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LEGO Sales Slip, But Toymaker Has a Plan

Sep 08, 2016
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SMITH BRAIN TRUST — Demand outstripping supply in North America prompted LEGO to curb promotional activities in the world’s biggest market for toys. First-half sales in 2016, reported on Tuesday, slipped to about $524 million from about $533 million last year. But LEGO says it initiated the downturn to expand its plant capacity and workforce in time to compete for holiday shoppers with rival toymaker Mattel, which LEGO recently surpassed in global sales.

Oliver Schlake, a management and organization professor at the University of Maryland’s Robert H. Smith School of Business, says one reason for LEGO's success has been the company's ability to connect with diverse audiences who do not outgrow the "toy." Girls within a certain age group play with Mattel's Barbie. But behind its interlocking toy bricks, LEGO breeds a subculture including adult hobbyists and LEGO-certified consultants for Fortune 100 workforces. Cambridge University even has a Lego Professor of Play in Education, Development and Learning. LEGO products, moreover, drive robotics learning customized for elementary schoolchildren as well as university-level engineering students. LEGO products also facilitate creativity and strategy exercises in company training, architectural learning and mind-focusing therapy for persons with disabilities.

At the Univeristy of Maryland, Schlake engages his Creative Problem Solving class in an activity called “Five Pieces of LEGOs.” Through this exercise, he grades the creativity and design of student conceptions from five LEGO pieces, in sets of 12 and ranging from solar panels to a “person squished by falling sheetrock.” “Students sometimes incorporate a back story to an object,” says Schlake, a self-described LEGO hobbyist since he was a 3-year-old in Germany. “It’s a mental challenge. It conditions students to learn by doing (as opposed to absorbing) and being creative and innovative in the process.”

Serious Play

Schlake has owned about 400 pounds of LEGOs (derived from Danish expression “leg godt” or “play well”) since childhood, including dozens of LEGO Friends (designed for girls) sets he purchased in recent years for his daughters. In the 1990s, he incorporated LEGO “relaxation” exercises for employees of a startup he operated in Germany. And, a friend and colleague of his is certified as a LEGO Serious Play facilitator. Such specialists are common to large consultancies serving the likes of Google, NASA and Toyota to “facilitate employees using LEGO pieces to create figures that illustrate trouble-shooting and problem-solving, including solutions for restructuring an organization,” Schlake says.

A pair of scientists in Switzerland conceptualized "Serious Play" in 1996. Quartz has described one exercise, for example, as involving manager trainees showing the "difference between manager and leader" via a set of LEGO pieces and under a time constraint. One build, entitled, “Stop having meetings with myself,” depicted its creator seated with a wall built between him and his colleagues.

Engagement Factors

About 10 years ago, LEGO market researchers began studying kids at play, including watching their brain sections illuminate under an MRI while playing with different toys. A key takeaway: Focusing on mastering a skill kept kids most engaged in sustained play. Strategy+Business last spring described this approach as departing from the standard surveys and focus groups, plus “unparalleled in the toy industry” and precipitating LEGO going from skirting bankruptcy to mega-profitability. But Schlake says LEGO’s nostalgic appeal to adults, including parents, plus associating its brand with such franchises as Star Wars and Marvel Comics and its “open innovation” practice (LEGO inviting product ideas from the public and rewarding selected contributors with a percentage of sales)” are equally  if not more  significant success factors.”

Hackers Assist

Schlake notes that open innovation was an unintended consequence of LEGO Mindstorms software (a “robotics invention system” developed with MIT researchers in a move to reach beyond the children's toy market) getting hacked in 1998 in an orchestrated move by several users who made modifications and added functions. “LEGO considered suing the hackers, but ultimately embraced the action to open-source Mindstorms,” Schlake says. “This was a huge turning point for LEGO and has made Mindstorms increasingly intensive and engaging and widely accessed by schools, especially engineering departments, to teach the basics of robotics,” Schlake says.

Businesses also adapt Mindstorms (separately from "Serious Play") for skills training, and the open-sourcing has led to collaborative initiatives with users, including a LEGO Ambassador Network and fostered a small community “master builders," known for producing large and complex models and employed by LEGO to support its attractions at its theme parks and discovery centers.

Though LEGO products have advanced in complexity, “imagination and creativity remain best exercised with the original, simpler sets of blocks,” Schlake says. “It’s a wonderful training tool for older and younger people alike.”

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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

Robert H. Smith School of Business