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A thread about LEGO
On overcoming adversity
On product principles
And on building a distribution channel, brick by brick
On overcoming adversity
On product principles
And on building a distribution channel, brick by brick
2/ It's 1916 in the sleepy village of Billund, Denmark
A young carpenter named Ole Kirk Christianson leverages his love for woodworking and opens a carpentry business
He finds modest success, producing ladders & stools
But in 1924 an accidental fire burns his shop down
A young carpenter named Ole Kirk Christianson leverages his love for woodworking and opens a carpentry business
He finds modest success, producing ladders & stools
But in 1924 an accidental fire burns his shop down
3/ Christianson rebuilds his workshop, bigger and better than before.
This financial risk turns into a disaster when the US stock market crashes in 1929, and a global recession ensues
Ole pivots his shop away from making expensive furniture
towards inexpensive Toys
This financial risk turns into a disaster when the US stock market crashes in 1929, and a global recession ensues
Ole pivots his shop away from making expensive furniture
towards inexpensive Toys
4/ The move to toys doesn't immediately pay off
In fact, Ole and his son Godtfred fall into bankruptcy
and also suffer personal loss as Ole's wife passes away in 1932
Christianson's family decide to bail him out financially
So that he can give his business one last shot
In fact, Ole and his son Godtfred fall into bankruptcy
and also suffer personal loss as Ole's wife passes away in 1932
Christianson's family decide to bail him out financially
So that he can give his business one last shot
5/ Ole and Godtfred emerge with new resolve and focus for their Toy business. They decide to rebrand, and choose the name "LEGO" which is in reference to the Danish phrase: "Leg Godt" which means "Play Well"
Godtfred hangs a sign in the shop: "Only the best is good enough"
Godtfred hangs a sign in the shop: "Only the best is good enough"
6/ Their emphasis on quality and exacting standards pays off
LEGO becomes a success in Denmark with several hit toys
But WW2 gets in the way of their growth, as Germany occupies Denmark
and disaster strikes the Christianson's yet again, as another fire ruins their factory
LEGO becomes a success in Denmark with several hit toys
But WW2 gets in the way of their growth, as Germany occupies Denmark
and disaster strikes the Christianson's yet again, as another fire ruins their factory
7/ Wartime production consumes many traditional raw materials, including wood
So Christianson looks forward and turns to new/cheaper technology:
Plastics
In 1946 he purchases the first plastic injection molding machine in Denmark for 10% of his business' annual revenue
So Christianson looks forward and turns to new/cheaper technology:
Plastics
In 1946 he purchases the first plastic injection molding machine in Denmark for 10% of his business' annual revenue
9/ The big LEGO breakthrough happens when in 1947 Christianson comes across a British toy:
"Kiddicraft Self-Locking Building Bricks"
Christianson creates his own version of the plastic brick which he calls "Automatic Binding Bricks"
"Kiddicraft Self-Locking Building Bricks"
Christianson creates his own version of the plastic brick which he calls "Automatic Binding Bricks"
10/ Ole and Godtfred immediately recognize the value of what they've created: A "System of Play"
They created a means for children to leverage their own imagination and build endlessly
In 1955 the stud-and-tube coupling system is created to the brick to add model stability
They created a means for children to leverage their own imagination and build endlessly
In 1955 the stud-and-tube coupling system is created to the brick to add model stability
11/ In 1958 LEGO receives a patent for their plastic brick
This is also the year that Ole passes away and Godtfred assumes control of LEGO Group
In 1960 the LEGO factory burns down (yes, again)
Production of wooden toys is discontinued, adding focus to their 'System of Play'
This is also the year that Ole passes away and Godtfred assumes control of LEGO Group
In 1960 the LEGO factory burns down (yes, again)
Production of wooden toys is discontinued, adding focus to their 'System of Play'
12/ Godtfred distills LEGOs product focus into 10 key attributes:
These attributes extend the System of Play and ensure that LEGO consistently generates products and extensions that captivate children's attention and imagination
This, while also building upon LEGOs brick IP
These attributes extend the System of Play and ensure that LEGO consistently generates products and extensions that captivate children's attention and imagination
This, while also building upon LEGOs brick IP
13/ by 1980 LEGOs product strategy has been so successful that according to a survey nearly 70% of Western European homes with children under 14 report having LEGO bricks in the home
LEGO has moved from a product to a brand, and now a distribution channel
LEGO has moved from a product to a brand, and now a distribution channel
14/ in 1996, a year after Godtfred passes, http://lego.com is established. LEGO is one of the earliest brands to embrace eCommerce and digitalization
Over the next decade, LEGO signs licensing deals with:
Warner Bros
Lucas Films
Ferrari
Disney
Over the next decade, LEGO signs licensing deals with:
Warner Bros
Lucas Films
Ferrari
Disney
15/ The licensing deals and subsequent LEGO sets are incredibly popular
They spawn successful video game franchises
and in 2014 The LEGO movie
The film has a $60M budget
it grosses $468M worldwide
Lego becomes the 3rd largest toy producer in the world, selling 19B bricks/yr
They spawn successful video game franchises
and in 2014 The LEGO movie
The film has a $60M budget
it grosses $468M worldwide
Lego becomes the 3rd largest toy producer in the world, selling 19B bricks/yr
16/ LEGO has now become one of the largest and high margin distribution channels worldwide
They are able to maintain this status by adhering to their Product Principles, and by constant research and innovation
60% of the LEGO portfolio is new each year and backward compatible
They are able to maintain this status by adhering to their Product Principles, and by constant research and innovation
60% of the LEGO portfolio is new each year and backward compatible
17/ This approach also allows LEGO to sustain near 30% Operating Margins
In 2019 the company generated $6.1B in revenue and $1.71B in Net Income
Sustained product margins built around their brick IP and progressive product approach are 72%, driving their profitability
In 2019 the company generated $6.1B in revenue and $1.71B in Net Income
Sustained product margins built around their brick IP and progressive product approach are 72%, driving their profitability
18/ The LEGO story is an example of the power of a simple idea that leads to more complex systems
It's an example of the power of sustained excellence, perseverance and focus over long time horizons
as a result of these efforts, LEGO has become synonymous with Play
It's an example of the power of sustained excellence, perseverance and focus over long time horizons
as a result of these efforts, LEGO has become synonymous with Play
19/ Postscript:
Fun Facts: LEGO is the largest producer of wheels in the world
Any brick made after 1955 is compatible
There are over 400B LEGO bricks in the world
6 2x4 LEGOs can make 915M combinations
Manufacturing standards are so tight, only 18 bricks/yr fail inspection
Fun Facts: LEGO is the largest producer of wheels in the world
Any brick made after 1955 is compatible
There are over 400B LEGO bricks in the world
6 2x4 LEGOs can make 915M combinations
Manufacturing standards are so tight, only 18 bricks/yr fail inspection
