How Lego “collabed” their way out of debt and into the cultural mainstream
The Main Takeaways:
Just as surely as “Video Killed The Radio Star” in the ‘80’s by the early 2000’s, it seemed inevitable that video games would kill Lego. Saddled with over $800 million in debt, Lego was on the verge of bankruptcy in 2003. But 20 years later, with annual revenue topping $9bn, Lego is the ultimate ‘build-back-better’ story.
With Lego’s sales tanking at the dawn of the 2000s as kids moved away from physical games to video, and desperate to remain relevant. Lego’s management made ill-fated moves into theme parks in Europe and the US, In-house video game production, and highly specialized but non-descript sets that doubled the range of pieces just as they halved sales.
Each business unit, owned, operated and mismanaged by Lego.
Selling the theme parks, icing the video game publishing unit, and halving the number of unique pieces were obvious table stakes for the turnaround. You don’t need a to hire McKinsey for that (although the CEO hired to sort the mess out was inevitably an alumnus.)
It’s one thing to survive. It’s another entirely to thrive. How then to grow?
Tellingly, Lego took a second run at content creation, but instead of going alone, they collabed with a partner with vast experience and an already resonating franchise:—Lucas Films. Together they created the Star Wars co-branded animated cartoon: Revenge of the Brick.
Encouraged by this early success, they went on to develop the Lego Star Wars video game series, and a genre was born. What seems obvious now, on the far side of this success, is the central insight; both Lego and Star Wars fans share a common trait.
A commitment to the franchise and to fandom that transcends media.
Repositioned as a canvas, Lego’s creative freedom expanded dramatically, free to appear in many guises and almost any community.
The franchise is a canvas, and canvases allow for boundless creative expressions.
Lego has gone on to partner with countless other franchises with committed fan bases, such as Marvel, Harry Potter, and Indiana Jones.
Important to note. Lego couldn’t do this on its own. It needed the established franchises to create credibility and provide the authority to be as experimental with the brand as their customers are with the bricks.
Up to this point, Lego had leveraged the power of their partner to add cachet to the Lego brand in film and games. But these were still at heart, child’s play.
By creating new sets for a customer group called “Adult Fans of Lego” they catered to a new and valuable market. Products geared towards AFOLs such as a 7,541-piece Star Wars Millennium Falcon set retailing at over $800 and taking a reported 3 weeks to complete, proved to be catnip for consumers and investors alike.
Suddenly Lego was cool. A statement piece fans would be happy to display and discuss—the commitment to complete the set, credentialling the customer in the eyes of friends and fellow enthusiasts, if not always, their family.
Lego had tried to create complex sets before, but shorn of the iconic subject, they failed to compel the customer. Building a Millenium Falcon appeals to a far more engaged audience than the Eiffel Tower.
Finally, Lego created a platform for the ultimate collab;
Lego x Customers.
In 2008, Lego launched a crowdsourcing platform enabling Lego fans to submit designs to be voted on by the community. Winning submissions can go on to become official Lego products, earning the winners up to 1% of the sales of that product.
And the winners are…collabs. The DeLorean Time Machine, Fender Stratocaster, WALL-E, Doctor Who, and The Beatles Yellow Submarine all owe their genesis to Lego Ideas.
Collabs conceived through collabs are the ultimate compound interest.
First, Collabs are a growth engine. They are compound interest for brands that run a program. They are to marketing what value investing is to stocks. You execute one, and it benefits the next one, which benefits from the one before. And you keep going.
Second, customer perceptions of your brand offer a far broader scope for creating value. Perceptions are more fungible and open to stretching. Don’t allow current product lines and attributes to define the uses and development of the brand and with it future lines.
Third, Brands with a collab strategy and program, become canvases that other brands aspire to work with leading to more opportunities to collab with better and better brands. Collabs find Lego, not the other way around. Create a program and the collabs will come, bigger, better and more valuable as they compound over time (see point 1)