Look carefully at Lego’s model of a bonsai tree and you will notice that most of the blossoms are produced from plastic bricks formed as pink frogs. Equally, on its mannequin of the Eiffel Tower, the in-house designers turned to an uncommon Lego piece: the new canine sausage.
Jens Kronvold Frederiksen, design director for the Star Wars line on the Danish toymaker, laughs as he particulars the resourceful, and typically simply plain comical, methods his colleagues repurpose current plastic bricks to make new objects and maintain prices down. Its common Botanical Assortment — which interprets orchids, wildflowers and bouquets utilizing Lego — reuses pterodactyl wings, robotic heads and automobile bonnets to imitate varied components of nature.
Such improvements have propelled the family-owned toymaker to grow to be one in every of Europe’s greatest company success tales of the previous decade. Lego, with basically only one product in limitless iterations, has raced previous Mattel and Hasbro — the listed US corporations with stables of tons of of various toy manufacturers — to grow to be by far the largest toymaker on this planet by gross sales, and on a unique stage altogether when it comes to earnings.
On the identical time, Lego quietly accomplished a transition in its household possession — the bedrock of the corporate — this 12 months. Kjeld Kirk Kristiansen, a former Lego chief govt and foremost household powerbroker for nearly half a century, handed on the mantle to his son Thomas, the fourth technology to run Lego within the small Jutland city of Billund.
“The ambition stage is tremendous excessive — we need to have that influence on each youngster on this planet that we will attain,” says Thomas, who’s now chair of Lego in addition to Kirkbi, the household funding car that controls the toymaker, in a uncommon interview.
The challenges dealing with Lego seem formidable — the worldwide toy market has lengthy seen little or no progress as kids flock to digital gadgets for play and leisure; its iconic plastic bricks are proving harder than expected to rid of oil. However the Danish firm is in sturdy form financially with gross sales and web earnings which can be up greater than seven-fold since 2006, and with the dedicated backing of its long-term household shareholder.
Lego is now not a pure toymaker. Its merchandise seem in TV reveals, movies, apps and theme park rides with storylines pitched at boys, women and, more and more, adults. “Lego is much less about brick-based development and extra about being a expertise company for mini-figures,” says David Robertson, creator of the main guide on the corporate, Brick by Brick.
Its revenues — together with the Legoland theme parks, managed individually by Kirkbi — are virtually as excessive as Mattel’s and Hasbro’s mixed. For a lot of inside and outdoors the corporate, the obvious rival is now the far greater Disney.
“We now have to take a look at ourselves as an leisure model. Our model traits are rather more like Disney, the model strengths are rather more like Disney than any extra conventional toy competitor,” says Niels Christiansen, Lego’s chief govt who is not any relation of the founding household.
Constructing blocks
Lego celebrated 90 years as an organization in 2022, however it solely received into plastic bricks within the Fifties having began out in wood toys.
The power of its system of play is that every one of its bricks are appropriate with the others whatever the decade wherein they had been made. Throughout a tour of its manufacturing unit, the corporate produced a lately recovered brick from 1962 which stays usable at the moment.
However Lego’s historical past just isn’t one in every of uninterrupted success. The corporate virtually collapsed across the flip of the century beneath Kjeld’s management: it misplaced religion within the brick and began providing merchandise that appeared extra like Barbie or Motion Man, which backfired.
In an effort to avoid wasting the corporate, an outsider, Jørgen Vig Knudstorp, was employed as chief govt, a back-to-basics coverage was instigated with the brick on the coronary heart of issues, and Lego has barely appeared again.
Gross sales in 2006 had been about $1.3bn, virtually a 3rd of Hasbro’s and 1 / 4 of Mattel’s. Its earnings had been about the identical as Hasbro’s and half Mattel’s, who produce Transformers and Barbie, respectively.
Right now it’s a completely different story: its revenues final 12 months had been $9.1bn in contrast with $5.4bn at Mattel and $5.9bn at Hasbro. Lego’s web revenue of $1.9bn was effectively above Mattel’s $390mn and Hasbro’s $200mn, each of whom had been under their 2006 ranges — though Mattel might obtain a lift this 12 months from the Barbie movie.
Income within the first half of this 12 months dropped by a fifth at Lego (in opposition to losses for the opposite two toymakers), however Christiansen says this was deliberate. Profitability soared to unsustainable ranges through the Covid-19 pandemic, and Lego determined to invest heavily in digital and sustainability.
“Think about: after I began in October of 2017, I might get a query: do you assume the brick continues to be related, or is it coming to an finish? I’ve not had that query one single time within the final three or 4 years,” says Lego’s chief govt, beneath whose watch the corporate has persistently taken market share.
Lego has elevated the variety of units it sells dramatically. As soon as targeted round a few homegrown product strains such because the police stations in its Metropolis vary and warriors of Ninjago designed to attraction to younger boys, alongside a couple of choose movie tie-ins equivalent to Star Wars and Harry Potter, Lego is now a lot broader.
It has a number of ranges marketed at women and quite a few large units for adults from soccer stadiums and automobiles to the Titanic and Concorde. DreamZzz, the primary vary focused equally at girls and boys, got here out this 12 months together with a brand new TV present. Different merchandise such because the Tremendous Mario vary work with their very own apps.
It has quickly elevated its retail presence. Partially as a consequence of the chapter of Toys R Us in 2017, Lego has expanded its community from 317 shops that 12 months to about 1,000 at the moment.
Christiansen says there isn’t any higher restrict as Lego goals to succeed in kids worldwide, with a specific current push in China, each with shops and a spread — Monkie Child — designed particularly to attraction to native clients. Legoland theme parks are increasing too.
Not the whole lot has labored effectively — Robertson notes that their “phygital” units, designed to bridge the hole between bodily and digital play, have fared badly with costly flops equivalent to Nexo Knights, Hidden Facet, and Vidyo.
“They’ve an incredible quantity of sources to cowl these failures. Extra energy to them for investing in dangerous issues that open up new potential areas for progress,” says Robertson, who can be a senior lecturer on innovation at MIT Sloan. “Lego are an important instance of how little innovation experiments can grow to be large progress alternatives.”
The artwork of succession
Backing Christiansen has been a founding household present process a change of its personal.
Kjeld, head of the third technology, was the final to carry a administration function at Lego, deciding that the household’s future as a substitute lay in being an energetic proprietor.
Since 2016, he has regularly stepped again from put up after put up, finishing the transition to his son Thomas in Might. All through, the household has been conscious of avoiding the squabbling that always besets household companies as they’re handed down the generations.
The household has labored with the Swiss IMD enterprise college to develop a household structure and guarantee that every technology turns into engaged with Lego.
“In my technology we’re three folks, within the subsequent technology there are seven, and within the subsequent one there can be much more,” says Thomas. “It’s vital to create a construction the place the household itself doesn’t grow to be a legal responsibility. As a result of we additionally know that the majority usually it’s the households themselves that destroy the businesses they personal as a result of they’ll’t get alongside or disagree on the route.”
He was designated his technology’s “most energetic proprietor”, which means he has taken on the function of chair at Lego, Kirkbi and the charitable Lego Basis that additionally owns 1 / 4 of the toymaker. A brand new fund referred to as K2 was arrange with a low quantity of capital however a excessive variety of votes, so if there ought to ever be disagreement sooner or later, it might vote alongside probably the most energetic proprietor to push change by way of.
Thomas is already desirous about passing on to the subsequent technology, even when they’re aged solely two to 17. He has arrange a Lego Faculty, which goals to inculcate them with the values and challenges of the toymaker in addition to the specificities of operating a household firm: “It’s merely about equipping them and getting ready them in addition to we will,” he says, including that “it’s accomplished in a really playful approach so that they assume it’s enjoyable and need to take an energetic proprietor function sooner or later”.
That stems from his personal “combined emotions” rising up in Billund the place Lego is an enormous employer. His dad and mom tried to guard him and his siblings from the enterprise, however at occasions it might be awkward. “A lot of the occasions it was nice when issues had been good. However when issues weren’t so good, it wasn’t enjoyable in any respect,” Thomas says, referring to the interval in 2003 when his father needed to make job cuts, together with these of his buddies’ dad and mom.
The primary board assembly he attended on the finish of 2004 was an eye-opener. Lego was nonetheless in disaster, even when its younger chief govt Knudstorp was setting up what would grow to be a profitable turnaround. “Everybody other than my father mentioned, ‘This isn’t going to work, now we have to promote.’ He held on to the concept that there have to be extra to it than this. So there have been bumps,” says Thomas.
Christiansen credit the household with staying the course, notably through the pandemic, whereas many listed corporations took short-term choices to chop investments to shore up profitability. “It’s more durable to persistently construct a model like Lego should you’re listed. You noticed some main manufacturers through the pandemic, in an effort to shield the underside line, overreact on issues that really damage the model,” he says.
The chief govt stresses that Lego’s board nonetheless discusses profitability, however is extra prepared to face by massive investments, equivalent to its current determination to triple spending on sustainability.
“I don’t need to go away this impression that it’s simply simpler or good, it’s most likely extra you could stand by way of the larger investments just a little higher. And should you do it that approach, the return may even be higher,” he provides.
For Thomas, sustainability is especially vital for a model targeted on kids. It requires 2kg of petroleum to provide 1kg of plastic, and he’s eager to maneuver to renewable sources.
Discovering a brand new resolution to this existential predicament stays a priority. “The uncooked materials that we rely a lot on is predicated on the unsuitable factor. It’s an enormous factor to alter that,” he provides. “It has been powerful as a result of it goes in opposition to the logic of a traditional enterprise to push very onerous on one thing that has no return for the subsequent 12 months or years.”
However Christiansen says Lego will again many companions and initiatives to search out greener plastics. “Here’s a place the place household possession may also help,” he provides. “We could take an even bigger load than most corporations will early on to get the ball rolling.”
‘Make it bigger’
There’s a new assertiveness about Lego.
Beforehand, its headquarters in Billund had been a colorless workplace constructing. Now it has a brilliant new campus — replete with start-up-like touches equivalent to a mini golf course on the roof, baristas doling out free espresso, and a lodge for visiting workers — with a large mini-figure exterior.
“Kjeld mentioned, ‘Make it even bigger,’” says Timothy Ahrensbach, director of office and worker expertise, of the Lego statue. Lego Home, designed by the world-renowned architect Bjarke Ingels, plunges guests right into a world of bricks, the place even the meals comes served in them.
That confidence extends to company offers. Legoland theme parks had been offered off in 2005 as a part of the turnaround, which pared the toymaker again to its core, however at the moment are again beneath Kirkbi management.
One other Lego Film — the franchise’s 4 blockbusters collectively made greater than $1.1bn worldwide — is “a risk,” says Christiansen, though he provides that he by no means desires to “grow to be predictable”.
In the meantime, Thomas’s ambitions for Kirkbi, which additionally owns stakes in a number of massive Danish blue-chip corporations, transcend Lego. The funding car lately purchased a digital studying platform within the US, and he’s clear that schooling is a approach of reaching kids it can not by way of the toymaker and its comparatively costly Lego units.
Lego is building new factories in the US and Vietnam — to go alongside its current ones in Denmark, Hungary, Czech Republic, Mexico and China. It’s engaged on a partnership with Epic Video games, the makers of Fortnite, to develop a Lego expertise within the metaverse.
And all of the whereas it’s increasing its product portfolio. Cerim Manovi, the artistic lead for one such new line referred to as DreamZzz, says he labored on the undertaking for 4 years, testing 50 completely different concepts with 15,000 kids to develop a brand new homegrown vary for Lego.
Lastly, his workforce got here up with a dream world inhabited by a sequence of mash-ups equivalent to a crocodile automobile, a shark ship and a turtle van. Every set has directions to construct the mannequin 80 per cent of the best way, after which offers them a selection on easy methods to end it off. “We name it ‘guided creativity’,” he says, an try to move off complaints Lego’s units now not encourage imaginative play.
Christiansen says that Lego could also be experimenting due to its newfound monetary power, however that it’s doing so in a targeted approach. “We will do experiments, however I might fairly do fewer issues and do them proper fairly than find yourself with many initiatives, none of them absolutely fledged. As a result of we all know what works, after which we make investments cash behind it.”
For Thomas, there’s rather more floor to overcome. He say: “My father all the time mentioned we’re greater than a toy firm. Everybody has all the time mentioned: ‘Yeah, yeah, yeah, however you’re a toy firm.’ However I feel the potential and the concept are about a lot extra.”
He sees Lego’s competitors as “everybody on the market who takes time from kids”.
Robertson, the educational, agrees that Lego — with toys, TV reveals, movies, and theme parks — is beginning to resemble Disney, which had $82.7bn in revenues final 12 months.
“Disney is a lot greater than Lego — and that’s an enormous alternative. Lego can decide and select how they go after that,” he provides. “You begin with this small plastic brick firm, and now you’ve gotten motion pictures, theme parks, digital — sometime it might be as massive as Disney.”