In June 2003, Jørgen Vig Knudstorp presented the results of his internal study to the Board of LEGO. In a devastating report, he told them that 2003 was going to be a terrible year and 2004 was likely to be worse. The company had defaulted on its loans, was running out of cash, and might not survive.
How did LEGO get in such trouble? In a word, innovation. LEGO’s managers had followed the advice of academics and consultants – advice that is still being given today – about how to manage innovation: head for blue ocean markets, practice creative disruption, build an innovation culture. That advice almost led LEGO to ruin.
After verifying Knudstorp’s findings, the Board restructured the management team and appointed him CEO. Within two years, Knudstorp and his team had fundamentally redesigned how LEGO managed innovation, and built one of the most sophisticated innovation systems in the world. Today, LEGO is the most profitable and fastest growing company in the toy industry, with growth and profitability rates similar to Apple’s.
The goal of this talk is tell the SXSW audience the LEGO story and the lessons they can learn from the company’s fall and rebirth.