30th November 2015

What Financial Services can learn from Lego

One of the great business success stories over the last five years has been Lego.

Since 2010, Lego has seen sales grow at an average of 25% per year and posted bumper profits in a period of global stagnation averaging 40% per annum. This has made Lego the world’s most valuable toy company and it all started in 1930’s Denmark.

In the Danish city of Billund the demand for furniture plummeted as the great depression began to bite. A master craftsman by the name of Ole Kirk Christiansen had 4 children to feed after the untimely death of his wife. He decided to turn to making toys instead. He called his business Lego, which was the combination of two Danish words ‘Leg and Godi. This means play well and in a strange case of serendipity Lego is also a Latin word which has the appropriate meaning of “I put together”.

The toy business really took off properly after World War II, when Ole Kirk spotted the potential of injection-moulded plastic and the rest as they say is history.

So why is Lego so successful when only ten years ago they were facing oblivion?

Dramatic words, but they were losing £500,000 a day. Lego looked like becoming another old world victim of the rise of digital technology.

The Lego board decided to bring in a young but highly qualified management consultant Jorgen Vig Knudstrop who according to David Robertson a professor of innovation at Wharton business school faced the scenario that:

“Lego in the period between 1999 and 2002 went into a period of experimentation where they left the bricks behind”

Vig Knudstrop developed a set of cultural principles to ensure Lego regained its focus and innovated on its own terms instead of trying to match other companies. They were what Lego now calls their moments of truth:

1. When it's advertised, does it make a child say 'I want this'?
2. Once they open the box, does it make them go 'I want more of this'?
3. One month later, do they come back to the toy, rebuild it and still play with it? Or do they put it on the shelf and forget about it?

What can we learn from Lego?

When you have been running your business for a number of years it is sometimes easy to lose touch with what made you begin the entrepreneurial journey in the first place. You can also fall into the trap that befell Lego at the turn of the century, when innovation was reactive rather than proactive.

This led to the wrong choices led being made and dangerous levels of debt accrued, as incorrect strategies dragged them from their initial and successful business model.

Change is constant and when done in an evolutionary manner, it can be empowering for any business. However, when it is done without reference to what the business stands for and is actually good at, then it can transform a business from success into failure.

Lego is not called the Apple of Toys for nothing. If you know the business history of the world’s biggest brand then you will know that Apple had its own turmoil and own moment of truth. Steve Jobs ensured on his return that design was to be at the heart of Apples resurgence and we can all see the results every day and some of you even on your wrists!

What is your business moment of truth?

If you’re in business and wondering what the future could hold then perhaps the message to learn from Lego, is stick to what you’re good at and innovate from there.

Do you know what your business is good at and how will you deliver this in the future?

These are 2 questions I would urge you all to have an answer for.

You can then ensure that you can develop your own version of the Lego moments of truth:

1. When you promote your proposition or service, do your clients say “I want this?”

If not what is stopping them from doing so?

2. Once you deliver your service or product, does it make them go 'I want more of this'?

If not, why not?

3. Do they come back to you? Or forget about you?

Either way, why do they do that?

Reflecting on these moments of truth can help any business gain clarity on where it should be now and where it could go in the future, whilst learning from an old childhood friend.

John Joe McGinley

Glassagh Consulting

Please follow me on twitter @glassaghconsult I always follow back

Business Development