I never noticed LEGO’s not-so-LEGO Galidor action-figure line, but it was a disaster, and even within its core construction toy business, LEGO was foundering:
LEGO managers had given designers free rein to come up with ever more imaginative creations. And they took it. Left to their own devices, designers conjured up increasingly complex models, many of which required the company to make new components — the various bricks, doors, helmets, and heads that come in a rainbow of colors and fill every LEGO box. By 2004 the number of components had exploded, climbing from about 7,000 to 12,400 in just seven years. Of course, supply costs went through the roof, too.
Even more troubling was that the new designs weren’t resonating with kids. That freedom to create elaborate new designs had a price. “It was making us more stupid,” Smith-Meyer says. All you needed to do was look at the fire truck in its LEGO City line. It went from being a conventional hook-and-ladder rig to a futuristic hot rod. Its cockpit-like pod for a driver was nearly twice the size of the back of the truck, where presumably all the firefighting gear was stored.
The truck looked cool to the adult designers, but kids hated it. “It totally failed,” says Nipper, the executive vice-president. The design free-for-all turned the LEGO City line, once among the largest pieces of LEGO’s business, into a shell of its former self, accounting for just 3 percent of the company’s total revenue, down from roughly 13 percent in 1999. “It literally almost evaporated,” Nipper says.
Looking back, Nipper doesn’t find fault with the designers. “Management was to blame,” Nipper says. “The same people who were doing crappy products then are making world-class products today.” Managers, rather, let those designers go wild. And, Smith-Meyer says, they did. “We almost did innovation suicide. We didn’t do a lot of clever components. We did a lot of stylized pieces,” Smith-Meyer says. “We wanted to be Philippe Starck” — the French industrial, interior, and furniture designer famous for everything from juicers to motorcycles. LEGO had assumed it would flourish by giving its designers whatever pieces they asked for in order to unleash their creativity. Instead, costs soared as the models veered toward the esoteric.
Just as design pushed LEGO to the precipice, it helped bring the company back. But here’s the paradox: Instead of giving designers free rein to conjure up their most brilliant creations to save the company, LEGO tied their hands. Instead of rubber-stamping nearly every request for a new component, LEGO put each one to a vote among designers. Only the top vote getters — the ones other designers imagined they could use — would be added to the palette. And it eliminated rarely used pieces, slashing the total number of components to about 7,000, the same number as in 1997.
LEGO also forced designers to come out of their cocoons and work with noncreative staff. At the earliest stages of product development, marketing managers, who had detailed research on the types of products kids wanted, helped guide development. Manufacturing personnel weighed in on production costs before a prototype ever saw the light of day. Gone were the days when designers could go wherever their imaginations took them.
Interestingly, that downturn was sparked by a previous upturn. The introduction of Star Wars and other franchise-based sets in 1999 was an enormous revival for the company, and also got adults back into LEGO in a way they never had before. It also created a new term — AFoL — Adult Fan of LEGO.
That led to a more adult-oriented approach, which in turn ended with the over-complexity here. Now they’ve got a pretty comprehensive range from the very complex, detailed collector’s edition sets down to the $2.99 fireman and chef boxes.
Full disclosure: I worked in a LEGO retail store last summer and this past winter.
I’m not surprised by the growth in adult-oriented kits for grown men, but I am surprised at the paucity of girl-friendly sets — at least past the Duplo stage, which does include lots of animals and ordinary people.
I’ve noticed over the years that LEGO has rended from “fairly affordable” and “open ended” to “pricey” and “brittle”.
For example, instead of a pile of bricklets I could build “just about anything” with for, say, $10.95, I now tend to see “models” I can build only one thing with (e.g. The Death Star!) for $350.00. Cool, perhaps, but makes for a brittle play experience.
However, for me, that was irrelevant to the revival of LEGO. What really, really “wows” me about the company is the customer service. Rather than a lengthy panegyric about it, here’s what I’ve experienced.
Wow. Simple, easy, fast, smart. Makes me want to buy a LEGO, it does. :-)
LEGO has also had some manufacturing issues, which have been covered by the guys at the Evolving Excellence blog. Bizarrely, they decided to outsource plastics molding — something in which they had long experience — while keeping electronics manufacturing in-house. And the company to which they outsourced the plastics work (injection molding) was itself primarily an electronics firm!
I also discussed LEGO last year: Lego Thinks Beyond the Brick. It looks like the New York Times story I cited ignored McKinsey’s bad advice and emphasized LEGO’s comeback under their guidance.