We have distilled the key leanings for you below and you can listen to the whole webinar here. Click on the video within David’s profile.
We hope you enjoy!
In 2003 Lego was near bankruptcy. This was the result of a decade where the business had: hung on to old ways of working; failed to understand its past successes and failures; over-invested in areas it knew little about; and created a situation where consumers and customers who had lost sight of what the company was all about.
To rescue the business the family who own Lego put energy into understanding the core essence of the business, its DNA, and refocusing on the brick, which had become one product among many. They sold off all non-core parts of the business and put two key things in place:
- The mission: ‘to inspire and develop the builders of tomorrow’
- System in play: the need for all Lego components and parts to work together.
These strategic decisions were reflected right across in the organisation’s supply chain and demand planning with 30,000 unique components reduced to and capped at 6,000, and two rules put in place: nothing new could be introduced to the system without something having to go and the ‘commonality rule’ whereby designers had to consider how what they invented would work across projects.
David joined in 2010 to help the company innovate by looking at adjacencies without losing its way as it had in the late 1990s and early 2000s. This meant building new innovation capabilities and infrastructure that could exploit emerging opportunities such as digital without losing sight of neither the business’s foundations (the brick and system of play) nor where it was headed (its mission), something David describes as becoming ‘Lego fundamentalists’!
Today there are three levels of innovation at Lego:
Core Business. This is something most companies are good at, upgrading and improving what already exists. For example Lego launches a new fire engine each year, it’s a complete redesign and a best seller each year.
Core Exploration. The business has Innovation Labs that explore the frontiers of the existing business across the whole value chain. A product example is Lego Minecraft.
Radical Innovation. This is the work of Lego Ventures, which was recently launched but began two years ago and which David heads up. Lego Ventures is owned by Lego’s holding company and therefore exists off the balance sheet rather than competing for resource with the core. It researchers and opens up new areas beyond existing capabilities often through creating or acquiring start-ups which will ultimately form part of an ecosystem of entities that will define the Lego of the future.
Lego Ventures remains true to Lego’s mission, like all parts of the business, and used this lens to look at mega-trends in the world. During its initial work it spent six months carefully doing this before choosing the most mission-relevant spaces to focus on.
When it comes to innovation, none of this would work without the right culture and at Lego that means a culture of intrapreneurialism. Intrapreneurialism Lego-style is about being a ‘diplomatic rebel’ which means seeing things others don’t and pursuing opportunities but always coupling rebelliousness with an ability to find balance, minimise risk, tell stories, engage with those around you, know how to secure resources and more. Diplomatic rebels desire autonomy but recognise and understand the importance of the core and are measured on their ‘experimental velocity’ not the end results.
This balancing of opposites reflects a broader philosophy of ‘ambidextrousness’ that David stresses is important for businesses who want to be able to cope with the speed of change. It also demands a different leadership style to Lego of the past, one that recognises and rewards disciplined effective exploration and encourages the right levels of risk in the right places. In this respect, the former CEO and Chair of Lego talked about how the get it right/get it wrong ratio in the core business should be 90/10 but in Lego Ventures it needs to be the other way around – 10% get it right and 90% get it wrong. This being said the core business must always be protected and getting it wrong must never be about recklessness but rather about the rigour of testing hypotheses with experimentation leading to learning and building and leveraging capabilities across the whole business.
Finally it’s worth saying that this systematic, sophisticated and far-sited approach to innovation is also a reflection of the priorities of the family who still own Lego today, which is never about the money but always, first and foremost, about having a positive impact on the lives of children.
David Gram is part of SpeakersHub and one of our most sought after speakers on innovation. To view his full biography, find links to his showreel and to book him to speak at your own event please click here.