The Secret to Success of The World’s No. 1 Toy Company

USERS

The reason a business exists is to satisfy the needs of its users, so the direction of the business and the use of every talent in the organization must be based on this. Other core business principles that never fail follow from this: understanding customers, meeting their needs, and being fair and assertive in negotiations.

▌Understand users

For example, Lego's lack of detailed understanding of consumer market needs and preferences led to supply chain chaos - undersupply of toys that were popular or likely to be popular, and oversupply of unpopular toys - which further weakened its relationship with retailers. Ability to negotiate effectively.

At that time, Lego was in a critical period of transformation. Barry, then chief operating officer of Lego, was keenly aware of the close connection between consumer research and the supply chain, and made his point of view clear: start from the needs of customers and adjust accordingly. Operations and Supply.

To make this point a reality, Bally engaged in difficult negotiations both externally and internally with retail customers and its own sales and marketing executives. It’s not often that supply chain executives meet with customers and attend trade shows. This effort has proven to significantly improve LEGO’s supply chain system.

▌Personalized service

The digital revolution is real and it's ongoing. Like all technological breakthroughs, it has a lot of potential and brings a variety of new production methods. Enterprises driven by data can indeed greatly improve operational efficiency - but automation is not a panacea, provided that the human system works well.

Allowing consumers to receive humanized and personalized help is an important part of LEGO's services. LEGO has established a LEGO call center for this purpose. The employees in the call center are as passionate about LEGO as the LEGO fans and have received systematic training to better interact with LEGO fans.

In today's digital age, Lego still insists on manual call center services. At least for products as highly personalized and requiring creativity as Lego, customer call services should never be automated.

▌Get inside fans

LEGO considers its loyal fans a valuable asset. In addition to receiving phone calls and feedback from users, LEGO also insists on being proactive: proactively engaging with fans. Starting in 2004, LEGO executives began visiting conventions organized by LEGO fans themselves, and they found that fans knew more about LEGO products than they did.

Talking to fans is inspiring and allows executives to draw ideas that will help them start the next design phase, pick up information that will help operations, and improve the overall gaming experience for users.

Of course, "customer is God" is not unconditional. Your interests and those of your customer overlap, but are not identical. You provide good service and please your customers, but you also need to maintain enough profits to safeguard the interests of the business. This is a relationship based on negotiation and mutual respect rather than excessive subservience.

 

INNOVATION

As a toy manufacturer, innovation is basically the life of LEGO. LEGO has a unique insight into innovation, which is mainly reflected in two aspects: first, all-round and full-process innovation, and second, the relationship between innovation and reliability.

▌Comprehensive, whole-process innovation

When we discuss a company’s innovation culture, it must apply to everyone, not just the product and R&D departments. And those involved in operations and service delivery can and should be innovative designers and developers.

At Lego, senior executives must understand the details of the front line of operations, and people who actually work on the assembly line can also participate in assembly line design. One of the benefits of doing so is to improve the whole-process innovation capabilities of the entire enterprise.

For front-line operators at Lego, they will not be regarded as "brainless screws". On the contrary, Lego believes that these operators are capable enough to contribute ideas to improve production. The results were remarkable. Lego invited front-line employees to redesign a new production line process based on team co-creation, which ultimately significantly improved productivity and shortened turnaround time by 50%.

▌Priority of innovation and reliability

Although innovation means creating new things, it is not without foundation. Barry believes that any innovation needs to pass the test of the following questions: Is it practical? Can it improve the quality of life and create value and opportunities for customers? In other words, innovation does not necessarily mean disruption, but also includes the continuous search for improvement.

Innovation and execution delivery are not opposites. "Reliability first, flexibility second", this is the principle that the author has always adhered to since he served as the head of Lego's supply chain. This insight also pointed out to us the misunderstanding of the so-called "agile management": Since innovation requires companies to be sensitive to the market to a certain extent, some people think that companies must be "agile managed" if they want to innovate, but Lego will tell you : "Do what you preach" is not only the operating department, but also the eternal compass of the entire team.

A common mistake that a highly innovative team makes is to be too ambitious and thus paint a pie that is too big. However, innovators and strategists must know what they can promise and deliver on it in a timely manner, otherwise it will be a fatal blow to the business.

 

MANAGE

An enterprise is not a dead engineering blueprint, but a living organism. An organism needs internal systems to cooperate with each other to provide blood to the core. For enterprises, this means cooperation between departments, but this cooperation must be based on mutual respect. This also places new demands on executives and various departments.

▌Leadership is everywhere

Different business units within a conglomerate may have different CEOs, different strategies, services and markets, but they still interact with each other in complex and unpredictable ways. In other words, each function should not have its own strategy, it must support the company's goals and overall strategy.

When Barrie joined Lego in the early 2000s, the company's supply chain was in shambles. He understood that his number one task was naturally to repair the supply chain, but he also saw that the company was facing a huge crisis - divisions and conflicts between different internal functions. . As a result, he must tackle a broader challenge: encouraging cross-department collaboration and fostering a culture of accountability, including asking other departments beyond the supply chain.

An enterprise is a complex network of people composed of various professional teams. Each action produces one or more reactions somewhere along some chain of the network. Executives need to interrogate operations leaders in detail about their jobs to ensure they have a good understanding of business operations, not just what's going wrong but also what's running healthy.

▌Coordination and cooperation among various departments

Not only do senior executives need to fulfill their management responsibilities, but departments also need to self-manage. The ideal state is for each department to "coordinate like an orchestra." This requires full cooperation between departments, but this cooperation must be mutually beneficial. Respect and trust are the basis, so how to establish this respect and trust?

The answer given by the "LEGO Work Law" is: each department can have the courage to adhere to process and accountability. At Lego, you don’t see confrontations and mutual obstructions between departments. This atmosphere is hard-won and comes from the correct authority and responsibility mechanism. Under this mechanism, everyone has rules that must be followed.

"Doing the right thing in the wrong way is still wrong," the book reads. This requires courage in all departments. Department heads must also have the courage to stand up and express their position when other departments violate regulations and harm the interests of their own departments. This is not provoking disputes, but the beginning of mutual respect among departments.

▌Reduce complexity

The principle of simplicity is valid for both enterprises and individuals. But in management, "complexity" often creeps into organizations in various forms. New initiatives, new levels of management, new departments, new products without market research, highly leveraged and fancy financial instruments - these will all increase Complexity in management. Excessive complexity can lead to opacity and may even end a business.

Therefore, managers must consciously and continuously pull away complexity like weeds. The benefit of reducing complexity is that you can focus on your goals. LEGO uses the concept of "critical few" to select core indicators and focus on them. This is easy to say, but difficult to do and stick to. Here’s the trick: always come back to the core requirements and the need to “deliver on what you promise.”

In management, especially in executive positions, it takes courage to admit that you don't know something, and you need a good code within the business to encourage the pursuit of clarity, exploration of details, and fully explained communication: If you don't know something, just say you don't. Know; if you don't understand something, ask questions to fill in the knowledge gaps.

Whether they are product range expansions or changes in operations or organizational structure, if they increase complexity, then it is important to ensure that the benefits are worthwhile and worth the significant additional management time and expertise required.

 

STRATEGY

"Strategy" is an unavoidable topic in the business field. As a company with a history of more than 90 years, Lego has also gone through many strategic adjustments and optimizations. Especially in 2005, when it stood at the turning point of the company's destiny, Lego's executives learned from the painful experience and reviewed He has solved his own problems, assessed the challenges he faced, and gained unique experience and insights into the topic of strategy.

▌Carry out strategic changes to target critical issues

From around 1995 to 2003, Lego had an era of continuous and disorderly innovation: dozens of brand-new products that deviated from Lego’s concept of building with bricks and were out of touch with its most loyal consumers. That period of innovation and change nearly destroyed LEGO's core business.

In order to cope with the challenges, Lego's senior management has made three main changes at the strategic level:

Focus on the core values of the brand. What does LEGO represent to the public? It means creativity and play. Therefore, Lego screened its product lines and kept those that met these definitions, while those that were too far away from the company's core values were sold or discontinued.

Seize the core elements of profitability. Lego's reforms in supply chain transparency, performance and "delivering on promises" are core elements of profitability. At the same time, the market insights returned by the supply chain department can provide useful information to designers and feed back innovation. So, partnerships must be re-established between all key functions.

Think of strategy as a process of continuous trial and error, adjustment, iteration, and adaptation. Strategy is not a fixed template secretly designed by an elite group, but more like an ongoing dialogue between members of the organization and between the organization and its customers and partners. This requires businesses to constantly monitor developments and prepare for the unexpected.

▌Maintain strategic focus in the times

The 1990s and early 2000s saw tremendous technological advances and demographic changes in the toy market. On the one hand, the complexity of video games is rapidly increasing, so many children are playing with physical toys for less time. On the other hand, the birth rate in LEGO's core markets of Western Europe and North America is falling, which means that household spending on toys is falling. , its profit margins were squeezed.

Many companies have lost themselves in the process of blindly pursuing digital transformation, and instead lost their core competitiveness. But in the process of company transformation, Lego has understood the truth of the market: electronic products are changing the market, but customers' preference for physical toys remains unchanged.

When change is rapid and complex, one must be wary of simplistic descriptions and remember that they cannot fully explain emerging trends, because complex change is not only complex but also full of variables. When a new technology emerges and products using it begin to gain market acceptance, it does not necessarily mean that the old technology will suddenly become obsolete.

There are many examples of traditional products that have gradually declined in popularity, or declined sharply, but then unexpectedly made a comeback, such as vinyl records, jigsaw puzzles, and construction toys—Lego’s main products, which have enjoyed unprecedented popularity during the epidemic. . In the world of video games, touch is missing, a core human sense and experience. In a time when everything seems to be changing dramatically, don’t be intimidated by false narratives and untested assumptions, because some things remain the same.

 

"Turning play into work" is the dream of many people and companies. What is rare is that LEGO can make this job sustainable and provide fuel for corporate development. Through an in-depth understanding of the ups and downs of Lego over the past 90 years, it is not difficult to see how much determination and effort Lego has made in order to stabilize the toy empire it built. Understand the market, do meaningful things, and do not sway randomly with the trend of the times. These are the working rules of Lego. I hope managers can encourage us.