Here's the question:

Lego's secrets competitions. "With the possible exception of Apple, Lego is everywhere - toys, games, books, magazines, arguably no brand sparks as much cult-like devotion competitions, retail stores, theme parks and now as Lego,' noted an expert. What are Lego's secrets? movies. If all the approximately 400 billion colourful Innovation and experimentation are among the fore- interlocking bricks ever produced by Lego were to be most characteristics of Lego. Derived from the Danish divided equally among the world's population, each leg godt ('play well'), Lego was founded in 1932 by person would have 86 bricks! Fortune magazine half- Ole Kirk Christiansen, a carpenter from Bilund, 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 quartered in Billund.) As a firm self-styled 'to stimulate 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 infinite 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 wallets 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 Lego 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- successful. The bricks snapped together, but could not book page 'For those who have experienced the pain be separated easily. Lego continued to experiment, caused by stepping on Lego'! eventualy hitting a stud-and-tube coupling design that Lego is also world-famous for generating a sys- was patented in 1958. When a child snaps two bricks tem, not merely a product. Long before the days when together, they would stick with a click and stay together computer programmes were supposed to be back- until the child separated them with an easy tug. Because ward compatible (a new version of Windows needs such bricks would not come apart, kids could build from to allow users to open old files), Lego made its bricks the ground up, leveraging what Lego continues to call backward compatible - new bricks would click with 'dutch power'. While the brick proved to be one of the old bricks of the 1950s vintage. As a result, kids (and toy industry's greatest innovations, Lego's experiment adults) can mix and match old and new sets and the marched on, with numerous hits and also numerous Lego universe can grow exponentially. misses in the last five decades. Of course it has not always been plain sailing for Another Lego hallmark is insisting on excellence. Lego. In the 1990s, Lego entered numerous related Coming from the founder, "only the best is good lines of business, ranging from book publishing to enough' is a company motto engraved on a plaque business consulting inspired by playing children. For that graces the entrance to Lego Group headquar example, Lego diversified into themeparks known as ters' cafeteria even today. The seemingly simple tight Legoland - first in Billund, and later also in Germany fit of two bricks - and their easy separation - calls for and the UK. While these parks were popular among extremely precise manufacturing. Since the size of children and their parents, the finances never quite each brick is so tiny, misalignment in the range of a worked out and Lego kept losing money. In 2005, Lego few millimeters can easily create a misfit when bricks eventually sold its themeparks to Merlin Entertainment. are stacked together. Competitors can produce Lego In the early 2000s, Lego also produced products like 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- film studio Warner Brothers. While this venture was ing with competing products for a short while. This 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 fail to After many years of poor performance, Jorgen Vig meet Lego's quality standards and have to be tossed. Knudstorp was brought in as new CEO in 2004. The In addition to tight fit and easy separation, Lego is also first question he had to address was, what does the known for its strength. It is legendarily indestructible: Lego name stand for? A toy brand, or specific type oftoy, or an experience? His team developed the new brick ever sold under the Lego name would easily click vision 'to inspire and develop the builders of tomor- with any other Lego brick. row. Under Knudstorp's leadership, Lego radically refocused on its core business, the bricks, as an inspi- CASE DISCUSSION QUESTIONS ration for creative children - and adults. New product 1 Applying the VRIO framework, what are the lines, such as 'Lego Friends' targeted at girls, built on sources of Lego's success? the age-old idea of using the brick to create new play- 2 How sustainable is Lego's success in the long ing and learning experiences. run? A more specific problem was the high costs in the primary production sites in Denmark and Switzerland. 3 How did Lego recover from a decade of poor Lego in 2006 thus offshore outsourced production to performance in the late 1990s/early 2000s? Flextronics plants in Hungary and the Czech Repub- lic. Yet Flextronics was unable to deliver the expected Sources: (1) N. Lunde, 2012, Miraclet i Lego, Copenhagen: Jyllands- quantity and quality of bricks; both Lego and Flextron- Posters Forlag: (2) Economist, 2013, Lego in Asia, November 16: ics had underestimated how difficult it is to manufact 72: (3) Economist, 2014, Unpacking Lego, March 8: 71: (4) D.C. 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, New York: Lego bought those Flextronics plants and invested in Crown Business; (5) Bloomberg, 2014, Brick by brick: inside Lego. automation and quality control to ensure that every online video, www.bloomberg.comews/videos/b/4856e664-4427- 40lc-8215-2d504a614502; (5) www.lego.com