Lego: Key Drivers of Innovation and Strategic Analysis Report

This report provides a comprehensive strategic analysis of Lego, examining the key drivers of its innovation and business success. It begins by identifying the core elements that contribute to Lego's innovative edge, such as clear goals, collaboration, transparency, and commitment. The report then ...Read More

Strategy Enterprise
and
Innovation

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 Evaluating key drivers of innovation contributing success of Lego.................................1
P2 Evaluate 4 P's of innovation mix in respect of Lego.........................................................3
P3 Evaluating Ansoff Matrix on Lego ..................................................................................5
P4 Evaluating Porter’s generic on Lego.................................................................................6
P5 Blue ocean strategy to compare two other competitors of Lego ......................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
This report is going to identify and analyses key drivers of innovation that are
contributing successful in business of Lego. Along with 4p's of innovation with Ansoff
frameworks its evaluation and analysing best out come from it that is beneficial for an
organisation. Moreover, implementing Blue Ocean graph comparing with other competitors to
know its competitive position in same product line of business.
Strategy innovation is an organisation process of reinventing or redesigning its corporate
strategy to drive business growth, generate value for a particular company and its customers. It
requires to bring changes new value proposition, services and production process. In other words
it can define as a plan made by an organisation to encourage advancements in technology or
product and services (Lambert and Davidson, 2013). It usually help in investing research and
development activities that are essential for an organisation. In this report the organisation
chosen is Lego, a line of plastic construction toys that are manufactured by The Lego Group. It
was founded in 1932 and has become famous carpenter's workshop to modern and global
enterprise that is now one of world's largest manufacture of toys.
P1 Evaluating key drivers of innovation contributing success of Lego
Lego is one of largest manufactures of wooden toys. Its open innovation is a trendy and
buzzword in business of toy industry sector. There are plenty of sources that are important and
fundamental need to attain success in business. In organisation Lego innovation enables
successful for their business but with practical implementation it will be less effective to attain
competitive edge. Whereas innovation aims to achieve idea and innovation in companies by
using both external and internal sources of knowledge. The key drivers of innovation
contributing success for Lego are determined below:
Clear goals: Clear goals are most effective when things are clear in an organisation.
Innovation need to be strong part of company culture and strategy (Dodgson, 2018). Many
experts of Lego emphasize important part knowing their goals towards open innovation both on
corporate and project of bringing innovation in toys. On the other hand on higher levels,
innovation process and goals should be well define to its employees so that they work towards it
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to achieve its motive. Moreover, attractive innovation will also help managers of Lego to bumps
up collaboration and attain competitive organisation.
Facilitating collaboration: Facilitating collaboration plays a vital part in success of
innovation. Lego are utilising its connection open for collaboration in different countries and it
create expansion in their business and trust between parties of collaboration (Johnston and Bate,
2013). It is helpful for Lego managers to expand their business in many countries, it is helping to
gain more market share and remain competitive in market of toy industry.
Transparency: Transparency must be there in an organisation to bring innovation and
become successful in a competitive market. Lego managers are providing transparency to its
stakeholder as well as to their customer. It is manifested in nature and valuable to bring
innovation in their product and services to their potential customers. Moreover, it boost
innovation and generates economic scale and promotes collaboration and problem solving across
company function.
Right channels: Selecting right mode of action is good to start face to face interaction
with right customers. It is initial for an organisation to choose right mode of distribution channel
so that they are able to meet customer's requirement easily and satisfy them in efficient manner.
Lego managers are choosing right mode of distribution channel in order to meet customer
requirements and solving out any queries if occur. From this mode Lego are able to attain more
market share in different countries and gaining competitive advantage in market of toy industry
Commitment: Commitment is the essential for an organisation. Lego are committing to
their customer to provide better quality of product and services that meet up to expectation of
customer. Building trust and working on ideas from the collaboration naturally take times. Lego
are building collaboration steady, allocate enough resources and commit to come up with
innovation in their product and providing premium quality of service to their customers
(Huybrechts, 2012). Moreover, commitment are also increase chances of bringing innovation
practices and results more collaboration online and announce innovation initiatives on regular
basic.
Above discussed points are the key drivers of Lego organisation in achieving success
from last consecutive years. They are coming up with various strategic innovation in their
products and services according to their potential customers needs and demand. Moreover, there
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success is fully depended on its transparency with is customer and stakeholders and its help them
to become successful and remain competitive in market of toy industry.
P2 Evaluate 4 P's of innovation mix in respect of Lego
4 P's of innovation framework is also known as innovation mix which is developed by
John Bessant and Joe Tidd. This tool enable an organization to identify what innovation process
can improve and bring to business (Murugesan and Gangadharan, 2012). The 4Ps of innovation
framework consist of product, paradigm, process and position.
The 4 P's of innovation model gives direction to organization that where they need to go
and in which area of business that company needs to innovate. Space of innovation support idea
process of idea generation and how new idea can be implemented. Lego use innovation mix to
explore possible enhancement of each area of their business. The implementation of 4 P's of
innovation on respective company are describe below:-
Product- What to offer? - It is most commonly understood form of innovation or
improvement of product or services that a company will offer to its end users. In other word it is
related to innovation of everything which is related to products and services that what offer to
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Illustration 1: 4 P's of innovation
Sources: 4 P's of innovation. 2019

customers. Lego Company do innovation in their products and services which help them in
attracting their customers and satisfy them with new technology, new design, and new ideas. The
respective company do innovation like they can introduce new style or design of interlocking
bricks, they can introduce more technology based toys that attract more children or customers.
Paradigm- How to do frame what to do? - Through this organization can improve the
way of doing business. Paradigm related to mental model that shape what an organisation or
business or company is all about and thorough it the business can plan or strategies the work and
objective accordingly which help them in enhancement (Gronum, Verreynne and Kastelle,
2012). Lego can use paradigm as innovation tool like they can innovate their publication and
marketing method such as they can publish their toys and other products from print form to
online platform, through it they can attract more customers or users and visible to wide
population.
Process- How to create that offerings? - It is one of the important part of every structure
in company. This tool not only include the preparation processes of products and services. IT
include all steps such as supplying, workflow, hiring people and training. This can enhance to
increase profit and give ideas to carry out new trends. It also focus on process through which
products and services are created or delivered. Process part of innovation mix help Lego to
enhance and innovate their process so that smooth functioning of business should maintain,
employees do their work in effective and efficient ways and through it product manufacturing
process also maintain.
Position- Where do we target the offering?:- It is consider as position similar to position
of marketing mix but it is not. Position is related to the customers or any person perception. It
refers to the repositioning perception of an establish products and services or process in a
specific context. In other word it is based on innovation identify to change in how specific
product and services or process is innovate and how it can be use (Lechner and Gudmundsson,
2014). Lego frame their products in such way that every individual can see it, for it they make
innovative products or toys which attract everyone and creative marketing and publicity to target
their audience in wide number.
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P3 Evaluating Ansoff Matrix on Lego
Ansoff model is invented by H. Igor Ansoff. It is also known as the Ansoff product and
market growth matrix, this is a planning tool of marketing that usually aids business by
determining and analysing its products and market growth. It can be determine by focusing on
whether products are new or existing and is the market is new or existing. This strategical
planning tool help executive, senior managers and marketers of Lego by providing frameworks
through which they can devise strategies for future growth. Ansoff matrix of Lego is describe
four alternative of marketing strategies- market penetration, product development, market
development and market diversification, which is describe below:-
Market Penetration: - In this alternative it cover those products that are in existence and
which are also exist in an existing market. According to this strategy there is further exploitation
of products without changing the products or outlook of products. Market penetration of Lego is
possibly done through the use of various ways such as promotional method of respective
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Illustration 2: Ansoff matrix
Sources: The Ansoff Matrix, 2018

company, putting various pricing policies which may attract more customers or audiences or one
can design the distribution that is more extensive. In it risk involve in market strategy when
consumers are not familiar with the products of respective companies.
Market Development: - It is a situation when an organization plan to expand in new
market or new areas of existing market where they want to sell same products and services to
different group of people (Eesley, Hsu and Roberts, 2014). For Lego development in new market
for products may be prove as good strategy if they follow following strategy such as the
respective firm introduce unique product with new technology, if new market is not to different
from one Lego is experienced and so on.
Product Development: - It is a strategy when a firm try to create new innovative products
and services which is targeted as their existing markets to achieve growth. It involves developing
products range that available to current market of company (Lowe and Marriott, 2012). If Lego
wants to expand in new market they have to do research and then develop additional products,
they can innovate packaging of existing products, respective company can take feedback from
customers and develop their products etc.
Diversification: - It is most risky strategy, in it an organisation want to their market share
by developing new products and services in new market. It is most risky from all four strategy
because both products as well as market required to develop. Diversification is of two type
related diversification and unrelated diversification. To adopt diversification Lego can first
identify its new market and design and develop products and services accordingly. It can be
resulted as a reasonable choice for Lego if high risk converted into high rate of return. The
additional advantage for respective company is that it involves potential to enhance foothold in
an attractive company and it reduce the portfolio risk of Lego.
P4 Evaluating Porter’s generic on Lego
Porter's generic strategy model is describe by Michael Porter in 1980, it evaluate about
how an organisation pursue its competitive advantage in it chosen market scope. A competitive
advantage is an advantage gain by offering greater and good value to customers in comparison
with competitors (Lapalme, 2012). It can be done through by offering products in lower price or
by giving more benefits and services which justify high price of products. There are four
strategies that a company can select to place itself on a path which leads to success. The four
strategies are cost leadership, differentiation, cost focus and differentiation focus. Lego use
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Poter's generic strategies to determine its firm profitability as compare to industry average,
description of Poter's model on respective company is given below:-
Cost leadership: - It is commonly use business strategy which is consider as try to gain
an edge on competition. Cost leadership means that a company is leading in market by
controlling cost in one way or another. In this strategy Lego can use two ways for cost leadership
- First one is that a respective company can offer its products or toys on cheap price than its
competitors and convince customers to pick their products and services because its less
expensive selection on shelves. On the other hand Lego can adopt a cost leadership strategy by
manufacturing products at low cost and charge average price for the goods, in this case
respective firm can make a large margin on per unit sales then its competitors. It seems easy
choice for Lego to sell their products for low possible price but they have to make sure that
respective firm sustain or carry out that plan for the long run.
Cost Focus: - This strategy of Poter's Generic Strategies is same as cost leadership, only
difference is that in it an organisation can be focused on a specific niche of market. In other word
a firm not trying to focus on whole market or everyone, they only want to sell in a small portion
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Illustration 3: Porter's generic model
Sources: Porter's Generic Strategies, 2018

of the market that focus on buying a unique or innovative products (Battistella, Biotto and De,
2012). In the case of Lego if they manufacture those products which is not available or less
available in particular market, by this they stand or create a great chance to succeed. But if
respective firm want to deal with broad market they didn't get growth potential, so for Lego if
they adopt this strategy there is opportunities to become major players within niche market.
Differentiation: - The differentiation strategy is exactly opposite from cost leadership
strategy. According to this strategy the firm are try to take over market form a unique quality and
function of a products rather than easily try to sell their products and services at less or cheap
price. If an organisation want to succeed by using this strategy they required good research and
development, innovation and ability to offer high quality products. In this appropriate marketing
is essential so that their target audience understand benefits of their unique and innovative
products. If Lego adopt it they need to have a unique products to offer for they also need strong
marketing and advertisement plan to aware their buyers or audience about the item. Without
having great marketing plan and team the respective company will left with an expensive or high
price product which stuck on them as their wrong decision.
Differentiation Focus: - It is similar with cost focus but it except a firm to do work
within a niche market by trying to stand out on a products quality and innovation basis (Teece,
Peteraf and Leih, 2016). It is not a point in this strategy that a company is offering least
expensive products or most expensive products, as long a company offer exact products which
customers is looking for and if a company justify its high price they are able to attract and grab a
huge shares of niche market. So if Lego produce or manufacture expensive products and they are
able to justify cost of products they can attract the wide audience which leads to growth of the
respective firm.
P5 Blue ocean strategy to compare two other competitors of Lego
Blue Ocean Strategy is introduce by W. Chan Kim and Renee Mauborgne in a book, it
refers to the creation done by company of new, uncontested market space which makes
competitors irrelevant and that create new value for consumers while reduce cost (Adner, 2012) .
It is based on idea through which every enterprise can earn high profit by developing demand in
a market which is non- competitive. Lego use blue ocean strategy for comparing Lego with its
other two competitors that are hamleys and hot-wheels (Sako, 2012). But according to data from
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brand finance, Lego is valuable or famous brand in toy manufacturing and packaging products
industry. Comparison of all three same level toys companies or brand are given below:-
Basis Lego Hamleys Hot-wheels
Products Offer Lego only offer toys
which is colourful
interlocking plastics
bricks.
Hamleys offers all
type of toys, arts &
craft, dolls, soft toys
and games.
Hot wheels is toys
brand which
manufacture scale
models of cars toys.
Target Audience Lego's target
audiences are kids or
children whose age
group is between 4
years to 8 years.
Hamleys basic target
audience are children
or kids.
Hot wheel's target
market are young
adults and children
group.
Target market on basis
of income
The target market of
respective company on
the basis of income is
high income group and
some range of middle
income people who
spend more money.
The price of toys or
products of Hamleys
are reasonable and
affordable by middle
income group. And it
also offer price
discount on special
occasion like Black
Friday.
The price policy of
Hot Wheels is
affordable by their
consumers of almost
every income group.
Respective company
sold their products on
reasonable price at
online because they
save on distribution
cost.
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Illustration 4: Blue ocean strategy, 2018
(Source: Blue ocean strategy, 2018)
Raise – These factors are based on industry practices which are based on different terms
as products, pricing and services standards as well. On the basis of this aspect it is determined
that Lego requires to introduce unique and innovative toys in the market that assist them in
building their own profit market. All these aspects assist in determining industry values in terms
of maximising organisation's sales and business profitability. It raise a question in front of
overall industry that the values of products and services raised industry's standard properly.
Eliminate – It can be a result stage on which organisation can identify several areas of
company or industry on which they could be completely eliminated or reduce the additional
costs. These kind of aspects assist in creating a new market completely for target organisation.
Reduce – These kind of factors assist in determining some major areas of company's
product and services that are not entirely necessary for customer's but play a significant role that
could be reduced on specific level. For example manufacturing cost on which organisation can
reduce or eliminate its cost.
Create – It determines that companies should have to be innovative in terms of their
products. Through this, they can differentiate their services in target market or in front of target
competitors.
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CONCLUSION
Form the above discussed point it is conclude that there are various key drivers of
innovation which help Lego to be successful, which is one of the famous manufacturer of toys
and they offer their products worldwide. The respective company use four P's of innovation mix
to identify innovation process which can improve and bring growth to their business. They
analysis and evaluate their business and business growth by using Ansoff framework and Poter's
generic strategies. Lego also compare themselves with two competitors of same level and do
analysis to evaluate.
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REFERENCES
Book and Journals
Lambert, S.C. and Davidson, R.A., 2013. Applications of the business model in studies of
enterprise success, innovation and classification: An analysis of empirical research from
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Dodgson, M., 2018. Technological collaboration in industry: strategy, policy and
internationalization in innovation. Routledge.
Johnston, R.E. and Bate, J.D., 2013. The power of strategy innovation: a new way of linking
creativity and strategic planning to discover great business opportunities. AMACOM
Div American Mgmt Assn.
Huybrechts, B., 2012. Fair trade organizations and social enterprise: Social innovation through
hybrid organization models. Routledge.
Murugesan, S. and Gangadharan, G.R. eds., 2012. Harnessing green IT: Principles and
practices. John Wiley & Sons.
Gronum, S., Verreynne, M.L. and Kastelle, T., 2012. The role of networks in small and medium‐
sized enterprise innovation and firm performance. Journal of Small Business
Management. 50(2). pp.257-282.
Lechner, C. and Gudmundsson, S.V., 2014. Entrepreneurial orientation, firm strategy and small
firm performance. International Small Business Journal. 32(1). pp.36-60.
Eesley, C.E., Hsu, D.H. and Roberts, E.B., 2014. The contingent effects of top management
teams on venture performance: Aligning founding team composition with innovation
strategy and commercialization environment. Strategic Management Journal. 35(12).
pp.1798-1817.
Lowe, R. and Marriott, S., 2012. Enterprise: Entrepreneurship and Innovation: Skills and
Resources for Entrepreneurship and Innovation. Routledge.
Lapalme, J., 2012. Three schools of thought on enterprise architecture. IT professional. 14(6).
pp.37-43.
Battistella, C., Biotto, G. and De Toni, A.F., 2012. From design driven innovation to meaning
strategy. Management Decision. 50(4). pp.718-743.
Teece, D., Peteraf, M. and Leih, S., 2016. Dynamic capabilities and organizational agility: Risk,
uncertainty, and strategy in the innovation economy. California Management
Review. 58(4). pp.13-35.
Adner, R., 2012. The wide lens: A new strategy for innovation. Penguin UK.
Sako, M., 2012. Business models for strategy and innovation. Communications of the
ACM. 55(7). pp.22-24.
Online
4 P's of innovation. 2019. [Online]. Available through:<https://www.researchgate.net/figure/4Ps-
of-Innovation-Space-Tidd-et-al-2009-The-hyper-competitive-nature-of-the-
new_fig2_264038111>.
The Ansoff Matrix. 2018. [Online]. Available
through:<https://www.mindtools.com/pages/article/newTMC_90.htm>.
Porter's Generic Strategies. 2018. [Online]. Available
through:<https://www.mindtools.com/pages/article/newSTR_82.htm>.
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