How Lego Went From Nearly Bankrupt to the Most Powerful Brand in the World

In 2003, Lego was $800 million in debt. Sales were down and the future was looking pretty bleak for the Danish toy company.

Just over a decade later, in 2015, Lego had miraculously become the world’s most powerful brand, boasting profits of $600 million.

So how exactly did Lego succeed in making one of the biggest brand comebacks of all time? There are three things that they did well…really well.

1. They Regained Their Focus

Believe it or not, there is such a thing as too much innovation—and Lego is proof of that. Before their near-demise, the brand began creating many different products, some of which were successful, but many of which were not what their core audience was interested in.

In 2001, Jorgen Vig Knudstorp, a former management consultant at McKinsey & Company, came on board and took over as CEO of Lego. He insisted that Lego must go “back to the brick” and focus on its core products. He reduced the number of different pieces that Lego manufactured from 12,900 to 7,000.

Lesson Learned: Maintain your focus. As your brand grows, don’t stray from what made it successful in the first place. Remember that many times, less is more.

2. They Found New Markets to Dominate

With everything going digital, Lego had to find a way to adapt. By breaking into the toys-to-life market (or video games where physical action figures interact with those on screen), Lego was able to stay relevant, while still remaining true to itself and its purpose.

Lesson Learned: Times change. Sometimes your brand must too. Find a way to stay relevant, while still remaining true to your brand identity and purpose.

3. They Got to Really Know Their Audience

One reason that Lego nearly went bankrupt was because they lost sight of who their target audience was. They made unfounded assumptions, hastily innovating and creating without really researching beforehand to find out if that was what their audience actually wanted.

Once Lego leaders started taking the time to really understand their audience, they were able to get things back on track.

One way they did that was by hiring adult fans to handle the design of their products. They also held ethnographic studies to find out how kids around the world actually liked to play. In doing so, they were able to create products that their audience truly valued.

Lesson Learned: Don’t assume that you know what your audience wants. Perform research to find out.

Last Words

As former CEO, Knudstorp, once said, “We need to constantly become better, or otherwise there will be someone out there who will catch up to us.”

Lego’s story is proof that in order for a brand to survive, its leaders must constantly ask why. They must continuously question the brand’s trajectory and dig deep to really understand what’s working and what’s not working. They must realize that controlled—not unbridled—innovation is the answer.

If they do that, then the sky’s the limit.