Apply the VRIO framework on the given scenario in the case study Lego's Secrets
(Appendix_Week_9T_C4_ Lego's_Secrets) and discuss the sources of Lego's success.
CLOSING CASE Lego's secrets competitions. "With the possible exception of Apple. Lego is everywhere - toys, games, books, magazines, arguably no brand sparks as much cuit-like devotion competitions, retail stores, theme parks and now as Lego,' noted an expert. What are Lego's secrets? movies. If al the approximately 400 billion colourful Innovation and experimentation are among the fore- Interlocking bricks over produced by Lego were to be most characteristics of Logo. Derived from the Danish divided equally among the world's population, each leg goot (play well). Lego was founded in 1932 by person would have 86 bricks! Fortune magazine half- Ole Kirk Christiansen, a carpenter from Billund, a rural joked that "at least ten billion are under sofa cushions town in the West of Denmark (Lego Group is still head- and three billion are Inside vacuum cleaners'. By quartored in Bilund) As a firm soll-styled "to stimulato itself, a single plastic brick is lifeless. But snap two children's imagination and creativity" and "to nurture the of these inorganic blocks together, and suddenly child in each of us,' Lego is known for being willing to they take on a life of their own and a world of nearly entertain numerous experiments in order to capture hinite possibilities opens up. Igniting the imagination the hearts and minds of its fickle primary customers - of millions of children and adults around the world, the boys aged seven to 16 - as well as the walets of their little Lego brick has become a universal building block parents. Lego started with wooden toys. In 1947, it for fostering creativity. Around the world Logo fan became the first Danish toymaker to experiment with clubs abound, often with their own conferences and plastics, even though trade magazines at that time pre- dicted that plastics would never replace wooden toys.Lego tinkered with the brick, and initial efforts were not more than half a million people have 'liked" the Face- toy, or an experience? His team developed the new brick ever sold under the Lego name would easily click successful. The bricks snapped together, but could not book page "For those who have experienced the pain vision "to inspire and develop the builders of tomor- be separated easily. Lego continued to experiment. with any other Logo brick. caused by stepping on Lego'l eventually hitting a stud-and-tube coupling design that row'. Under Knudstorp's leadership, Lego radically Lego is also world-famous for generating a sys- CASE DISCUSSION QUESTIONS was patented in 1968. When a child snaps two bricks refocused on its core business, the bricks, as an inspi- tern, not merely a product. Long before the days when ration for creative children - and adults. New product 1 Applying the VRIO framework, what are the together, they would stick with a click and stay together computer programmes were supposed to be back- sources of Lego's success? until the child separated them with an easy tug. Because ward compatible (a new version of Windows needs lines, such as "Logo Friends' targeted at girls, built on such bricks would not come apart, kids could build from to alow users to open old files), Lego made its bricks the age-old idea of using the brick to create new play- ing and learning experiences. 2 How sustainable is Lego's success in the long the ground up, leveraging what Lego continues to call backward compatible - new bricks would click with run "dutch power. While the brick proved to be one of the old bricks of the 1960s vintage. As a result. kids (and A more specific problem was the high costs in the 3 How did Lego recover from a decade of poor toy industry's greatest innovations, Lego's experiment adults) can mix and match old and new sets and the primary production sites in Denmark and Switzerland. Lego in 2006 thus offshore outsourced production to performance in the late 1990s/early 2000s? marched on, with numerous hits and also nume Lego universe can grow exponentially. misses in the last five decades. Flextronics plants in Hungary and the Czech Repub- Of course it has not always been plain sailing for Sources: (1) N. Lunde, 2012, Miraclet i Lega, Copenhagens Jyllands. Another Lego hallmark is Insisting on excellence. Lego. In the 1990s, Lego entered numerous related lic. Yet Flextronics was unable to deliver the expected quantity and quality of bricks; both Lego and Flextron- Posters Fortag: (2) Economist, 2013, Lego in Asia, November 16: Coming from the founder, 'only the best is good lines of business, ranging from book publishing to 72: (3) Economist. 2014, Unpacking Lego, March 8: 71: 14) D.C. enough' is a company motto engraved on a plaque business consulting inspired by playing children. For ics had underestimated how difficult it is to manufac Robertson, 2013, Brick by Brick: How LEGO Rewrote the Rules ture those simple yet very precise bricks. Thus in 2008 of innovation and Conquered the Global Toy Industry, Now York: that graces the entrance to Lego Group headquar example, Lego diversified into themeparks known as ters' cafeteria even today. The seemingly simple tight Lego bought those Flextronics plants and invested in Crown Business: (5) Zoomberg, 2014, Brick by bricic inside Logo. fit of two bricks - and their easy separation - calls for Legoland - first in Billund, and later also in Germany and the UK. While these parks were popular among automation and quality control to ensure that every online video, www.bloomberg.comews/videos/b/40560864-4427- 4910-821-21504a014502; [5) www.lago.com. extremely precise manufacturing. Since the size of each brick is so tiny, misalignment in the range of a children and their parents, the finances never quite worked out and Lego kept losing money. In 2005, Lego few millimeters can easily create a misfit when bricks eventually sold its themeparks to Merin Entertainment. are stacked together. Competitors can produce Lego In the early 2000s, Lego also produced products like NOTES look-alikes that tolerate higher levels of variations, but Harry Potter-branded toys under licence of Hollywood kids often quickly figure out Lego is the best after play- ing with competing products for a short while. This film studio Warner Brothers. While this venture was "For journal abbreviations please see page xx-xxi.' profitable in the short term, it distracted the focus of is not to say Lego's quality is perfect. It is not, as on the company. average 18 out of one million bricks produced fall to meet Lego's quality standards and have to be tossed. After many years of poor performance, Jorgen Vig 1 E. Penrose, 1959, The Theory of the Growth of Knudstorp was brought in as new CEO in 2004. The the Firm, London: Blackwell; M. Pettus, 2001, The 7 C.F. Fey & D.R. Denison, 2003, Organizational culture In addition to tight fit and easy separation, Lego is also first question he had to address was, what does the resource-based view as a developmental growth and effectiveness, OSC, 14: 686-706; D.R. Denison, S. Haaland & P. Goetzer, 2004, Corporate culture and known for its strength. It is legendarily indestructible: Lego name stand for? A toy brand, or specific type of process, AM/, 44: 878-898; K.E. Meyer, 2006, organizational effectiveness, OD, 33, 98-109; Globalfocusing: From Domestic Conglomerate to 8 N. O'Regan & A. Ghobadian, 2009, Successful strategic
