LEGO: Leveraging the Building Blocks of Open Innovation

How LEGO's legion of global fans helped the company drive value from open innovation.

Image Source: Jay’s Brick Blog [1]

Some are born Master Builders, some achieve it, and some have it thrust upon them [1].”

– Jay, Lego Super-Fan

 

A Nostalgic Childhood. To our generation, LEGO is often linked to far-away childhood memories. However, as we all know, the times have changed. Today, children are growing up in a sophisticated digital landscape brimming with toys that easily outshine LEGO’s traditional and iconic building blocks. In alignment with these technological advances, the toy industry has been rapidly evolving toward “fad toys,” and consequently, very short product life cycles [2]. In a race to cater to these new consumer demands, LEGO’s product development process has become a high-stakes game of staying relevant.

So, how has LEGO approached these increasing market pressures? Enter: Open innovation.

A Legion of Super Fans. Within the toy market, there are thousands of competitors but only a handful have truly led the market (think: Mattel, Fisher-Price, Hasbro etc.) [2]. Luckily, LEGO is an undisputed member of this select group and, as a result, is backed by legions of loyal, LEGO-obsessed fans. As an example, consider the super-fan run “Beyond the Brick” YouTube channel which features innovative LEGO creations from around the world. This channel, in existence since 2011, has over 400,000 active subscribers and over 150 million video views [3]. “Beyond the Brick” is one of many such channels that signal the strength of LEGO’s brand equity.

Crowd-Fueled Transformation. In the last decade, open innovation has been a critical tool in helping LEGO create popular products while also building a meaningful connection to their fanbase. Through their platform, LEGO Ideas, the company has activated the creative mindshare of super-fans around the world. As a direct result, LEGO’s product development process has been accelerated: what used to take 2-3-years, can now be accomplished in just 12 months [4]. In addition to process improvements, LEGO’s use of open innovation has created a sticky consumer-driven value-stream.

What Now? In the short-term, LEGO continues to invest in their LEGO Ideas platform geared toward adults and teens (13+). The platform enables users to design new models, share ideas and most importantly, vote for their favorite creations. Once an idea reaches 10,000 votes it is funneled to the product development team [5]. In celebrating its 10-year anniversary, LEGO reported that the platform has over 1 million members who have contributed 26,000 ideas, resulting in 23 official LEGO sets created [5]. Further, in February of 2018, LEGO introduced a mobile app – LEGO Life – which creates a small-scale (and highly controlled) social network for younger LEGO-enthusiasts to share their ideas [6]. Since launch, the app has attracted nearly 6 million children from 26 countries [7]. Continuous investments in such products demonstrate LEGO’s commitment to leveraging open innovation as a platform to remain competitive in the near-term.

A Digital Future. While LEGO’s detailed medium-term approach to open innovation has not been clearly laid out, the company has unquestionably signaled their commitment to digital. Facing weaker sales and lower profits for the first half of 2018, LEGO recently named a new CEO, Niels Christiansen, who is known for his digital transformation of Danish company Danfoss [8]. LEGO is looking to Christiansen as a digital beacon, and a portion of his strategy is reported to be the online engagement of consumers [6]. It is likely that this online engagement will continue to leverage and build upon existing open innovation platforms.

The Strength to Stick It Out. As LEGO continues their year-long turnaround and restructuring [6], I would encourage the team to continue to invest in their open innovation platforms – LEGO Ideas and LEGO Life. While the short-term returns of such investments may pale in comparison to other cost-cutting maneuvers, LEGO’s longevity could be dependent on tapping into a highly-engaged and inspired consumer-base.

In the longer-term, as LEGO continues to rollout new products like LEGO Boost – “a hardware / software product that enables consumers (7+) to use a simple, app-based coding language to program the personality and behaviors of their models [7]” – I would further encourage the team to consider investing in a controlled API and curated ecosystem of third-party developers. Given LEGO’s iconic brand, management could likely attract external developers who are dedicated to creating the next generation of child development and educational products.  While tactically, this would require a significant dedication of resources to build and maintain, this developer ecosystem could become a critical competitive advantage in the future, further differentiating LEGO from its peers.

Blocks for Thought.  In the face of never-ending privacy violations, do the competitive benefits of open innovation outweigh the potential risks of tarnishing LEGO’s brand-reputation? As LEGO continues to leverage open innovation, who should their target segment be? Adult super-fans, children, both?

 

(Word Count: 780)

 

[1] Jay, “Review: The LEGO Movie Minifigures Part 1,” Jay’s Brick Blog (blog), January 16, 2014, http://jaysbrickblog.com/2014/01/16/review-the-lego-movie-minifigures-part-1/, accessed November 2018.

[2] Jan W. Rivkin, Stefan H. Thomke and Daniela Beyersdorfer, “LEGO,” HBS No. 9-613-004 (Boston: Harvard Business School Publishing, 2012), p. 2.

[3] Joshua Hanlon, “Beyond the Brick,” YouTube, published November 2011, https://www.youtube.com/user/BeyondTheBrickTV, accessed November 2018.

[4] Jesus Diaz, “Everything You Always Wanted to Know About Lego,” Gizmodo (blog), June 26, 2008, https://gizmodo.com/5019797/everything-you-always-wanted-to-know-about-lego, accessed November 2018.

[5] “Celebrating 10 Years of Crowdsourcing and Co-Creation with LEGO Fans,” press release, November 08, 2018, on LEGO website, https://www.lego.com/en-us/aboutus/news-room/2018/november/ideas-10th-anniversary, accessed November 2018.

[6] Saabira Chaudhuri, “Lego Turns to Digitally-Savvy Dane as Its New CEO.” Wall Street Journal, August 10 2017, https://www.wsj.com/articles/lego-replaces-ceo-after-eight-months-to-further-digital-ambitions-1502351909?mod=article_inline, accessed November 2018.

[7] “Fast Company Announces Most Innovative Companies for 2018,” press release, February 20 2018, on LEGO website, https://www.lego.com/en-us/aboutus/news-room/2018/february/lego-group-and-fast-company, accessed November 2018.

[8] Thumbnail Image Source, “LegoBlocks.jpg,” https://commons.wikimedia.org/wiki/File:Lego_blocks.jpg, accessed November 2018.

 

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18 thoughts on “LEGO: Leveraging the Building Blocks of Open Innovation

  1. As a former lover of LEGOs, and now as a parent of a young child, I admit I am concerned by the shift to digital. What I always loved about LEGO was that they were real. Today, my child is surrounded by screens and digital influence. I would see value in the company actually sticking to its core, physical product. It is great that the R&D cycle is shortening thanks to open innovation, but I think it needs to stay focused on the children seeking a way to actually physically interact with their environment.

  2. I like the idea of LEGO Ideas from both the recreational kid user, master builder, and company point of view.

    For the recreational kid user, it provides inspiration and a cool window into what other people can build/imagine with their LEGO sets. To Sam’s point above, I agree that LEGO’s strength is in its offline, tactile, freeform play. If, however, we view LEGO Ideas and other LEGO-owned digital platform time spent as a portion of existing screentime (as opposed to additive), one might prefer their kid to be on a safe, closed LEGO site than on the major destination – YouTube.

    For the master builder, it provides a sandbox to create and share your masterpieces and see what other artists are building. It also provides hope that maybe your idea will be implemented!

    And for LEGO, it provides new ideas, shortens the product development cycle, and builds brand affinity and share of heart among your most dedicated users.

  3. In the case of LEGO, I am not sure the benefits of LEGO Ideas or LEGO Life outweigh the risks. There are obviously huge privacy implications. Unfortunately, there are people would want to target the young users of LEGO Life and any breeches of user information could spell disaster for LEGO. Additionally, like the comments have previously stated, I think LEGO’s strength are in its physical product. I don’t see LEGO Ideas or LEGO Life driving meaningful incremental sales that support the LEGO business overall. They may even undercut LEGO by turning fans towards other popular digital building platforms like Minecraft.

    My other concern is how fans respond to rejected ideas of the LEGO Ideas platform. I would be curious as to how members feel after working on an idea on the LEGO Ideas platform if that idea doesn’t get selected for production. Would that cause these teens and adults to be disappointed and turn away from the brand? Since only 23 of 26,000 submissions have been accepted there may be a lot of frustrated enthusiasts.

  4. Leveraging the LEGO Ideas platform to inspire ideas and design new models is indeed a very smart move. LEGO is outsourcing part of the R&D process to its enthusiastic fans, and the fans would feel engaged and more attached to the brand after participating on the platform. However, I am not in favor of the idea of a digital future for LEGO. The physical product is what made LEGO so attractive to its fans, both adults and children. Especially for children, playing with the physical toys is an important way to develop their brains and capabilities. LEGO can combine the digital and physical parts to tap into the digital trend while remaining true to itself, e.g. encourage fans to customize their own models and then sell them the corresponding physical product, so that fans can build their own physical model.

  5. While Lego Life and Lego Ideas seem to be great ideas on paper in terms of fostering open innovation and allowing customer insight to drive product development, I am not convinced that Lego is set up for the future of toys – which I am guessing will not be in a physical form (but perhaps Lego knows better). Looking at both Lego Ideas and Lego Life, it appears to me that these two platforms are still driven by physical Lego blocks and are focused on “iterations” of Lego blocks rather than breakthrough products.

    My primary concern for Lego is whether its prior success in physical Lego blocks will hinder it from developing toys for the next generation (in whatever form they may be).

    In addition, I am also curious to see how these two open innovation platforms will play out in the long run because my hypothesis is that kids in the current generation arguably have less exposure or experience with Lego than our generation did. As a result, they may not feel as nostalgic about the brand and hence do not feel the need or desire to help the company to innovate and create products which they would not want to play with anyways.

  6. To you second question, I think that LEGO has to target both parents and adults. As shown through your thoughtful research on nostalgia, the population of young adults and adults that still hold tight to their childhood favorites, and in fact still find a great deal of value in these items, is higher than ever. Allowing for continued open innovation and responses, and continuing to target this group, will increase brand loyalty for generations.

    As I think through the next generation of parents and toys, I think that LEGO has to adjust to trends within parenthood in order to stay relevant. Parenting at large is moving towards a world where toys must serve some type of educational purpose. Parents want to capitalize on all of the time their child has. Thus, it would be critical for LEGO to bridge the gap between their web based presence and their material toys. In order to do this, I think they can leverage their commitment and footprint in open innovation and allow for parents to collaborate with their teams to deliver the best, most beneficial lego toys moving forward.

  7. Looking at the designs that have successfully gone from crowd sourcing to the shelves, they are consistently geared towards adults as opposed to children. I think this is a great way to keep adult fans engaged with the brand and foster a deeper sense of community. LEGO Ideas could also open the market to more parents which could in turn increase the brand awareness with children.

    I think your points around LEGO Boost are spot on. It is a smart move to develop a technology focused product line as this helps bridge the gap between the physical toy space and online. In addition, the coding component of the Boost line will appeal to the growing demand from parents for educational toys. However, it is difficult to say if this will all be enough to position the company for success as the world shifts into digital media and entertainment.

  8. Great topic! As a LEGO fan myself it is great to see the Company making advancements to stay relevant in an increasingly digital world. Although privacy can be a concern with this growing focus on crowd-sourcing and information sharing, I do feel that the benefits from such a program definitely outweigh the risks. I truly feel the best way to relate to your customers is to allow them to help source your ideas, which I believe will be imperative to LEGO maintaining its competitive advantage going forward. Also, as we continue to move into this focus on a more digital world I believe that children will only get more knowledgeable on such topics. As a result, it does not seem necessary to me that LEGO shift its target market.

  9. I love your pen name. Keep killing it.

    I personally don’t see too many privacy issues here since this is all open source innovation and Lego doesn’t hide any advanced trade secrets that I know of. I’m sure the composition of its blocks and some of its manufacturing processes are proprietary but beyond that, the designs themselves come with each set. I definitely think open innovation in a space like this is the way to go. My concerns would be the cost of filtering through all these ideas and how many personnel you have to hire just to do that.

    I think it is definitely worth it for the additional engagement with fans. Does Lego advertise on the box that this design was crowdsourced? I think that would be a great marketing strategy to drive further engagement.

  10. How Lego is choosing to embrace their digital edge is really interesting, particularly to learn about how children today seamlessly integrate hardware and software in play, and are much more comfortable crowdsourcing their opinions and sharing innovations through social media and public platforms. Lego Ideas also seemed like an ingenious way to crowdsource innovation for Lego, particularly as they fight to stay relevant in the toy and play space.

  11. It’s great to learn more about how a classic toy brand is innovating and staying competitive within the rapidly evolving digital landscape. In response to your first question, I believe that the competitive benefits of open innovation outweigh the potential brand risk. For LEGO, open innovation appears to be an important strategy for both accelerating product innovation and enhancing brand loyalty. To the product innovation topic, your research on the accelerated product development timeline (from 2-3 years to 1 year) is striking, and I expect that as the crowd-sourcing efforts grow, this timeline could continue to shorten (i.e., as more super-fans and fans provide input, more innovative ideas that will be feasible to efficiently develop will be shared). In addition, open innovation and crowd-sourcing provides a second advantage around enhancing brand loyalty through tapping into the creativity and nostalgia of the fan-base. By providing an avenue for super-fans to be directly involved in generating product ideas and enhancements for LEGO (including through competitions), LEGO will increase the loyalty and involvement of its customer base for years to come.

  12. Great article!
    Overall, as you mentioned, the open innovation at LEGO really helped to retain fans and encourage them to participate in the platform: creating a virtuous circle.
    My question would be: Since I loved to watch LEGO’s aggressive yet effective expansion from toy to animation, movie, game, etc., to what extent the open innovation platform of LEGO did influence those expansions? How does LEGO idea incentivize users? Does LEGO pay for the ideas? Furthermore, did LEGO idea and LEGO life help LEGO acquiring new customers?

  13. I personally love LEGO and feel nostalgia simply from reading through your essay. I think that both platforms, LEGO Ideas and LEGO Life, have a place in LEGO’s future, but I am not sure how big of a role they will be able to play. I don’t see many concerns with privacy or reputation, since I imagine the majority of the people who will use the websites already hold LEGO in high regard and won’t have that image changed based on what other, non-affiliated people post.

    My concern for LEGO going forward would be its ability to stay relevant in a digital world when so much of its value is tied to a physical product. Without having played with LEGOs as a young kid, I don’t think other products, such as video games and movies, would have had much value to me. It seems like the only way that LEGO can truly succeed is if they widen the funnel for their open innovation platform beyond super-fans and children in order to get more people bought into the creation of the brand, which would hopefully generate additional sales after the products are developed and work to create further brand awareness.

  14. Ideally LEGO would be able to target both adult super-fans and children alike. The process of open-sourcing LEGO set ideas and funneling them to the product development teams after 10,000 votes is brilliant. The popularity of the game Minecraft tapped into the same creative vein in both adults and children. People create for their own enjoyment as well as to share with others online, so LEGO should continue to leverage their digital platforms and provide as much exposure to the creations of their super-users as possible. I don’t think there is much risk of tarnishing brand reputation as long as the ideas that are company-endorsed are carefully vetted. Additionally, the risk of being left behind is too great to not leverage the digital platform.

  15. My concern for the Lego open innovation platform is that it is still a fairly closed ecosystem in the sense that the idea contributors are probably mostly are Lego enthusiasts already. Admittedly, such platforms can build greater stickiness with Lego’s existing fans. However, there is also a fairly barrier of entry to participate, i.e. platform members need to come up with innovative new ideas. The children, teens, and adults who are less interested in Lego are probably not willing to make so much efforts and will not participate in activities on these platforms. Such selective bias will not achieve what Lego’s purpose of using the platforms to attract new customers. Therefore, I suggest it might be helpful for Lego to launch campaigns that require lower efforts to participate and yet eye-catching in order to pique new customer interests.

  16. This is very interesting! It is amusing how people are willing to share their ideas and allow for a company to generate extra revenue without asking anything in exchange. Something that I wonder is how Lego is giving recognition to the people that give the ideas that at the end are being selected. Are there any incentives? Given that the people that are giving the ideas love Lego a good incentive could be inviting them to visit the production plant or become part of an exclusive club.

    Also something amazing that I see is happening is that with the voting process on the ideas the company gets some measures on future demand. This, besides reducing the time to come up with a product, almost guarantees the sales later on and generates a great advertisement.

  17. Great article! Very informative! I think LEGO almost created a cult around its products and the avid fans will keep buying its products, no matter what they are. The LEGO Ideas seems to be a engine of new product pipelines that never ends. I wonder if the digital era and more advanced games will ever one day win over kids through new and innovative technologies such as VR and AR. Obviously, traditional video games haven’t taken market share away from LEGO!

  18. LEGO is clearly in a unique advantage to implement open innovation given its loyal fanbase. I would encourage them to continue investing in these processes as well. I am interested to see how they define their target market going forward using open innovation. Will using an existing fanbase to acquire ideas bias them to keeping that market, as opposed to trying to reach out to new demographics?

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