CHICAGO-LEGO is all about the pieces, and the story of LEGO's rise, fall and rise again is all about how it took its own pieces apart and reassembled itself.
It's also a story of innovation management, including innovation that worked too well, according to Dave Robertson, a Professor of Practice at the Wharton School at the University of Pennsylvania, and author of the soon-to-bereleased "Brick by Brick: How Lego Reinvented its Innovation System and Conquered the Toy Industry."
To understand what happened at LEGO and what credit unions can learn from the company, Robertson told COOP's THINK '13 Conference it's necessary to understand LEGO's history. The iconic Danish company was founded in 1932 and business generally boomed until 1993 when sales flattened, and by 1998 it suffered its first loss.
LEGO's long-time CEO stepped aside in favor of a well-known consultant with a track record of turnarounds. That's when a number of things going exactly as they should ended up with results that were exactly what they shouldn't be.
"What got them into trouble is they did what we as academics and consultants told them they should do to successfully innovate," he said. "They explored the full spectrum of innovation. They invested in disruptive innovation. They built an innovation culture. They hired diverse and creative people. They walked in the customer's shoes. LEGO did all these things and almost ended up bankrupt.
"What happened was that most of this innovation was not profitable," noted Robertson.
A new, 34-year-old CEO was brought in who took a look at LEGO and installed new ways of managing the company and innovation, said Robertson. "What LEGO said to their developers was 'don't design a great toy; go out and design a great police station, a great fire truck.' In a way LEGO designers rediscovered what LEGO is all about. You can use pieces in different ways. By putting constraints around the development process they ended up with just as much innovation, but more profitable innovation."
Everything Done Right, And Yet...
Since 2007 it has been growing sales at 24% per year and profits at 40% per year. But what about that spectrum of innovation that the consultants recommended? What did LEGO do wrong?
"The problem with the seven truths of innovation isn't that they don't work, it is that they do. They couldn't control what they started. What we found at LEGO is they really reconnected with their customers and in a really in-depth way. What people told them is you're about the construction experience....People (in a company) who know what customers care about are just as important as those creative people who churn out all those new ideas. We're continually empowered by the small ideas. And lots of small ideas well integrated can be very powerful.
