LEGO: Rebounding from creativity run amuck …

Punch line: In an excerpt from Design Is How It Works, former BusinessWeek staff writer Jay Greene explores Lego’s troubles and its comeback.

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Excerpted from: How LEGO Revived Its Brand, July 23, 2010

Not many toy companies in the world have more brand power than LEGO.

Three generations of kids have built cars, cities, and spaceships with LEGO’s iconic bricks. Its logo — the red square with the rounded white letters — is immediately identifiable to most of the developed world and to a bunch of developing nations as well.

Brand power opens doors, getting kids and parents alike to consider LEGO products. But if those products don’t engage them, kids will quickly move to the next toy.

It is sometimes forgotten that LEGO struggled mightily in the early to mid-2000s.

Back then, company executives believing “being LEGO allowed us to do anything” wanted to extend the brand, venturing off on wild forays into new product development.

The prototypical example: Galidor, a legendary bomb that was all about action figures that … were little different than toys offered by scores of other manufacturers. They didn’t require building skills or much in the way of imagination, the hallmark of the more traditional LEGO construction toys.

Worse still, LEGO branched into a whole new business about which it knew little. The company co-produced a kids’ TV show called Galidor: Defenders of the Outer Dimension. The story line was meant to add detail to the action figures, giving kids more reason to buy them. But the shows sparked little interest.

Within its core construction toy business, LEGO was foundering. LEGO managers had given designers free rein to come up with ever more imaginative creations. And they took it. Left to their own devices, designers conjured up increasingly complex models, many of which required the company to make new components — the various bricks, doors, helmets, and heads that come in a rainbow of colors and fill every LEGO box. The number of components exploded, climbing from about 7,000 to 12,400 in just seven years. Of course, supply costs went through the roof, too.

Even more troubling was that the new designs weren’t resonating with kids.

“We almost did innovation suicide. We didn’t do a lot of clever components. We did a lot of stylized pieces.”

LEGO had assumed it would flourish by giving its designers whatever pieces they asked for in order to unleash their creativity. Instead, costs soared as the models veered toward the esoteric.

But, just as design pushed LEGO to the precipice, it helped bring the company back.

But here’s the paradox: Instead of giving designers free rein to conjure up their most brilliant creations to save the company, LEGO tied their hands. Gone were the days when designers could go wherever their imaginations took them.

Instead of rubber-stamping nearly every request for a new component, LEGO put each one through a systematic screening process. And it eliminated rarely used pieces, slashing the total number of components to about 7,000, the same number as in 1997.

LEGO also forced designers to come out of their cocoons and work with noncreative staff. At the earliest stages of product development, marketing managers, who had detailed research on the types of products kids wanted, helped guide development. Manufacturing personnel weighed in on production costs before a prototype ever saw the light of day.

LEGO found that design thrives with some constraints.

That might send chills up the spines of some in the design world. The idea of fencing in designers, forcing them to play in a confined space, runs counter to the notion that design needs to be set free.

“If you put guiding principles in place, you empower people to make the right decision.” 

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From Design Is How It Works, to be published in August 2010 by Portfolio/Penguin Group.

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