LEGO Case Study: Innovation, Strategy, and Market Analysis

This case study examines the key drivers of innovation contributing to LEGO's success, including restructuring, product innovation, and understanding market changes. It analyzes LEGO's strategic approaches to identify market opportunities, such as the 4Ps of innovation, organizational restructuring, and the Ansoff Matrix. The study critically assesses the role of the Blue Ocean strategy in LEGO's success, highlighting how the company differentiated itself and created new markets. The analysis covers various frameworks and opportunities that have helped shape LEGO's entrepreneurial vision, including online platforms for customer input and understanding consumer behavior to launch products like LEGO Friends. The study also evaluates the impact of innovation on the company's profitability and efficiency.

LEGO- Case Study

Table of Contents
INTRODUCTION...........................................................................................................................1
Task A, identify and evaluate the key drivers of innovation contributing to the success of
LEGO.....................................................................................................................................1
Task B, using appropriate strategy and innovation frameworks, critically analyse the different
approaches taken by LEGO to identify opportunities on the market.....................................3
Task C, critically analyse the view that LEGO's success can be attributed to the successful
application of Blue Ocean strategy.........................................................................................6
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
LEGO is a manufacturing company. It mainly manufactures stepladders, ironing boards,
stools, wooden toys etc. The company was found in 1932 by Ole Kirk Christiansen. Recent
period is mainly working in toy manufacturing. LEGO was a strong company which was
covering a large market but as the time passed, the company started facing a large competition in
the market and hence it started analysing the market, making strategies, understanding market
and consumer behaviour as well in order to sustain in the market for long period of time. The
following study will disclose the key drivers of innovation that are contributing to the success of
company, it will discuss the strategies, innovation framework, and also will analyse the different
approaches following by LEGO. This assignment will also analyse that how application of Blue
Ocean Strategy is attributing towards the success of the company. This study will also analyse
and evaluate different approaches which are helpful in shaping the entrepreneurial vision and
identifying the opportunities of the company. The study will develop a creative, innovative
thinking and analytical skills as well. This study will cover appropriate research tools, models
and frameworks in support of analysis with appropriate examples.
Task A, contribution of key drivers to the success of LEGO.
Value of business can be increased by bringing innovation in the business. Innovation can be
both threats and opportunity to the business. Market changes are quite uncertain and
unpredictable. If the innovators of the company could predict the market changes right and make
innovation accordingly, it will become a opportunity for the company. On the other hand, wrong
prediction could be result on the failure of business .
Traditionally LEGO was manufacturing fire station, games which were reflecting the
classic theme. But as the time passed, taste of costumers changed and due to change in market
behaviour LEGO has to develop innovative products which could satisfy the consumer needs and
attract maximum consumers as well.
Key drivers of innovation contribution to the success of LEGO are as under:
At the time when LEGO needed innovation they first restructured the company and hired
a new CEO. As a result, LEGO got a new direction and appropriate innovative plans for the
success of business. Presently, LEGO has reached in the list of over innovators in video games
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manufacturing. Now it launches new innovated products frequently and attracting more and
more customers towards the company's products (Chrisman, 2015).
Innovation is not an option for any company. But it is a necessity of the company in
order to play well for the long period of time. Innovation includes product innovation, change in
strategy, methods, cost cutting, etc. for effective innovation LEGO appointed a team which have
a full focus on understanding the market changes and innovating new ideas to overcome and face
the changes efficiently. Recently, company has developed low risk, low cost innovation practices
in order to earn maximum profit for the business.
At starting stage LEGO adopted a strategy that it will do innovation at small scale with
small budget in order to reduce the risk of failure. LEGO avoids mistake of innovating all things
together. Rather, they create a prototype at minimum level and bring the new product at small
speed. This strategy is cost effective and having low risk as well. The R&D drives changes to
ensure that their new innovating ideas are working well and are being accepted by the consumers
in the market (Ciganek, Haseman,. and Ramamurthy, 2014, pp.278-297).
LEGO has brought a new idea that allows its consumers to design their own sets. It
provides an online platform to its customer to give suggestions regarding innovation. Company
analyses all the suggestions and brings the best innovation in the market. This open innovative
technique helps the company to employ everything via internet to peer selection and tempt its
fans for contributing in the new design and innovative ideas. It also helps the company to
enhance the interest of consumers towards the company.
LEGO realised that girls are not attracting towards the brand's product. As 90% of
LEGO's customers were boys. It was just because the games designed by the company were as
per the taste of boys only. Both girls and boys have different taste while boys love strong
characters, girls likes to use their own sets for role playing. After that company launched a line
called LEGO friends. Through this line, company expected to double the sale in the year. But the
company made triple sale in the year of launching. Hence, this idea was a key driver which
contributed in the success of the company (Reichardt and Rogge, 2016, pp.278-297)
At starting level of the company, LEGO didn't make any large innovations, rather, it
focused on building reputation of the company, maintaining a good quality of products, etc. as it
the company brought changes at small scale, any failur barely effected the brand's image. This
driver helped the company to have mastery in doing experiments cheaply, quickly. Also, it
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enabled the company to discover new games and satisfy its customers(Prokop, Stejskal and
Kuvíková, 2017, pp.278-297).
Task B, critical analyses of the different approaches taken by LEGO to identify
opportunities on the market.
There are 4p's of innovation which is being followed by LEGO for making its innovation plan
more effectively. Namely,:
4p's of innovation
Product Process Position Paradigm
Main product of the
company is Video
games.
The company is using
Incredible
manufacturing process
in its course of
business.
It owns the Second
largest company in
global market.
New processes can be
used by LEGO for the
purpose of toy
manufacturing. Like
manufacturing robotic
toys, etc.
Strategies
In the year 2004, CEO of LEGO realised that company is in need of innovation. So he started
identifying factors which were resulting in reduction of capability of the company. Hence, it
identified some internal and external factors for this purpose (Orji and Liu, 2018). Afterwards
company started working on these factors which resulted in a turning point for the company
LEGO adopted some strategies in order to identifying opportunities in the market.
Company changed the whole organisational structure of the business in order to enhance the
efficiency of the business. It hired a new CEO, managers and also some other key managerial
persons in the company so that company can bring more effective innovations in the market, as
change in the organisational structure resulted in changing the thinking of business. Which lead
to having more innovative ideas for expansion of the business (Aboelmaged, 2018, pp.310-318).
When effective innovation became a necessity for the business, LEGO started assembling
people who had innovative and creative mind. Company made a team of creative and innovative
people gave them responsibility to understand the market and bring ideas according to the
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market. This team is recently consisting large number of designers which works for designing
new products as per the change in taste of its consumers. It enables the company to have a stable
position of the company in market (Moon, Lee. and Lai, 2017, pp.278-297).
Further, the company decided not to have large changes in the business in order to reduce
the risk of failure. As if any innovative idea gets fail, it may result in a huge loss to the company.
It also helped the company to build a habit of its members to bring changes with a cheap cost. It
also results in becoming cost effective.
Strategy applied by LEGO
LEGO applies Ansoff Matrix strategy in its course business. This strategy makes the company to
determine its product and market growth strategies. The result of Ansoff matrix strategy comes
as per its suggested growth which helps the company to set the direction for the business. These
directions are as under:
Ansoff's matrix for Lego company
The first step of this strategy could be Market penetration. It seeks to achieve some major
objectives like maintaining and increasing the company's market share through many ways like
advertising, sales promotion, restructuring new market, introduction of loyalty scheme, etc.
on the next part of this matrix company need to do Market development. In this strategic plan
company starts selling its existing products in new market, bringing new product in the market,
or new packaging or dimensions in existing products, adopting different pricing policies, and
new distribution channels etc.Marketing development is one of the most risky strategies.
On the another part of this matrix, company performs Product development. In this
strategy, company aims to introduce new products in the market; it results in innovation in the
business. In this strategy LEGO have its emphasis on research & development, knowing the
customers need, tries to gain top position in the market. This strategy helps the company to grow
faster in the market. on the next part, it performs Diversification strategy. In which, business
brings new products in new market. It helps the company to have a new direction for its
business. It is helpful in enhancing the scope of business.
This is obviously more risky strategy. Because moving to the new market needs a strong plan for
the purpose of success. Although, it may also result in gaining a huge growth in the market.
(Zhang, Kandampully. and Bilgihan, 2015, pp.279-308).
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Frameworks
It is a well known fact that innovation is a major driver for the purpose and increasing
profitability of the company. Company can not stay in the market for a long time if it focuses on
enhancement of its efficiency, and its fabulous performance only.
Innovation highly depends upon organisational culture. Therefore, company must have a
culture to adopt changes easily. Frameworks include practice to adopt the strategic changes and
solutions. Therefore, the company needs to have an innovative framework in the organisation in
order to making the innovation more potential for the business.
The company's designers keep themselves engage in innovation and generating new
ideas. For this purpose they keep doing study on consumer behaviour and market changes as
well. Company tries to make market innovation environment with the help of digital outreach
and internal campaigning.
Opportunities
Innovation brings the lots of opportunities to the company. It enables the company to enhance its
profitability. Innovation helps the company to enhance its capacity as well. Through innovation
the strategies of the company, it enhances the efficiency of the whole organisation. As through
innovation, company makes effective changes in the strategies of the company because the
changes has been made only after analysing the existing strategies of the business (Canepa-
Talamas, Nassehi. and Dhokia, 2017, pp.279-308).
LEGO keeps working on monitoring its existing plans, which gives an opportunity of
having best plans for the company as company makes changes in plans whenever it thinks fit. It
helps the company to achieve the goals effectively. Change in plan also enables the company to
enhance the skill and knowledge of its members. It may result in a good opportunity for the
member's future and company's future as well.(Torres-Padilla, 2015).
Hence, we can say that having an innovative strategy is good for the company. But for
the success of strategy it is important to have a healthy framework in the organisation.
Innovation provides many opportunities to the company which are helpful for the growth of
company.
Task C, critically analyse the view that LEGO's success can be attributed to the successful
application of Blue Ocean strategy.
Blue ocean strategy:
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Blue ocean strategy refers to pursuing differential and low cost strategy and opening a new
market. In other words we can say that blue ocean strategy is all about to capturing an
uncontested market space. This strategy is totally based upon viewing the market boundaries and
reconstructing the business through actions.
Blue ocean strategy can also be said as an irrelevant because in this strategy company
makes itself ready for those situations which have not occurred. This strategy is much wider,
deeper and potential than any other strategies (He, and Wang 2016).
Attribution of blue ocean strategy in the success of LEGO
LEGO felt that many situations can be solved easily if it could be predicted earlier by the
company. Therefore, it decided to adopt the blue ocean strategy in the organisation. This strategy
helped the business to predict some situations and make them ready for those situations. It had a
great result in the company because whenever any negative situation occurred, company directly
applied the solution without wasting the time on analysing the situations and finding their
solutions. This strategy was resulted cost effective and time effective as well.
LEGO can be taken as the best example of blue ocean strategy. As it adopted the strategy
so effectively this gave the best result to the company in return. The blue ocean enabled the
company to grow up its business. And enhance its market share as well. It helped the company to
create new demand in the market which leads to capture more market share by the company.
This strategy also helped the company to gain more profit from the market (Kim and Mauborgne,
2014, pp.278-297).
The company was reinvented via adopting new strategies in the course of business. Blue
ocean strategy says that business should enter in a new market with new customers and new
products that are not been served by anyone else. It will result in gaining large amount of profit
along with high growth in sales volume.
Through adopting Blue ocean strategy, it hit kid’s fantasy with the help of its signature
brick goods. They made children to learn stories of NINJA-GO which was the most popular
theme of LEGO. This change made the LEGO as a most popular brand among the kids. Kids
attracted toward the new product offered by the company. Kids were also seen inviting their
friends for buying LEGO's product. It was a turning point for the company (Yardley, 2015,
pp.311-328).
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The primary reason for adopting Blue ocean strategy was because the company realised
that other competitors are providing way better, smart and innovated products to the customers at
a very cheap price. Hence, company decided to bring more technical advanced products in the
market to attract its customers again towards the company. And again grab more market share.
Further, LEGO decided to introduce robotic products in the market as a next generation
product. Company took help of mind storms NXT for the purpose of introduction of new robotic
product in the market. It changed the market behaviour totally and attracted the kids towards the
product as never before.
As LEGO started innovating its product frequently, it leads to the success of all the
innovated products effectively but it also resulted in failure of its existing products as all its
customers moved towards its new product and stopped buying its existing products. And hence
the sales of its products declined sharply. It became a serious issue efficiently for the company.
But company innovated its business plans, modals and strategies to overcome from this
situations too (Qudah and Hashem, 2018, pp.311-328).
LEGO stands as the best example of having success through Blue ocean strategy.
Because through this strategy, company gained a growth in its sales by 2% in a year and also
increased its profit up to 40%. This growth was remarkable as well as considerable in all over the
world. Company also increased its market share globally and became second largest toymaker
company in all over the world.
The remarkable success of the company was all about adopting Blue ocean strategy
efficiently along with making its member prepare for adopting changes easily. The company
trained its members in order to make their mind set in such a way so that they can adopt
innovations easily. It worked more effectively for increasing skills and knowledge of its
employees (Aithal and Kumar, 2015, pp.311-328).
Comparison of LEGO with other competitors within industry
Along with LEGO, the toy manufacturing market also have many other companies like
Agglo, Coleco, Flextronic, etc. all these companies are strong competitors of LEGO. But LEGO
always adopt better strategies than its competitors. These companies make huge investment over
innovation, in case of failure of any innovation, the companies sometimes has to bear a huge
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loss. Whereas, LEGO believes in having innovation at small scale which leads to be the
company more cost effective.
Through the above analysis we can say that LEGO had a considerable and remarkable
success through adoption of Blue ocean strategy in the company efficiently and effectively as
well. Also, the company is performing way better than its competitors (Tidd, Bessant and Pavitt,
2013). As it adopts more effective strategies and marketing plans than its competitors.
Canvas value curve
Canvas curve helps the company in gaining maximum market share and identifying all
the opportunities related to the consumer's wants, what they receives in advance, comptetion in
the market, the best investment factors, etc. which helps the Lego in taking best decision and
gaining more effective success in the market.
(Source: Self created)
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CONCLUSION
With the help above study we can conclude that LEGO is a manufacturing company
which has adopted market strategies by analysing all the pros and cons of the strategy. Company
decided innovating itself whenever it needed. When company started going downward, it
reorganised the company wholly and also set a new direction for the company. It has adopted
open innovation strategy to know the exact consumer needs and enhancing interest towards the
company. For the purpose of rapid growth, company has adopted Blue ocean strategy in its
course of business this adoption has resulted in a remarkable success of the company. Company
has trained its employees to enhance their skills, knowledge, and make them more creative.
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Illustration 1: blue ocean model
source: (What is Blue Ocean Strategy. 2015)

Training the employees helped the company in achieving its organisational goals more
effectively. In short, it has been concluded that LEGO have a innovative framework, and
environment in the company. Company has hired a team of inventors which work for studying
market changes and build innovations according. Also, company has adopted strategy of having
innovations at small scale which has helped the company to have a low risk in the business
which has lead to make the company more cost effective.
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