How LEGO Almost Went Out of Business

A LEGO designer gives some history:

“When [CEO Jørgen Vig Knudstorp] first analyzed the company and for the first time ever figured out the outgoings and the profits he almost had a heart attack.

The LEGO company at that stage had no idea how much it cost to manufacture the majority of their bricks, they had no idea how much certain sets made. The most shocking finding was about sets that included the LEGO micro-motor and fiber-optic kits – in both cases it cost LEGO more to source these parts then the whole set was being sold for – everyone of these sets was a massive loss leader and no one actually knew.

This was combined with a decision to ‘retire’ a large number of the LEGO Designers who had created the sets from the late 70’s through the 80’s and into the 90’s and replace them with 30 ‘innovators’ who were the top graduates from the best design colleges around Europe.

Unfortunately, though great designers they knew little specifically about toy design and less about LEGO building. The number of parts climbed rapidly from 6000 to over 12,000 causing a nightmare of logistics and storage and a huge amount of infrastructure expansion for no gain in sales. Products like Znap, Primo, Scala and worst; Galidor all came out of this period.

The only reason the company survived was the incredibly lucky timing of the brilliant and very popular home grown Bionicle theme and the internally controversial decision to license and make Star Wars sets – which turned out to a very good idea.

Jorgen Vig was put in charge, he made the hard call and made redundancies, they slashed the number of parts down to 6000 (a figure that has grown, but we’re still below well below the 2003 total) – the company reorganized and analyzed all costs, design was finally linked to manufacturing cost and re-focused on the core business of making construction sets. The unprofitable LEGO Computer games business was shut down. (Some of these guys returned to the UK and started their own company called Travellers Tales, they then licensed the LEGO computer game business and freed from LEGO management (who know nothing about computer games) they still make the LEGO computer games today – making good money for all involved – including LEGO.)

After two/three years of consolidation and streamlining the company had it’s first Designer recruitment workshop in September 2006. I was one of the 11 designers hired at that time, new managers were in place in the Design building, all developed inside the company, these guys loved the product, they knew the customers as they had grown up playing with LEGO and they had ideas that had been restrained for years. They hired several kid focused design graduates and a few AFOLs (adult fans of LEGO), of which I was one. We already knew and loved the product, we brought new energy and new ideas to the cream of the old Designers who had survived the bad times. For me it’s been an absolutely fantastic seven years so far and I see all of the work and principles these guys have created as the message of The LEGO Movie, it’s not just a toy, it’s a tool for creation and imagination and getting LEGO bricks into the hands of kids is the only aim of everything we do. I’m so proud of being even a tiny bit involved in it!”

Full thread http://www.reddit.com/r/lego/comments/1x6ldp/lego_franchise_infographic/cf8vdl3