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LEGO® Friends: Leveraging


Competitive Advantage

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Michael Mazzeo & Greg Merkley
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Abstract

In December 2011 the Lego Group (TLG) announced the launch of Lego
Friends, the company's sixth attempt to market a product to girls. Lego
Friends, which was supported by a $40 million global marketing campaign,
was designed to introduce the fun of building with Lego bricks to girls, who
represented less than 10 percent of Lego's audience.
The company's poorly executed brand extensions and move from free-form
building sets to story-driven kits had nearly cost it its independence in 2004,
so the launch of Lego Friends was strategically important. However, within
hours of the product's appearance it was heavily criticized for reinforcing
gender stereotypes and damaging the valuable Lego brand.

Jørgen Vig Knudstorp, CEO since 2004, had saved TLG and ushered in an
era of sales growth with a series of successful strategic initiatives. Would
Lego Friends be another addition to TLG's graveyard of failed products for
girls, or would it prove popular and finally enable the company to double its
sales and profits by reaching this segment?

Case

On December 19, 2011, in its Billund, Denmark, headquarters, The Lego


Group (TLG) announced what CEO Jørgen Vig Knudstorp described as “the

most significant strategic launch we've done in a decade.” 1 Lego Friends


was the company's sixth attempt to market a product to girls; supported by a
$40 million marketing campaign, it was designed to introduce the fun of
building and creating with Lego bricks to girls, who represented less than 10

percent of Lego's audience. 2

One former TLG employee was quoted as saying, “Lego has a position to die

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for. Children think they are having fun and parents think it's educational. It's a

wonderful position and probably unique in the toy industry.” 3 That unique
position also brought with it extra scrutiny, and within hours of its launch
Lego Friends was the target of global criticism for its reinforcement of gender
stereotypes as well as for its fit with the Lego brand.

Poorly executed brand extensions had nearly cost TLG its independence by
2004. Was Lego Friends a similar blunder, or was it a savvy strategic move
by the toy marketer?

Lego Origins

In 1932 Danish carpenter Ole Kirk Kristiansen began making and selling
high-quality wooden toys for children in Billund. Two years later Kristiansen
named the company Lego, which combined two Danish words—LEg and
GOdt—that meant “play well.” (He later learned the neologism also meant
“put together” in Latin.)

Figure 1.©2012 The Lego Group, used with permission.


From the beginning, Kristiansen had a commitment to quality; his motto was

“Only the best is good enough” (see Figure 1 ). When Lego was still

producing wooden toys, Kristiansen's son tried to cut costs by shipping toys
with only two coats of varnish instead of the three coats his father had
specified. Furious, Kristiansen ordered his son to go to the railway station to
intercept the shipment and finish the job properly.

After purchasing the first plastic injection molding machine in Denmark, Lego
began manufacturing plastic building bricks in 1949 based on a patented

British design that included the now-iconic knobs (see Figure 2 ).

Kristiansen enhanced the design by adding tubes to the underside to


increase the “clutch power,” or holding power, of the bricks when they were
snapped together. His version of the brick was patented in Denmark in 1958

and is still in use in 2012 (see Figure 3 ). The re-engineered brick was the

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foundation of the “Lego System of Play,” a design standard that ensured all
Lego bricks and elements—starting with bricks produced in 1958 and
including elements produced in 2012—would link together.

Figure 2.©2012 The Lego Group, used with permission.

Figure 3.Illustration from Lego patent, 1958.


By 2011, 75 Lego pieces had been produced for every person on earth. In
2011 Lego products were sold in more than 130 countries; total sales were
DKK 18.3 billion. Measured another way, all the Lego bricks sold that year
laid end to end would reach around the world more than seven times. Lego
was also the world's largest tire manufacturer, producing nearly 400 million
toy tires each year.

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Free-Form Building Sets

The original concept of the Lego brick was free-form building play. By 1967,
the company's product line had expanded to include more than two hundred
interlocking elements beyond the original brick, including wheels, windows,
doors, roof tiles, trees, and flags. These elements enabled children to
construct more realistic creations, but there was nothing other than a few
photographs on the box to guide children in the building process. (See
Exhibit 1 for pictures of free-form sets.)

In 1978 TLG introduced sets with themes, which included bricks and parts
with common designs. Dozens of themes were introduced and phased out
over the next three decades; early themes such as Town, Space, Castle, and
Pirates spanned several decades and spawned related subthemes, but later
themes were produced only for one to three years. (See Exhibit 2 for
pictures of themed sets.)

The now-iconic TLG minifigure was introduced in 1978 in three theme sets:
Castle, Town, and Space. The first miniature figure in the building toy

industry, it had a painted face and movable arms and legs (see Figure 4 ).

In line with the company's family friendly anti-violence policy, minifigures


were not allowed to carry guns or other modern weapons; however, an
exception was made to allow knights and other historical-themed figures to
carry swords and other historically accurate armaments.
Figure 4.©2012 The Lego Group, used with permission.

Although the themed sets encouraged limited role-playing and provided


inspiration through pictures on the packaging, they were designed to provide
children with unrestricted building play opportunities. By 2006, free-form

building sets generated less than 20 percent of TLG's profits. 4 As the head

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of TLG's U.S. subsidiary observed, “That's what the parents want to buy, but

that's not what the kids want.” 5

Story-Driven Kits

Until 1999, TLG was unique among major toy manufacturers in avoiding
licensing the names and likeness of branded characters for its products.
These were big business in the toy industry, accounting for approximately 25

percent of all toys sold. 6

After an unprofitable year in 1998, TLG was urged by its U.S. subsidiary to
introduce a Star Wars product in conjunction with the release of the fourth
installment in the popular movie franchise. It took six months for executives
in Billund to approve the arrangement, not only because it represented a new
way of doing business but also because the word “war” and the inclusion of
weapons violated TLG's anti-violence policy. The opposition was so strong
that TLG acquiesced only after Kristiansen's grandson personally backed the
project. In 1999 TLG introduced fourteen Lego Star Wars kits (see Exhibit
3), which tallied sales of DKK 2 billion.

Lego Star Wars offered children something previous Lego products had
not—a narrative they knew and could integrate with their building play. Peter
Eio, former head of TLG in the Americas and the original champion of
licensing, observed: “[Lego Star Wars] led us to say, Storytelling is
important.” 7 The success of the line shifted Lego products from “designing

and constructing” to “narrative and role-playing,” or “from play as

construction process to play with finished product.” 8

One mother said of her Lego-loving son, “I prefer the free-form bricks, where
he can make his own universe. Ethan is most drawn to the theme-based
scenarios… He's fixated on the directions—when he builds it, he wants it to
look exactly like it looks on the box. That introduces a note of anxiety into

playing with Legos—did I do it right?” 9 A former TLG employee lamented,

“There is a danger of Lego forgetting what has made the brand famous—it

allowed children free expression.” 10 One psychologist described the

tradeoff for children playing with these kits: “When you have kids playing out

Indiana Jones, they're playing out Hollywood's imagination, not their own.” 11

By 2004, Lego Star Wars products represented 41 percent of all Star Wars

toy sales in the United States. 12 When TLG announced a ten-year

extension of its license to produce Star Wars kits in 2012, it reported sales of
more than 200 million boxes of Lego Star Wars products since 1999, making

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it the best-selling product line in the company's history.

After Star Wars, TLG licensed other properties including Harry Potter,
Indiana Jones, Spiderman, and Lord of the Rings. (See Exhibit 4 for pictures
of licensed kits.) Sports-themed kits were developed under licenses with
NBA basketball and NHL hockey, and in 2009 TLG partnered with Disney to
produce Lego kits featuring characters and settings from the films Toy Story,
Prince of Persia, Pirates of the Caribbean, and Cars.

The company's increased reliance on licensed products led to higher


licensing expenses (see Exhibit 5). In 2004 licensed products accounted for
15 to 20 percent of TLG sales, and by 2006, 70 percent of TLG profits came

from themed sets and licensed kits. 13 While successful at generating sales,

licensing altered TLG's risk profile. As one toy industry analyst observed,
“Today's hit can quickly turn into tomorrow's dud, adding volatility that Lego

never faced in the past.” 14

Licensed kits required specific design skills to translate the varied characters
and settings that were well known from movies into the Lego motif of
elements and minifigures. The fantasy environments demanded specialized
pieces to make them realistic, which required new molds, production
methods, and inventory. The success of the kits confirmed that the stories
and realism were appealing, but the preformed pieces limited what could be
built with the kits, which came with detailed instructions to ensure the
accurate construction of what was more a fragile model than an active
plaything.

Figure 5.©2012 The Lego Group, used with permission.

Not content to rely entirely on licensed stories, TLG in 2001 introduced


Bionicle, a line of story-based toys that consisted of seventeen futuristic

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robot-like figures that were built with plastic parts—not Lego blocks—that

snapped together (see Figure 5 ). TLG supported the elaborate story line of

Bionicle with websites, movies, books, video games, and cartoons that
introduced new characters and contexts. Bionicle was a hit, but unlike
previous TLG story-based products, “none of the figures have a ‘play
meaning’ independent of their story… You can buy one and build it—but
when you're done, unless you know the story, you won't have a clue as to

what you've got.” 15

The storytelling aspect of TLG grew to the point that it was described in 2010
as a media company where “the stories are told not in books or on film but in
small interlocking blocks and through the imaginations of the children who

play with them.” 16

Marketing

Lego brand recognition in the mid-1990s ranked fifth among toys after Mattel,
Hasbro, Sega, and Nintendo. In 1997 TLG unveiled a new vision for its
brand: “In the year 2005, we want the Lego brand to be the most powerful in

the world among families with children.” 17 One toy industry analyst

commented that TLG executives in this era “thought they knew about

everything: pricing, product, marketing. They just had closed ears.” 18


In 1999 Lego bricks were voted “Toy of the Century” by Fortune. In 2001 one
analyst observed, “There are only a handful of great brands, and Lego is

certainly one of them”; 19 that same year Lego was ranked the seventh most

respected brand among families with children. By 2002–2003, Lego had

climbed to third place. 20

In 2001 TLG announced a new brand architecture to “restate the core

essence of Lego.” 21 The architecture consisted of four portals that reflected

what consumers did with Lego products:

• Explore: All preschool brands, e.g., Duplo


• Make and Create: Pure construction toys intended to build objects,
e.g., Lego bricks
• Stories and Action: Toys driven by stories or role-playing, e.g., Bionicle
• Next: Toys that enabled not only building but also controlling behavior,
e.g., Mindstorms

TLG did not do much advertising—it preferred to communicate with its


customers and prospects in environments it owned and controlled. As one
company executive explained, “One of our main strategic efforts as a
company is to get closer to consumers… It's best achieved in venues where
we can manage the total consumer experience, such as Lego.com, Legoland

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theme parks, and the Lego brand shops.” 22

Adult Fans of Lego

An estimated 5 to 10 percent of Lego toys were purchased by adult fans of

Lego (AFOLs). 23 TLG introduced special edition kits for AFOLs and

collectors, including Architecture and Star Wars Ultimate Collector Sets.


These kits, which were highly detailed models designed primarily for display,

were larger (for example, the Taj Mahal in Figure 6 was 20 in./51 cm. long,

20 in./51 cm. wide, and 16 in./41 cm. tall), contained more pieces for realism
(more than 5,900), were more complex (nearly two hundred pages of
instructions), and were priced much higher (USD 299.99) than typical Lego
kits.

Figure 6.©2012 The Lego Group, used with permission.


TLG created a Lego Certified Professional program for adult Lego
enthusiasts, many of whom treated Lego “as an art form rather than just a

toy.” 24 AFOLs also created thousands of websites and blogs, which were

visited by hundreds of thousands of unique visitors each month. In 2010

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AFOLs organized more than 170 public events, which were attended by 2.6
million people.

Competition

In 1991 Canada-based Mega Brands introduced Mega Bloks, a product that


exactly copied the Lego brick design and promoted its ability to connect with
Lego bricks. (TLG's last major patent on Lego bricks expired in 1978.) TLG

petitioned Canadian courts for trademark 25 protection of its brick design, but

in 2002 the Federal Court of Canada dismissed its request because the
design was functional and therefore ineligible for trademark protection. As a
result, Mega Brands and other companies were permitted to continue
manufacturing and marketing their Lego look-alike products.

Mega Bloks produced toys under licensing agreements with the Halo video
game franchise, Marvel Comics, Hello Kitty, Smurfs, and Thomas the Tank
Engine, among others. In 2012 Mega Brands announced that it had secured
the rights to create Hot Wheels and Barbie-themed construction toys. Sales
of Mega Bloks grew from USD 94 million in 1999 to USD 280 million in 2011.

By 2004, Mega Bloks accounted for 30 percent of the North American

building toy market; as shown in Figure 7 , TLG market share in the United

States decreased significantly from 1992 to 2007. By 2005, Mega Bloks were
being sold in Europe, a region that accounted for 60 percent of TLG sales.
Figure 7: TLG Market Share of U.S. Building Toy Sales

Source: Joseph Pereira and Christopher J. Chipello, “Battle of the Block


Makers,” Wall Street Journal, February 4, 2004; Daniel McGinn, “Building an
Empire One Block at a Time,” Newsweek, April 16, 2007.

Ninety-five percent of toys—including Mega Bloks—were manufactured in


China, which had significantly lower labor costs than TLG's manufacturing
locations. In addition, Mega Bloks were molded using less expensive,

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commodity-grade resin instead of the higher-quality resin used in Lego
bricks. This cost difference was reflected in Mega Blok prices: in 2004 a 140-
piece Lego Bulk Tub was priced at $19.99, whereas a 100-piece Mega Bloks

Mini Bag was $9.99. 26

Manufacturing and Distribution

In 2004 TLG operated one of the largest injection molding operations in the
world, an 800-machine factory in Denmark, along with three factories in
Switzerland and one each in the United States, Korea, and Brazil. Molds
were produced in Switzerland and Germany. Within each factory, production
teams operated independently. Engineers who designed new kits also
worked independently to develop relationships with suppliers.

Lego products were distributed through dozens of wholly owned sales


companies, each of which covered a national market. Sales agents handled
countries not covered by the subsidiaries. The sales companies were
responsible for relationships with retailers in their countries and took
ownership of inventory until it was sold and delivered. Daily deliveries were
standard to ensure good customer service and to minimize retailer inventory
and stock-outs.
At retail, TLG sold its products through specialty toy stores, discount
merchandise retailers, department stores, drug stores, grocery stores,
warehouse stores, Lego.com, Lego Shop-at-Home catalogs, and Legoland
parks. The company began opening Lego brand retail stores around the
world in 2002; by 2012, it had more than sixty stores in the United States,
including its flagship store at Disney World, and another twenty in Canada,
Germany, the United Kingdom, and Denmark.

Other Initiatives

TLG entered the amusement park business in 1968 with the opening in
Billund of Legoland, a theme park. Parks were later added in Windsor,
England (1996); Carlsbad, California (1999); Günzburg, Germany (2002);
and Winter Haven, Florida (2011), with another planned to open in Malaysia
in 2012. The parks, which were marketed to families with children ages two
through twelve, offered Lego-themed rides and attractions suitable for small
children as well as large-scale models built using millions of Lego bricks.
Each of the parks received more than 1 million visitors per year (the Billund
park was the most popular Danish tourist attraction outside Copenhagen).
The cost to construct a park was approximately DKK 1.5 billion; total net

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profits for all parks in 2004 were DKK 20 million. 27

In 1997 TLG introduced Lego Island, its first branded video game developed
in partnership with Mindscape. The game sold 7 million copies, which
encouraged TLG to produce more than forty games featuring Lego
minifigures in Star Wars, Indiana Jones, Harry Potter, Batman, or TLG's own
themed environments. The non-violent games became quite popular, selling

a total of more than 60 million copies between 1997 and 2009. 28 Although

TLG executives initially were concerned that video games were incompatible
with the company's educational focus and building products, a company
executive later said, “We've done extensive research that shows that video
games actually encourage creative play. Kids will play on their Lego Star
Wars computer game for half an hour. Then they'll jump onto the floor and

start trying to make the models.” 29

Lego Mindstorms, an “intelligent brick” with programmable computer controls


and sensors, was the first integration of computer technology with Lego
bricks when it launched in 1998. It quickly became the best-selling single box
in TLG history. After the next generation of Mindstorms was launched in
2004, TLG learned that users were hacking the software to add new
capabilities, so it responded by adding an explicit “right to hack” to its
software license, making the Mindstorms source code publicly available and
holding fan competitions. “We came to understand that this is a great way to
make the product more exciting,” said Mads Nipper, executive vice president
for products and markets. “It's a totally different business paradigm—
although they don't get paid for it, they enhance the experience you can have

with the basic Mindstorms set.” 30

TLG also pursued numerous other brand extensions. These included


acquiring an intelligent toy company in California, establishing a design
studio in Italy and a media group in the United Kingdom, launching a Lego
Education Centre offering after-school activities, and partnering with Steven
Spielberg to develop Lego movies. Apparently influenced by brands such as
Harley Davidson, TLG attempted to make Lego into a lifestyle brand by
introducing Lego-branded clothing, watches, bags, and accessories. The firm
even explored launching a Lego-branded car as the “ultimate family vehicle.”

31 In order to provide opportunities for cross-selling products, TLG also

made forays into television and film production and Lego-branded books and
magazines.

Situation in 2004

By 2004, competition from electronic games had reduced demand for

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traditional toys, as children were moving away from toy play as early as age
eight, a phenomenon known as “kids getting old younger,” or KGOY. This
was especially true for girls: “Girls mature faster and therefore migrate
quicker away from toys. They tend to imitate adult tastes and lifestyles at a

much earlier stage than boys.” 32

A consultant reportedly advised the TLG board in the early 2000s that only
three of the company's products were profitable: Bionicle, which made
consistent profits, and Harry Potter and Star Wars, which were profitable only

in years when a new movie was released. 33 Thirty TLG products generated

80 percent of sales, but those thirty products were not the same year to year:

75 percent of sales each year came from new products. 34

TLG's top twenty retailer customers accounted for 70 percent of sales.


However, because its twenty-six logistics providers made frequent
deliveries—in many cases, deliveries to retailers were made every day—67
percent of all orders were less than a full carton, which required labor-
intensive pick-packing. Big-box stores such as Wal-Mart, Target, Toys R Us,
and Carrefour dominated the retail sale of toys, which led to increased
competition for shelf space and lower margins for TLG.

The design of story-driven kits resulted in TLG producing 13,000 different


elements (90 percent of which were used in only one set) in more than one
hundred colors. For example, one pirate set included eight pirates with ten
types of legs in different attire and positions. Each element required a
separate mold, which cost DKK 350,000 apiece. Manufacturing capacity
utilization was approximately 70 percent, and TLG was working with 11,000
suppliers, twice as many as Boeing used to build a commercial airliner.

TLG sales dropped 30 percent in 2003, which led to the biggest loss in its
history (see Exhibit 6 and Exhibit 7). The company's high level of debt and
dwindling cash reserves turned the loss into a battle for its survival as an
independent entity.

New Leadership

In October 2004 the board of directors appointed TLG's first CEO from
outside the founding family. Jørgen Vig Knudstorp, a 35-year-old former
consultant for McKinsey & Company, developed a three-phase strategy that

focused the company's initial efforts on ensuring its survival (see Figure 8 ).

Figure 8: TLG Three-Phase Strategy

Source: Based on figure in TLG Annual Report 2007.

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Knudstorp sharply reduced expenditures by cutting 2,000 jobs and
negotiating with the workers' union on plans to cut thousands more. He
raised cash by selling TLG office properties around the world, which had
always been owned rather than leased. To improve liquidity, TLG exited the
theme park business by selling Legoland to Blackstone for $800 million in
2005. The new CEO stopped internal development of video games in favor
of a licensing agreement and eliminated the company's software division.
Information technology also was outsourced to IBM.

Knudstorp aggressively sought to balance the design of Lego kits with


manufacturing cost. He focused on reducing the number of unique elements
used in the company's designs; nearly half were eliminated very quickly, and
by 2011, there were only 4,000. The head designer of the Lego Harry Potter
team described the change in the design process: “Models go through
several evolutions of development before they are ready… Sometimes it's a
case of refining elements so they can be physically molded into Lego bricks;

sometimes it's a case of reducing the number of new elements involved.” 35

For example, the orange fire in Lego Harry Potter kits became water when

molded in blue (see Figure 9 ); brown clubs used by Beaters in Quidditch

were molded in orange to be used as carrots in other kits. The number of


colors was reduced by 50 percent; resin costs were cut in half; production
cycles were rationalized to reduce changeovers; the number of suppliers was
reduced by 80 percent; and the fixed cost base was reduced from 75 percent

to 33 percent. 36

Figure 9.Harry Potter Kit, fire (left) and water (right).

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TLG's supply chain was another major focus. According to Knudstorp, “The
supply chain is a company's circulation system. You have to fix it to keep the

blood flowing.” 37 TLG's twenty-six logistics providers were consolidated to

four, and a single new distribution center, which was managed by DHL
Solutions under an outsourcing contract, was built outside Prague, Czech
Republic, to replace five centers in Denmark, Germany, and France. When it
was completed in 2006, the new center reported costs 30 percent lower than

TLG's operation in 2005. 38

Outsourcing Manufacturing and Logistics

In 2006 TLG announced it would close its Swiss factories and outsource
much of its manufacturing to Flextronics, an electronics manufacturing
services company that already produced Lego Duplo products. Production of
Bionicle and other more demanding products would continue in Billund, but
standard Lego bricks would be produced and packed by Flextronics in
Eastern Europe and Mexico to take advantage of lower wage rates in those
countries. Flextronics would also take over operations at the existing TLG
factory in Kladno, Czech Republic. The number of TLG employees dropped
from 7,300 in 2004 to 5,300 in 2006; when the outsourcing plan was fully
implemented in 2010, headcount was expected to drop to approximately
3,000. The outsourcing was expected to reduce the share of TLG products
manufactured in-house from 95 percent to 20 percent.

In 2008, however, TLG decided to take back the majority of its production
and return to manufacturing most of its products in-house. Although TLG had
initially concluded that its manufacturing was a commoditized process, it
found it could do it at lower cost because Flextronics did not have superior

technology or better raw material access, only a lower salary for workers. 39

The seasonality of the toy business—60 percent of production was in the


third quarter—also proved to be a challenge for Flextronics. The migration to
outsourcing had been very complex, and TLG found it needed a more
flexible and market-responsive manufacturing capability.

In 2011 TLG operated factories in Denmark, Hungary, Czech Republic, and


Mexico. Manufacturing in Europe rather than China enabled TLG to deliver
products faster to retailers in its biggest markets, reducing their inventory and
helping them earn higher margins. A buyer for one retail chain in Australia
said his company was making more money in 2011 than ever from Lego
products even though retail prices had been reduced: “I'm selling box sizes

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today for $100 that would have been $149 five years ago and they're more

profitable.” 40

TLG and DHL encountered some challenges in implementing their


distribution outsourcing agreement. When TLG executives interviewed their
top twenty customers, they found the retailers did not need the daily or next-
day delivery service the company had been providing. TLG changed to
weekly delivery service, which improved its on-time delivery rate from 62
percent in 2005 to 92 percent in 2008. However, the reduced frequency of
deliveries dramatically changed the economics for DHL after it had built the
largest distribution center in Eastern Europe and priced its services to TLG.
The two companies worked together to modify their agreement to reflect the
revised economics.

User-Generated Design

In 2005 TLG introduced free software that enabled users to design


constructions using Lego bricks in a manner similar to computer-aided
design (CAD) programs. Each MOC (My Own Creation) design could be
shared by uploading it to the Lego Factory website (renamed Lego Design
byME in 2006). The models also could be ordered for delivery as packaged
sets in custom-designed Lego boxes, and some popular MOCs were
selected to be sold as official Lego products. Lego Design byME was closed
in January 2012 because it “struggled to live up to the quality standards for a

Lego service.” 41

The concept of open innovation was continued in Lego Cuusoo, 42 another

website that gave Lego fans the opportunity to share MOCs. All designs that
garnered 10,000 votes from other website users were reviewed by a TLG
jury to confirm they were safe and consistent with the Lego brand. Those that
passed the review were produced and marketed as standard Lego sets and
earned their creators commissions of 1 percent of total net sales.

Websites became an important channel for Lego fans to share their passion,
promote their MOCs, and express their creativity. A 2012 search of the
video-sharing website YouTube revealed more than 300,000 user-created
videos with the keyword “Lego”; more than 50,000 of the videos were
reviews of Lego kits and a similar number were stop-motion videos created
with Lego minifigures. Flickr, a photo-sharing website, returned more than
1.4 million results for a search for “Lego.”

Lego Friends

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TLG originally held to the “good Scandinavian unisex tradition that toys were

for boys and girls.” 43 However, anthropologists had observed that girls

differed from boys in preferences and styles of play—not only did they want
“friendlier” colors and lots of detail, they also took frequent breaks during
building to begin storytelling and rearranging. Boys, on the other hand,
tended to be more linear and build quickly to get to the end result. Boys also
tended to interact with figures in the third person, whereas girls projected

themselves onto the figures they played with. 44 As a result, the blocky Lego

minifigure was not popular with girls: “Let's be honest: girls hate him,” said

Mads Nipper in 2011. 45 As a result, TLG had virtually ceded the market for

girls' toys to competing products such as Mattel's Barbie, Disney's


princesses, and American Girl dolls.

Lego Friends was the company's sixth product aimed at girls: Scala
(introduced in 1979) was a line of kits containing small plastic parts for
assembling necklaces and bracelets; Fabuland (1979) contained minifigures
with the heads of animals and the bodies and clothing of humans; Paradisa
(1992) included pastel bricks along with minifigures; Belville (1994) included
larger articulated figures and pastel-colored elements; and Clikits (2003) was
an arts and crafts system for creating necklaces and bracelets. (See pictures
of representative products in Exhibit 8.) Clikits and Scala failed because
they did not integrate with the company's brick products, and the others had
not correctly addressed gender differences in children's play patterns.

Lego Friends introduced twenty-nine realistic female mini-doll figures that


had not only backstories but also thousands of customizable hair and fashion
combinations. The bricks in Lego Friends kits were compatible with all other
Lego bricks, but they were molded in new pastel colors to appeal to girls.

The line included kits featuring houses (see Figure 10 ), a veterinarian's

office, a beauty shop, an invention workshop, and a fashion design studio, all
set in the fictional town of Heartlake City.

Figure 10.©2012 The Lego Group, used with permission.

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Launch

Knudstorp had saved TLG and ushered in an era of sales growth with a
series of successful strategic initiatives since taking over leadership of the
company in 2004. Would Lego Friends be another addition to TLG's
graveyard of failed products for girls, or would it prove popular and finally
enable the company to potentially double its sales and profits by reaching
this segment?

Notes and References

(/cases/lego-friends-leveraging-competitive-advantage##i2001) 1 . Brad

Wieners, “Lego Is for Girls,” BusinessWeek, December 14, 2011.

(/cases/lego-friends-leveraging-competitive-advantage##i2002) 2 . Cristina

Lindblad, “Lego Gets Snapped at Over Girls' Line of Toys,” SFGate, April 23,
2012.
(/cases/lego-friends-leveraging-competitive-advantage##i2003) 3 .

Christopher Brown-Humes, “After the Crash: Lego Picks up the Pieces,”


Financial Times, April 2, 2004.

(/cases/lego-friends-leveraging-competitive-advantage##i2004) 4 . Lauren

Foster and David Ibison, “Spike the Robot Helps Lego Rebuild Strategy,”
Financial Times, June 22, 2006.

(/cases/lego-friends-leveraging-competitive-advantage##i2005) 5 . Daniel

McGinn, “Building an Empire One Block at a Time,” Newsweek, April 16,


2007.

(/cases/lego-friends-leveraging-competitive-advantage##i2006) 6 . Stephan

Faris, “How to Rebuild Lego,” Time, June 7, 2010.

(/cases/lego-friends-leveraging-competitive-advantage##i2007) 7 . Charles

Fishman, “Why Can't Lego Click?” Fast Company, August 31, 2001.

(/cases/lego-friends-leveraging-competitive-advantage##i2008) 8 . Maaike

Lauwaert, The Place of Play: Toys and Digital Cultures (Amsterdam:


Amsterdam University Press, 2009), 59.

SAGE Recommends
(/cases/lego-friends-leveraging-competitive-advantage##i2009) 9 . Fishman,

“Why Can't Lego Click?”

(/cases/lego-friends-leveraging-competitive-advantage##i2010) 10 . Harriet

Marsh, “Lego Reconstructs Its Brand,” Marketing, August 8, 1996.

(/cases/lego-friends-leveraging-competitive-advantage##i2011) 11 . Nelson

D. Schwartz, “Turning to Tie-Ins, Lego Thinks Beyond the Brick,” New York
Times, September 6, 2009.

(/cases/lego-friends-leveraging-competitive-advantage##i2012) 12 . Alyson

Grala, “Building Blocks,” License! Global, June 2004.

(/cases/lego-friends-leveraging-competitive-advantage##i2013) 13 . Foster

and Ibison, “Spike the Robot Helps Lego Rebuild Strategy.”

(/cases/lego-friends-leveraging-competitive-advantage##i2014) 14 .

Schwartz, “Turning to Tie-Ins, Lego Thinks Beyond the Brick.”

(/cases/lego-friends-leveraging-competitive-advantage##i2015) 15 .

Fishman, “Why Can't Lego Click?”

(/cases/lego-friends-leveraging-competitive-advantage##i2016) 16 . Faris,

“How to Rebuild Lego.”

(/cases/lego-friends-leveraging-competitive-advantage##i2017) 17 . Danny
Rogers, “Lego to Be a Danish Disney,” Marketing, July 2, 1998.

(/cases/lego-friends-leveraging-competitive-advantage##i2018) 18 . Faris,

“How to Rebuild Lego.”

(/cases/lego-friends-leveraging-competitive-advantage##i2019) 19 . John

Tagliabue, “Lego Tinkered With Success, and Is Now Paying a Price,” New
York Times, December 25, 2001.

(/cases/lego-friends-leveraging-competitive-advantage##i2020) 20 . Majken

Schultz and Mary Jo Hatch, “The Cycles of Corporate Branding: The Case of
the Lego Company,” California Management Review 46, no. 1 (Fall 2003): 8.
In 2001 Lego ranked behind Coca-Cola, Kellogg Company, Disney, Levi's,
Fisher-Price, and Pampers. In 2002–2003 only Coca-Cola and Kellogg
ranked higher.

(/cases/lego-friends-leveraging-competitive-advantage##i2021) 21 . Ruth

Mortimer, “Building a Brand Out of Bricks,” Brand Strategy, April 1, 2003.

(/cases/lego-friends-leveraging-competitive-advantage##i2022) 22 .

“Strategic Play—Lego: Building up an Empire,” New Media Age, April 29,

SAGE Recommends
2004.

(/cases/lego-friends-leveraging-competitive-advantage##i2023) 23 .

Schwartz, “Turning to Tie-Ins, Lego Thinks Beyond the Brick.”

(/cases/lego-friends-leveraging-competitive-advantage##i2024) 24 . Ibid.

(/cases/lego-friends-leveraging-competitive-advantage##i2025) 25 . A

trademark is a word, name, or symbol that distinguishes one product from


other similar products. A patent is an exclusive right granted by a
government body to an inventor to manufacture, use, or sell an invention for
a specified period of time.

(/cases/lego-friends-leveraging-competitive-advantage##i2026) 26 . Joseph

Pereira and Christopher J. Chipello, “Battle of the Block Makers,” Wall Street
Journal, February 4, 2004.

(/cases/lego-friends-leveraging-competitive-advantage##i2027) 27 .

“Legoland Profits Drop Despite Visitor Increase,” April 7, 2005,

http://www.e-tid.com/Legoland-profits-drop-despite-visitor-increase
(http://www.e-tid.com/Legoland-profits-drop-despite-visitor-increase)

.
(/cases/lego-friends-leveraging-competitive-advantage##i2028) 28 .

Lego.com Parents News, “Lego Universe to Close in 2012,” November 4,


2011,

http://parents.lego.com/en-gb/news/Lego%20Universe%20to%20close.aspx
(http://parents.lego.com/en-
gb/news/Lego%20Universe%20to%20close.aspx)

(/cases/lego-friends-leveraging-competitive-advantage##i2029) 29 . James

Delingpole, “When Lego Lost Its Head—and How This Toy Story Got Its
Happy Ending,” Mail Online, December 18, 2009.

(/cases/lego-friends-leveraging-competitive-advantage##i2030) 30 . Brendan

Koerner, “Geeks in Toyland,” Wired, February 2006.

(/cases/lego-friends-leveraging-competitive-advantage##i2031) 31 . “Lego in

Talks Over Branded Family Vehicle,” Marketing Week, January 18, 2001.

(/cases/lego-friends-leveraging-competitive-advantage##i2032) 32 . Ravi

Chandiramani, “Lego Moves in on the Girls' Market,” Marketing, February 13,


2003.

SAGE Recommends
(/cases/lego-friends-leveraging-competitive-advantage##i2033) 33 . Andy

McCormick, “How Lego Reinvented Its Innovation System and Conquered


the Toy Industry,” UTalkMarketing.com, April 10, 2012.

(/cases/lego-friends-leveraging-competitive-advantage##i2034) 34 . Keith

Oliver, Edouard Samakh, and Peter Heckmann, “Rebuilding Lego, Brick by


Brick,” Strategy + Business, August 29, 2007.

(/cases/lego-friends-leveraging-competitive-advantage##i2035) 35 .

Elizabeth Dowsett, Lego Harry Potter: Building the Magical World (New York:
DK Publishing, 2011).

(/cases/lego-friends-leveraging-competitive-advantage##i2036) 36 . Carlos

Cordon, Ralf Seifert, and Edwin Wellian, “The Case Study: Lego,” Financial
Times, November 24, 2010.

(/cases/lego-friends-leveraging-competitive-advantage##i2037) 37 . Oliver,

Samakh, and Heckmann, “Rebuilding Lego, Brick by Brick.”

(/cases/lego-friends-leveraging-competitive-advantage##i2038) 38 . “Bricks

Stack Up for Lego,” Supply Chain Europe 18, no. 1 (January 2009): 28–29.

(/cases/lego-friends-leveraging-competitive-advantage##i2039) 39 . Agnes

King, “Trouble in Toyland,” BRW, May 4, 2011.

(/cases/lego-friends-leveraging-competitive-advantage##i2040) 40 . Ibid.
(/cases/lego-friends-leveraging-competitive-advantage##i2041) 41 .

Lego.com Digital Designer, “What Happened to Design byME?”

http://ldd.lego.com/en-us/subpages/designbyme (http://ldd.lego.com/en-
us/subpages/designbyme)

(accessed July 23, 2012).

(/cases/lego-friends-leveraging-competitive-advantage##i2042) 42 . Cuusoo

is a transliterated Japanese word that means “imagination” or “wish.”

(/cases/lego-friends-leveraging-competitive-advantage##i2043) 43 . Jan M.

Olsen, “Toy Lesson for the ‘90s: Girls Are Girls, Boys Are Boys,” Marketing
News 29, no. 16 (July 31, 1995): 30.

(/cases/lego-friends-leveraging-competitive-advantage##i2044) 44 . Wieners,

“Lego Is for Girls.”

(/cases/lego-friends-leveraging-competitive-advantage##i2045) 45 . Ibid.

This case was prepared for inclusion in SAGE Business Cases primarily as a
basis for classroom discussion or self-study, and is not meant to illustrate
either effective or ineffective management styles. Nothing herein shall be

SAGE Recommends
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