LEGO, a Danish construction toy production company based in Denmark, is known for its interlocking toys. The company has collaborated with some of the biggest brands in the industry, from Star Wars to Harry Potter. However, did you know that in 2003, LEGO was once in debt to the tune of $800 million, losing $1 million each day and just weeks away from collapse? How did the company maintain its life and, at the same time, succeed to unimaginable levels? Let's find out!
Founded in 1932 by Ole Kirk Christiansen, LEGO was the 'IT' toy in the 90s, with every kid wanting a LEGO set and being obsessed with creating something with the renowned bricks. Thus, just like every other brand, LEGO expanded its territory to clothes, watches, TV shows, theme parks and whatnot.
But with so much to do, the company was not excelling at any one task. The toy sales were decreasing, and behind the scenes, the company was struggling with finances. The company was facing a debt of $800M and was on the verge of collapse.
Then came the knight in shining armour, the new CEO, Jørgen Vig Knudstorp, a Danish businessman who succeeded Kjeld Kirk Kristiansen as president and CEO of the company in October 2004. He presented a unique question: "What if the problem...is LEGO itself?
One of his first moves was to slash the product lines by 30% and to lay off about 1,000 people. Then, deeper research revealed to him that the company was making 7,000+ unique parts, which made the production process slower and expensive. Thus, he and his team simplified certain brick types and focused on sets that were popular in the market.
Additionally, LEGO started focusing on what the fans and buyers actually wanted. They partnered with big brands such as Star Wars and Harry Potter to develop sets with storylines. The result was instant and quite visible, with the Star Wars set alone boosting the company revenue by 35%. Their lesson from this sale was that every creation has a story and to create, people need bricks!
By 2015, LEGO passed Mattel to become the world's greatest toy company with $2.03B sales in the first half of 2014.
