The Seven Truths of Innovation and the LEGO Group’s Decline Part 2

Fifth Principle: Make It Authentic

LEGO long ago figured out that kids’ fantasy lives grow out of their real lives. That in fact, the everyday world that children observe is the feedstock for their imaginations. Well before the advent of the modern brick, one of Ole Kirk’s top-selling toys was the plastic, lifelike 781 Ferguson Traktor, modeled on the Massey-Fergusons found on many a postwar European farm. The logic was inescapable: if Dad’s got a tractor, the child should have one, too—as well as miniature hoes, cultivators, and other implements that could be attached to the toy. Today, a quick trip through YouTube reveals more than a few clips, posted by grown-up LEGO devotees, of remote-controlled mini Massey-Fergusons custom-built out of bricks.

Sixth Principle: First the Stores, Then the Kids

Although the LEGO Group’s guiding mission is to develop children through play, it’s the stores, not the kids, who rank first among the company’s priorities.

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The Seven Truths of Innovation:

1. Hire diverse and creative people.    
2. Head for blue-ocean markets. For more than a decade, business thinkers such as W. Chan Kim and Renée Mauborgne, the authors of Blue Ocean Strategy, have exhorted companies to push beyond the tactic of making incremental improvements to existing products and instead swim for the open water of untapped market spaces.    
3. Be customer driven.
4. Practice disruptive innovation. In his book The Innovator’s Dilemma, Harvard Business School professor Clayton Christensen introduced his theory of disruptive innovation, which he defined as a less pricey product or service, initially designed for less-demanding customers, which catches on and captures its market, displacing the incumbents.
5. Foster open innovation—heed the wisdom of the crowd.    
6. Explore the full spectrum of innovation.    
7. Build an innovation culture. [LEGO] put a premium on audacity and nonconformity, daring to scuttle a beloved but tiring brand such as DUPLO and replace it with something entirely new. Again and again, they upended the LEGO status quo.

   What’s more, the LEGO Group’s executive team built a culture within the company that valued and celebrated creativity above all else. Management encouraged people in every part of the organization to think outside the proverbial box and it rewarded those who did.

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What should we take away from the LEGO Group’s bid to become a truly customer-first company? Let us suggest four essential lessons.

In a crisis, act first; then plan. Before it could get the new LEGO Development Process up and running, the company relied on deeply experienced and engaged executives such as Mads Nipper to point the way. Until they developed an approach to testing with kids, designers essentially tested their ideas on Nipper and other veteran managers. Their ready-fire-aim review sessions were far from ideal, but they were good enough.

Mix it up. LEGO didn’t attempt to find one “right” solution. It launched a wide array of ventures to reconnect with customers—from small, no-risk efforts such as the Ambassador program to experimental approaches such as tapping adult fans for LEGO Factory and big structural initiatives such as remaking the LDP [LEGO Development Process]. As time went by, managers culled what didn’t work, even as they sought new ways of engaging customers.

Let customers walk in your shoes. LEGO grew adept at finding creative ways to use the Web to connect with kids and adult fans. But the most far-reaching changes came out of its face-to-face interactions with customers at events such as BrickFest and at testing sessions with kids. LEGO found that it’s not enough to walk in customers’ shoes. Sometimes you have to let them walk in your shoes, by letting them create stories, characters, and building experiences out of ideas that you show them.

Set the course; then get out of the way. As the LDP took shape, the company’s leaders began to take less of a top-down approach to innovation. Managers still decided what customers they wanted to target. And they still allocated resources, enforced processes, and set priorities. But when the development teams started engaging with kids, the execs let the teams take on far more decision-making authority.

Source: Brick by Brick. How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry (2013) by David C. Robertson.