LEGO: Laying the Foundations for Building Blocks
We all remember LEGO right? From the times we spent building random things and ignoring instructions as a kid to that one time we’ve all experienced when we’ve stood on a piece left out on the ground. I mean these things are hard to forget (especially the latter). Yet one can’t help but look back on these times and become curious about LEGO and how much a phenomenon it was and, in many regards, still is. We begin to wonder how LEGO came about to be found in every household. To understand this it makes sense to look at the company behind LEGO and see what got them to the point that they are at today with the LEGO Groups 2018 revenue coming in just shy of 5 Billion Euro.
Where it all began:
The LEGO Group was founded in 1932 by Ole Kirk Kristiansen in Denmark. The company started with the founder producing wooden toys and actually only started using plastic LEGO bricks in 1947. The LEGO Group is most well-known for its production of LEGO-branded toys, in particular the interlocking plastic bricks that we all know so well. However, the LEGO Group has started several other ventures since it was founded almost 90 years ago, including the LegoLand theme parks, its retail stores and more recently its production of two movies and several video games.
The company is privately owned still by the Kirk Kristiansen family, in the form of Kirkbi A/S which is the families holding and investment company and holds 75% of the shares. The rest of the company is owned by The LEGO Foundation, a group that was set up to transform attitudes and behaviors about learning and play across society, a goal it shares with The LEGO Group. The headquarters also remain in Denmark.How did it get here?
Yet how did the company go from a man producing wooden toys to a multi-billion-euro company? For many of its early years the company grew slowly and began to integrate changes such as the introduction of plastic and the first minifigures in 1978. However, the company has seen much of its growth since the start of the 21st century. From the years 2004 to 2014 the company nearly quadrupled its revenue from roughly 1 to 4 Billion Euros. In 2012 it overtook Mattel (the producers of Barbie) as the most valued toy company in the world, a position which it still holds to this day.
Things weren’t all rainbows and sunshine for the company however because in 2003-04 the company nearly collapsed. They had begun to drift and started to diversify too much, producing too many products and at one stage attempting to sell LEGO-branded clothes and watches. The LEGO Group did manage to build itself back together through the appointment of a new CEO called Jorgen Vig Knudstorp who brought the company back to its core or as he liked to call it, going “Back to the Brick”. He made the company focus on its core products and even reduced the different pieces the company produced from 12,000 to 7,000.
Since the appointment of this new CEO the company as evidently seen huge growth and this is due to the fine balance they have achieved between innovation and tradition. This has been seen in the release of “The LEGO Movie” in 2014 which stayed at the top of the American Box Office for several consecutive weeks.
In 2017 their first loss in sales in 13 years was recorded when sales fell by 8% following a tough year in which 1,400 jobs were cut. Funnily enough this loss came after the change of Mr. Knudstorp from Chief Executive to Chairman.So Where to Next?
Following the decline of sales in 2017 The LEGO Group has recorded a growth in sales in 2018 and seems to have gotten itself back on track for maintaining its position at the top of the worlds most valuable toy companies and this is where it plans on staying.
The company has, like many other top-end companies, began to address the issue of sustainability in its plans for the future. Of course reducing the use of plastic would be considered a harder task for the plastic brick producing company than it is for most other companies. The companies 2030 goal is to increase the use of plant based alternatives to make the plastic that goes into their product rather than phasing out plastics altogether.
The current CEO Niels B. Christiansen has also talked about the trend in the slowing of growth in the brands European markets. They have instead begun to focus their efforts on emerging markets, such as China and North Africa, that are proving to be quite successful for them. Christiansen states that he attributes the increased popularity of LEGO in these markets to the improved standards of living and growth in middle-class families that are more aware of LEGO than before.One of the most prominent questions that come to mind when we consider the future of The LEGO Group is how they plan to incorporate technology into their products. Kids these days are more and more obsessed with technology and so tend to forget about toys such as LEGO. One thing they have done is introduce LEGO Robots aimed at kids.
All the old concepts apply except that the finished product is a fully functioning robot. The parts can also be used in conjunction with the free programming app to allow children to build their own creations. This introduction has proven so popular that one of the toy sets (LEGO BOOST – Beginners to Advanced) was voted “Tech Toy of the Year 2018”. This is a great example of how The LEGO Group has changed to match the changing cultures of society, something that all successful companies must do and continue to do if they are to remain relevant in an ever-changing world.