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Reference no. IMD-3-1978
Published by:
Institute for Management Development (IMD) (2008)
13 pages
Data source:
Field research


This is the first of a two-case series (IMD-3-1978 and IMD-3-1979). The case tells the story of a company where innovation is tremendously important, but not working well. In 2003, the LEGO Group had a number of positive attributes: it had a well-respected brand with some very good toy lines. It had a passionate customer base that in many areas was more sophisticated than its internal designers. And it had been able to extend the brand into many areas such as toys, games, clothing, theme parks, movies, and many others types of play, earning significant revenues (but not profits). But, in 2003, the company had gotten itself into deep trouble. Over the previous 5-10 years, the toy industry had been changing dramatically in ways that did not favour the LEGO Group. These changes, coupled with some poorly planned investments and a downturn in the sales of some important toy lines, combined to almost put the LEGO Group out of business. The company lost nearly DKK1 billion in 2003 and its cash dwindled dangerously low. This was the largest loss in the history of the company, and many analysts believed that bankruptcy and perhaps even the breakup and sale of the company were likely. The company quickly sold off assets, reduced headcount, and outsourced production to cut costs and generate cash. But it knew, to turn the company around, it had to improve its overall innovation system. It had to improve the time to market, success rate, and profitability in its innovation system. The case presents a number of representative challenges that LEGO was facing during 2004 and beyond. Learning objectives: (1) how to restructure an innovation system; (2) how to encourage all types of innovation (innovation in pricing, business model, channel to market, branding, customer experience, etc) and co-ordinate these innovations across the company; and (3) how to involve external parties such as customers, complementary product producers, and external inventors in your innovation system.


Innovation; Product development; Open; Turnaround; Customer-driven; Renovation
2003 revenue of DKK9.5 billion (EUR1.2 billion)
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