From its founding in 1932 until 1998, Lego had never posted a loss. By 2003 it was in big trouble. Sales were down 30% year-on-year and it was $800m in debt. An internal report revealed it hadn’t added anything of value to its portfolio for a decade.
Consultants hurried to Lego’s Danish HQ. They advised diversification. The brick had been around since the 1950s, they said, it was obsolete. Lego should look to Mattel, home to Fisher-Price, Barbie, Hot Wheels and Matchbox toys, a company whose portfolio was broad and varied. Lego took their advice: in doing so it almost went bust. It introduced jewellery for girls. There were Lego clothes. It opened theme parks that cost £125m to build and lost £25m in their first year. It built its own video games company from scratch, the largest installation of Silicon Graphics supercomputers in northern Europe, despite having no experience in the field. Lego’s toys still sold, particularly tie-ins, like their Star Wars and Harry Potter-themed kits. But only if there was a movie out that year. Otherwise they sat on shelves.
“We are on a burning platform,” Lego’s CEO Jørgen Vig Knudstorp told colleagues. “We’re running out of cash… [and] likely won’t survive”
In 2015, the still privately owned, family controlled Lego Group overtook Ferrari to become the world’s most powerful brand. It announced profits of £660m, making it the number one toy company in Europe and Asia, and number three in North America, where sales topped $1bn for the first time.
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Read more about the Lego story at www.theguardian.com