Impact of Innovation on LEGO: Strategy, Enterprise and Opportunity

This paper evaluates the impact of innovation on the contemporary business world through an analysis of the organization LEGO which after a decade of turbulent period had revived again in the present decade.

Running head: STRATEGY, ENTERPRISE AND OPPORTUNITY
Strategy, Enterprise and Opportunity
Name of the Student:
Name of the University:
Author’s Note:

1STRATEGY, ENTERPRISE AND OPPORTUNITY
Table of Contents
Introduction................................................................................................................................2
Overview of LEGO....................................................................................................................3
Key drivers of innovation...........................................................................................................4
Opportunities presented by the toy business market..................................................................6
Innovative approaches taken by LEGO.....................................................................................7
Use of Blue Ocean strategy by LEGO.......................................................................................9
Conclusion................................................................................................................................11
References................................................................................................................................12

2STRATEGY, ENTERPRISE AND OPPORTUNITY
Introduction
Zhang, Zhao and Xu (2016) are of the viewpoint that the extensive usage of diverse
kinds of innovations and technologies had significantly changed the nature of the present day
business world. As opined by Prajogo (2016), this change not only becomes perceptible in the
kind of business models which are being followed by the different contemporary business
enterprises but at the same time in the kind of products or services that are being offered by
them to the customers. In this regard, it needs to be said that the majority of the contemporary
organizations are opting for the use of the constructs of innovation and creativity for
enhancing the efficiency of the different departments of their organization (Lages 2016). For
example, the influence of the two above mentioned constructs is seen within the processes of
marketing, promotion, manufacturing and other different aspects of the contemporary
organizations.
According to Singh, Chakraborty and Roy (2016), the extensive usage of these
innovative ideas or models offers different kinds of benefits or opportunities to the
organizations like the improvement of business performance, opportunity to earn a higher
amount of profit, manufacture of better quality products and others. It is pertinent to note that
the organizational prospects of an organization depend greatly on these attributes and these in
short are the major reasons why the majority of the contemporary organizations are
increasingly resorting to the use of innovation and creativity (Enderle and Murphy 2015).
This paper evaluates the impact of innovation on the contemporary business world through an
analysis of the organization LEGO which after a decade of turbulent period had revived again
in the present decade. The paper begins by offering an overview of the organization LEGO
and the kind of products that it offers to the customers. Next, the paper highlights the key
drivers for innovation like higher growth rate, opportunity to earn higher profit and others

3STRATEGY, ENTERPRISE AND OPPORTUNITY
which propelled the organization to make the use of this construct within the cannon of its
business operations. The paper also discusses the different opportunities which are being
offered by the contemporary toy business market and the different initiatives or approaches
like innovative value chain, profit system and others that the concerned organization has
undertaken for the utilization of these opportunities. Finally, the paper concludes by stating
the manner in which the organization LEGO through the effective usage of the Blue Ocean
Strategy has improved the prospects of its business.
Overview of LEGO
The organization Lego System A/S, founded in August 1932 by Ole Kirk
Christiansen, is more commonly called by the names of The Lego Group or The LEGO
Group (Lego.com 2019). The organization since the year of its foundation has focused on the
aspect of quality and this is probably one of the main reasons why the mantra “Only the best
is good enough” is being followed within the framework of the organization under discussion
here (Kahn 2018). The organization LEGO is not only one of the oldest toy making
organizations of the world but at the same time is known for the quality as well as the
diversity of the toys offered by it to the customers from the diverse parts of the world. LEGO
although initially founded in the nation of Denmark is currently operational in the majority of
the nations of the world and has more than 42 different business centers (Lego.com 2019). In
addition to the different kinds of toys which are being offered by the organization under
discussion here for boys and girls and also grown-ups as well as children, the concerned
organization in the recent times has established eight amusement parks in the diverse parts of
the world which are called by the name of Legoland (Kurkovsky 2016).
The organization in the last decade of the 20th century and the early years of the 21st
century lost a considerable amount of the market monopoly because of the stringent

4STRATEGY, ENTERPRISE AND OPPORTUNITY
competition which it faced from other organizations like Mattel, Hasbro and others and also
because of the ineffective management policies followed by it (Rivkin, Thomke and
Beyersdorfer 2012). However, in the recent times, it is seen that the organization because of
the extensive usage of the constructs of innovation and creativity and also effective
management policies has been able to regain its market monopoly. As a matter of fact, the
organization under discussion here for the 2015 was the largest toy making company of the
world in terms of the annual revenue generated by it, that is, US$2.1 billion (Lego.com
2019).
Key drivers of innovation
Visnjic, Wiengarten and Neely (2016) have articulated the viewpoint that there are
various key drivers of innovation which motivate the different business enterprises to take the
help of the same. In this regard, mention needs to be made of the factors of the opportunity to
enhance the quality of products offered by an organization, nurturing talent, opportunity to
market as well as promote the goods or services in an effective manner and others (Enderle
and Murphy 2015). Along with these, there are other drivers of the process of innovation
which propel the different organizations to take the help of the same like the opportunity to
earn a higher amount of profit, improve business performance and others (Kueng, Li and
Yang 2016). There drivers of the process of innovation becomes especially apparent from an
analysis of the case study of LEGO under discussion here.
The case study under discussion here clearly reveals the fact that there are various
kinds of performance as well as management issues that the organization LEGO has been
facing for quite some time now. For example, it is seen that in the absence of any effective
talent management or nurturing program the organization despite having a large workforce
has not been able to offer the right volume of toys so as to outrival its other competitors with

5STRATEGY, ENTERPRISE AND OPPORTUNITY
the toy business market (Rivkin, Thomke and Beyersdorfer 2012). In addition to this, it was
also seen that in the past enough push was not offered to the different employees to utilize the
constructs of creativity and innovation within the framework of the job roles that they were
supposed to perform (Martins, Rindova and Greenbaum 2015). The net result of this was the
employees of the organization use to produce the same kind of toys and other products that
had once enabled it to gain monopoly in the toy business market (Rivkin, Thomke and
Beyersdorfer 2012). However, because of the change in the society and also the requirements
of the customers these older versions of the toys offered by the organization were no longer
adequate to help the organization to earn a higher amount of revenue (Rusu and Avasilcăi
2015). Apart from these, the traditional business model as well as the management policies
followed by the organization under discussion here also contributed towards the steady
decline of the business prospects of the organizations over the years (Rivkin, Thomke and
Beyersdorfer 2012). Furthermore, the customer base of the organization was also declining in
a substantial manner because of the inability of the organization to understand the
requirements of the modern children and this directly affected the profit earned by the
organization (Sutardja 2015). Thus, it can be said that these problems or issues faced by the
organization under discussion here were the factors or drivers which motivated the
organization to take the help of the construct of innovation.
LEGO for the effective mitigation of these problems that it had been facing over the
years took the help of the processes of innovation and creativity. For example, the ex-CFO of
the organization Poul Ploughman terminated more than 10% of the non-performing
employees of the organization so as to not only reduce the operational cost but at the same
time to enhance the performance level of the other employees of the organization as well
(Rivkin, Thomke and Beyersdorfer 2012). More importantly, after the fire which destroyed
the workshop of the organization under discussion here in Denmark, the Godtfred, the son of

6STRATEGY, ENTERPRISE AND OPPORTUNITY
the founder of the organization stopped the production of wooden toys and started the
manufacture of toys which were prepared from bricks (Rivkin, Thomke and Beyersdorfer
2012). This might not seem to be an innovative idea today in the 21st century however in the
20th century it was a landmark move and helped the organization to gain a substantial amount
of success at that particular point of time. More importantly, the organization in the later part
of the 20th century taking the help of the process of innovation not only improved the quality
of toys that it was manufacturing but at the same time started new lines of products like the
ones for girls, grown-ups, “LEGO system of play” and others (Rivkin, Thomke and
Beyersdorfer 2012). In this regard, mention also needs to be made of Legolands, the
amusement parks of the organization under discussion here which has been designed on the
model of the Disney Theme Parks (Mathias et al. 2017).
Opportunities presented by the toy business market
As opined by El Sawy et al. (2016), the business prospects of an organization depends
greatly on the effectiveness with which it is being able to capitalize on the opportunities
presented by the external business world in which it is operational. Furthermore, in order to
effectively utilize the opportunities presented by the business environment the organizations
not only need to conduct regular external business environment audit but also formulate
effective business strategies for the utilization of the opportunities (Ringen 2015). In the
particular context of the organization LEGO the case study reveals the fact that there were
various kinds of opportunities that the toy business market of the 20th century presented to the
organization under discussion here.
The case study clearly reveals the fact that there were some dominant trends which
were seen in the 20th century within the toy business market. For example, in the 20th century
it was seen that the fad toys were the new emerging trend within the framework of the toy

7STRATEGY, ENTERPRISE AND OPPORTUNITY
industry (Rivkin, Thomke and Beyersdorfer 2012). Furthermore, it was seen that the
customers or the children were no longer like the ones of the earlier times and also their
requirements or demands were totally different from that of the earlier times (Kerr, Phaal and
Thams 2017). For example, it was seen that unlike the earlier times the educational or the
school life of the children dominated the majority of their time and they had very little for the
traditional kind of toys (Rivkin, Thomke and Beyersdorfer 2012). The net result of this was
the toy organizations needed to manufacture the kind of toys which would not only captivate
the children but at the same time would entertain them as well. More importantly, the toy
organizations also needed to manufacture the kind of toys which would be accepted by the
parents of the children.
There are other kinds of business opportunities as well which the toy business market
of the 20th century presented to the organization LEGO. For example, the unprecedented
success attained by the organizations like Mattel, Hasbro and others clearly reveals the fact
that the toys which had their themes the various comic characters and situations (Rivkin,
Thomke and Beyersdorfer 2012). In addition to this, it was also seen that the toys which were
manufactured through the use of innovative ideas were much appreciated by the children.
Moreover, the development of retail channels for the sale of the toys and thereby the
enhancement of the profit percentage was another important opportunity that the toy industry
of the 20th century offered to the organizations (Mørch and Thomassen 2016).
Innovative approaches taken by LEGO
The organization under discussion here for the effective utilization of the business
opportunities presented by the toy industry of the 20th century took the help of various
innovative frameworks. One of the most important ones in this regard was the innovative
value chain which consisted of three steps, namely, idea generation, idea identification and

8STRATEGY, ENTERPRISE AND OPPORTUNITY
idea diffusion (Roth, Schneckenberg and Tsai 2015). Following the first step of this
framework the organization gathered all the possible opportunities and options that were
available to them. In the second stage, the organization identified the opportunity which was
likely to offer them the maximum amount of benefit or reward, namely, the use of innovation
for the manufacture of toys for the children. The third stage was the stage of the diffusion of
this opportunity or idea to the management team of the organization and also its active use.
In addition to the above mentioned innovative framework, the organization under
discussion here also took the help of other kinds of innovative frameworks for the
rejuvenation of its business like profit model, networking, customer engagement, product
system and others (Kurkovsky 2016). For example, LEGO through the use of the innovative
framework of networking established effective networks with the different vendors as well as
the retailers for the enhancement of the sale of the toys offered by them to the children
(Rivkin, Thomke and Beyersdorfer 2012). One of the major problems that the organization
LEGO faced in the 20th century was the fact that the toys manufactured by them were not
accessible to all the customers from the different parts of the world because of the ineffective
supply chain model followed by them. However, through the effective use of the construct of
networking the organization was success in establishing networks with the different retailers
for the improvement of the supply chain system that they followed (Kahn 2018). This in turn
ensured the fact that the customers had access to the toys manufactured by the organization
under discussion here. Another important innovative framework that the organization used in
the 20th century was the profit model. For example, it was seen that the organization used to
offer toys to the customers which were actually cheaper so as to create interest regarding the
theme of the characters and their background history (Rusu and Avasilcăi 2015). This interest
which the organization has created among the customers was in turn used by the organization

9STRATEGY, ENTERPRISE AND OPPORTUNITY
for the success of the different amusement parks, namely, Legolands which was later on
created by the organization to earn a higher amount of profit.
Customer engagement was another innovative framework which was used by the
organization under discussion here so as to earn a higher amount of revenue (Ringen 2015).
For example, it was seen that the organization used to take the help of effective as well as
intriguing storylines so as to harvest the interest of the children regarding the toys
manufactured by them (Mathias et al. 2017). More importantly, this interest that the
organization garnered among the children was even utilized by it for the success of the
amusement parks. In addition to the above mentioned ones, the organization also took the
help of various measures like manage for cash, manage for value, manage for growth and
others (Rivkin, Thomke and Beyersdorfer 2012). Through the use of these measures the
organization was able to not only reduce its operational cost but also to launch new products
and also ensure the future organization as well (Mørch and Thomassen 2016). Thus, it can be
said that measures as well as innovative frameworks that the organization LEGO used not
only helped in the revival of the organization but at the same time helped it to become one of
the largest toy manufacturing organizations of the world.
Use of Blue Ocean strategy by LEGO
Martins, Rindova and Greenbaum (2015) are of the viewpoint that the blue ocean
strategy has emerged as one of the most important strategies within the framework of the
contemporary business world because of the various benefits that it offers to the business
enterprises. As opined by El Sawy et al. (2016), the blue ocean strategy becomes especially
important for the organizations which are not only trying to enter new business markets but at
the same time trying to reduce the high amount of business competition faced by them in the
business market as well. It is pertinent to note that in the contemporary times it is seen that

10STRATEGY, ENTERPRISE AND OPPORTUNITY
there are various business enterprises which taking the help of this particular business
strategy have launched the kind of products or services which are not being offered by the
other business enterprises (Kueng, Li and Yang 2016). This in turn has helped them to not
only earn a higher amount of profit and revenue but at the same time competitive advantage
within the business market and also sustainability as well. The organization under discussion
here also took the help of this particular business strategy not only for the mitigation of fierce
competition which was facing from its rivals like Hasbro, Mattel and others but also to earn a
higher amount of revenue as well (Rivkin, Thomke and Beyersdorfer 2012).
The usage of the blue ocean strategy becomes evident in the various facets of the
business enterprise LEGO. For example, back in the 1960s the decision of the organization to
switch over to the brick material for the manufacture of toys rather than the use of wooden
material can be seen as an example of the same (Rivkin, Thomke and Beyersdorfer 2012).
Furthermore, the decision of the organization to build amusement parks, namely Legolands,
on the basis of the themes of the toys which it used to offer to the children is another instance
in which the organization took the help of the strategy under discussion here (Zhang, Zhao
and Xu 2016). In addition to these two instances, the extensive usage of the blue ocean
strategy also becomes evident in the decision of the organization to embrace the concepts of
innovation, creativity, technology and others for the manufacture of the toys that they offered
to the children. Furthermore, the organization also used the four tools of the above mentioned
strategy, namely, create, eliminate, raise and reduce to mitigate the fierce competition that it
faced and also for offering new kinds of toys to the children (Singh, Chakraborty and Roy
2016). It is pertinent to note that the decisions or measures are likely to sound commonplace
within the context of the contemporary business world however back in the 20th century there
were very few organizations which were taking the help of these measures. Thus, it can be
said that the usage of this particular strategy not only helped the organization to regain the

11STRATEGY, ENTERPRISE AND OPPORTUNITY
monopoly that it once held within the toy industry but at the same time helped it earn a higher
amount of profit as well.
Conclusion
To conclude, the construct of innovation and creativity have emerged as one of the
most important ones within the framework of the contemporary business world and it is seen
that there are many business enterprises which are actively taking the help of these concepts
for the process of their business operations. Furthermore, for the effective utilization of these
two concepts the organizations are required to take into effective consideration various kinds
of innovative frameworks like innovative value chain, profit system, networking and others.
Another important business strategy which is being extensively used by the different business
enterprises in order to mitigate competition and also to earn a higher amount of revenue is the
blue ocean strategy. These aspects of the contemporary business world become evident from
the above analysis of the organization LEGO and their usage of the above mentioned
constructs.

12STRATEGY, ENTERPRISE AND OPPORTUNITY
References
Avasilcăi, S. and Rusu, G., 2015. Innovation management based on proactive engagement of
customers: A case study on LEGO Group. Part II: Challenge of engaging the digital
customer. In IOP Conference Series: Materials Science and Engineering (Vol. 95, No. 1, p.
012144). IOP Publishing.
El Sawy, O.A., Kræmmergaard, P., Amsinck, H. and Vinther, A.L., 2016. How LEGO Built
the Foundations and Enterprise Capabilities for Digital Leadership. MIS Quarterly
Executive, 15(2).
Enderle, G. and Murphy, P.E. eds., 2015. Ethical innovation in business and the economy.
Edward Elgar Publishing.
Kahn, K.B., 2018. Understanding innovation. Business Horizons, 61(3), pp.453-460.
Kerr, C., Phaal, R. and Thams, K., 2017. Customising and deploying roadmapping in an
organisational setting: The LEGO Group experience. Journal of Engineering and Technology
Management.
Kueng, L., Li, N. and Yang, M.J., 2016. The impact of emerging market competition on
innovation and business strategy (No. w22840). National Bureau of Economic Research.
Kurkovsky, S., 2016, July. A lego-based approach to introducing test-driven development.
In Proceedings of the 2016 ACM Conference on Innovation and Technology in Computer
Science Education (pp. 246-247). ACM.
Lages, L.F., 2016. VCW—Value Creation Wheel: Innovation, technology, business, and
society. Journal of Business Research, 69(11), pp.4849-4855.

13STRATEGY, ENTERPRISE AND OPPORTUNITY
Lego.com 2019. LEGO.com US – Inspire and develop the builders of tomorrow. [online]
Available at: https://www.lego.com/en-us [Accessed 6 Jan. 2019].
Martins, L.L., Rindova, V.P. and Greenbaum, B.E., 2015. Unlocking the hidden value of
concepts: a cognitive approach to business model innovation. Strategic Entrepreneurship
Journal, 9(1), pp.99-117.
Mathias, D., Boa, D., Hicks, B., Snider, C., Bennett, P. and Taylor, C., 2017. Design
variation through richness of rules embedded in LEGO bricks. In DS 87-8 Proceedings of the
21st International Conference on Engineering Design (ICED 17) Vol 8: Human Behaviour in
Design, Vancouver, Canada, 21-25.08. 2017 (pp. 099-108).
Mørch, A.I. and Thomassen, I., 2016. From Wooden Blocks and Lego to Minecraft:
Designing and Playing with Blocks to Learn in a 3D Virtual World. In CoPDA@
NordiCHI (pp. 61-67).
Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment
in delivering business performance. International Journal of Production Economics, 171,
pp.241-249.
Ringen, J., 2015. How Lego Became the Apple of Toys. Fast Company, (192).
Rivkin, J.W., Thomke, S. and Beyersdorfer, D., 2012. LEGO. Harvard Business Review
Roth, S., Schneckenberg, D. and Tsai, C.W., 2015. The ludic drive as innovation driver:
Introduction to the gamification of innovation. Creativity and Innovation Management, 24(2),
pp.300-306.
Rusu, G. and Avasilcăi, S., 2015. Innovation management based on proactive engagement of
customers: A case study on LEGO Group. Part I: Innovation Management at Lego Group.

14STRATEGY, ENTERPRISE AND OPPORTUNITY
In IOP Conference Series: Materials Science and Engineering (Vol. 95, No. 1, p. 012143).
IOP Publishing.
Singh, M.P., Chakraborty, A. and Roy, M., 2016. The link among innovation drivers, green
innovation and business performance: empirical evidence from a developing economy. World
Review of Science, Technology and Sustainable Development, 12(4), pp.316-334.
Sutardja, S., 2015, February. 1.2 the future of IC design innovation. In Solid-State Circuits
Conference-(ISSCC), 2015 IEEE International (pp. 1-6). IEEE.
Visnjic, I., Wiengarten, F. and Neely, A., 2016. Only the brave: Product innovation, service
business model innovation, and their impact on performance. Journal of Product Innovation
Management, 33(1), pp.36-52.
Zhang, Y., Zhao, S. and Xu, X., 2016. Business model innovation: an integrated approach
based on elements and functions. Information Technology and Management, 17(3), pp.303-
310.