, as the overall toy market declines, LEGO's revenues and profits are climbing…

LEGO’s 2004 Action Plan described the need to set a clearer direction, restore competitiveness and reduce risk by resizing activities and assets. That language reflected a recognition that innovation choices had become connected to the company’s financial survival. A failed product was no longer an isolated mistake; it could increase operational complexity across the entire business. [LEGO]lego.comAnnual Report 2005 ENGAnnual Report 2005 LEGO Group14 Feb 2006 — The future strategy. The overall objective of the Action Plan was to return the LEGO Group to…

How the Executive Innovation Group Coordinated Risk

The Executive Innovation Governance Group was designed to make innovation a managed portfolio rather than a collection of independent ambitions.

According to Harvard Business Review’s analysis of the turnaround, the group coordinated innovation activities across the company, defined the new-product portfolio, allocated resources, delegated authority and evaluated results. Those responsibilities mattered because they concentrated decision-making around a single strategic view rather than allowing innovation projects to compete without common standards. [designblog.uniandes.edu.co]designblog.uniandes.edu.cooducts but pricing plans, com- munity building, business processes, and channels to…Read more…

Several important changes followed from that structure:

• Innovation became visible at executive level. Major initiatives no longer advanced simply because a business unit supported them. Senior leadership could compare opportunities directly and decide which projects deserved investment. [designblog.uniandes.edu.co]designblog.uniandes.edu.cooducts but pricing plans, com- munity building, business processes, and channels to…Read more…
• Resources became strategic rather than political. Funding, talent and manufacturing capacity were allocated according to company priorities instead of being spread across disconnected experiments. [designblog.uniandes.edu.co]designblog.uniandes.edu.cooducts but pricing plans, com- munity building, business processes, and channels to…Read more…
• Projects had to fit a portfolio. The question shifted from “Is this idea interesting?” to “Does this improve the overall innovation portfolio?” That distinction encouraged balance between safer core products and more exploratory initiatives. [designblog.uniandes.edu.co]designblog.uniandes.edu.cooducts but pricing plans, com- munity building, business processes, and channels to…Read more…
• Performance could be reviewed systematically. Innovation efforts became subject to evaluation rather than protected by enthusiasm alone. This made it easier to identify weak projects before losses escalated. [designblog.uniandes.edu.co]designblog.uniandes.edu.cooducts but pricing plans, com- munity building, business processes, and channels to…Read more…

The significance of the group was therefore organisational as much as strategic. It created a place where risk could be compared, discussed and controlled. Instead of every experiment becoming a separate bet on LEGO’s future, innovation became part of a governed system.

Why Strategic Ownership Made Experiments Easier to Stop

One of the most important effects of the Executive Innovation Group was that it changed the politics of failure.

In many companies, projects survive because nobody wants to admit that an earlier decision was wrong. Teams become attached to initiatives, managers defend budgets, and investments continue long after warning signs appear. LEGO’s governance reforms reduced this tendency by giving strategic ownership to a cross-functional executive body rather than leaving decisions solely with project champions. [designblog.uniandes.edu.co]designblog.uniandes.edu.cooducts but pricing plans, com- munity building, business processes, and channels to…Read more…

Because the group evaluated innovation against company-wide goals, a project could be stopped without treating the decision as a personal defeat. The question became whether the initiative strengthened LEGO’s strategic position, not whether a particular manager had worked hard on it.

This mattered especially after the company’s experience with expensive diversification. The turnaround leadership increasingly asked whether a new idea reinforced LEGO’s distinctive assets: the brick system, building play, strong themes, loyal fan communities and retailer relationships. Projects that failed this test became harder to justify. [Harvard Business Review]hbr.orgHarvard Business ReviewInnovating a Turnaround at LEGOToday, as the overall toy market declines, LEGO's revenues and profits are climbing… [2strategyzer.com]strategyzer.comLEGO's Great Business Model Turnaround StoryLearn how LEGO pulled off a spectacular business turnaround, quadrupled its revenues in less…

That discipline did not eliminate experimentation. LEGO continued to innovate through licensed themes, digital experiences, community participation and new product formats. The difference was that experiments were expected to demonstrate strategic value before receiving larger commitments. Governance created a mechanism for scaling successful ideas while containing unsuccessful ones. [Harvard Business Review]hbr.orgHarvard Business ReviewInnovating a Turnaround at LEGOToday, as the overall toy market declines, LEGO's revenues and profits are climbing… [Harvard Business]d3.harvard.eduHarvard Business School AI InstituteHarnessing Open Innovation at The LEGO Group13 Nov 2018 — In the short term, Lego wants to focus on d…

Why the Change Matters for LEGO’s Antifragility

The Executive Innovation Group changed LEGO’s bets because it changed the size and visibility of failure.

Before the turnaround, innovation often produced complexity first and learning later. By the time an idea proved weak, it could already be tied to manufacturing systems, marketing plans and large financial commitments. After governance reforms, the company increasingly treated innovation as a portfolio that required strategic ownership, resource discipline and measurable outcomes. LEGO [2designblog.uniandes.edu.co]designblog.uniandes.edu.cooducts but pricing plans, com- munity building, business processes, and channels to…Read more…

That shift made LEGO more antifragile. The company did not stop taking risks. Instead, it built a structure that allowed risks to generate information before they generated existential damage. The Executive Innovation Group served as the mechanism that connected creativity to accountability, ensuring that new ideas strengthened the business before they became large enough to threaten it. [Harvard Business Review]hbr.orgHarvard Business ReviewInnovating a Turnaround at LEGOToday, as the overall toy market declines, LEGO's revenues and profits are climbing… [2designblog.uniandes.edu.co]designblog.uniandes.edu.cooducts but pricing plans, com- munity building, business processes, and channels to…Read more…

Amazon book picks

Further Reading

Books and field guides related to Who Decided Which LEGO Ideas Survived?. Use these as the next step if you want deeper reading beyond the article.

Book

Brick by brick

By Unknown author

Directly addresses innovation governance during LEGO's turnaround.

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Book

The Lean Startup

By Eric Ries

Rating: 3.0/5 from 33 Google Books ratings

Demonstrates how governance can contain experimental risk.

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Book

Good Strategy, Bad Strategy

By Richard P. Rumelt

First published 2011. Subjects: Planning, Strategic planning, Strategy, management, Hd30.28 .r854 2011.

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Book

Antifragile

By Unknown author

Provides the theoretical basis for controlled experimentation.

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Browse more on Amazon: Brick by brick The Lean Startup Good Strategy, Bad Strategy

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Endnotes

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    itself, launching new products, committing to continual innovation.Read more...

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Additional References

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   3 LEGO: Redefining the boundariesFrom a financial perspective, the turnaround plan was successful. Following a 40 percent decline in sale...

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   A True Toy Story: LEGO's Incredible Turnaround TaleThe story of how LEGO, the family-owned toy company went from teetering on the brink o...

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   2 IE Business School THE TURNAROUND OF LEGO… DE1-213-I. Despite these efforts, sales remained stagnant and...Read more...

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   Writing the Case of a Company Coming Back From the BrinkProfessor Jan Rivkin discusses his passion for case writing and how the LEGO case...

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