How LEGO Used Change Management to Help Rebuild its Empire: Assignment Case Study

At the beginning of the 21st century, LEGO, a company that was popular all over the world for its interlocking plastic bricks, faced a critical financial situation. Due to mismanagement and lack of vision, it was on the brink of closure, recording declining revenues, increased expenses, and no growth strategy. However, with proper strategic change management in place, LEGO was able to re-strategize and gain its position as one of the leading toy manufacturers in the world today. This paper aims to discuss the topic of change management with reference to LEGO, and how it was implemented to help the organization come out of possibility of bankruptcy, as a case study for MBA students learning about organizational change.

The Crisis

Things became worse by 2003, and LEGO started facing the heat of bankruptcy. It posted a loss of $220 million and was nearing to insolvency. Several issues caused this crisis:

1. Product Diversification and Complexity: Over the years, LEGO committed the error of extending its product range, which led to operational complications as well as high expenses. There was a significant increase of unique pieces from over 7,000 pieces in the 1990s increased to more than 12,000 pieces in 2004.
2. Operational Inefficiencies: The company was struggling with manufacturing problems and supply chain issues, which resulted in high costs of manufacturing its products and poor stock management.
3. Market Misalignment: LEGO became detached with its core consumers, by focusing more on electronic toys and video games.

Turnaround Strategy Implementation

The appointment of Jørgen Vig Knudstorp as the CEO of LEGO was in the year 2004. Originally a McKinsey consultant, Knudstorp had to utilize an aggressive change management program to stabilize the company. His approach focused on several key areas:

1. Focusing on Core Products: Knudstorp discovered that LEGO’s biggest asset lies in the firm’s brand classic block toys known as LEGO bricks. Management modified product range, simplified the number of SKUs, and axed the unprofitable lines and products. This meant that LEGO was able to concentrate on producing creative building blocks and construction toys again.
2. Improving Efficiency: To increase the efficiency of its operation, LEGO incorporated Lean manufacturing techniques. This included:
   • Reducing Complexity: Simplifying the supply chain and manufacturing processes by reducing the number of unique pieces, cutting production costs, and reducing lead times.
   • Outsourcing: Restricting product variants, lowering costs, and shortening cycle time in supply chain and manufacturing.
3. Revitalizing Innovation: LEGO’s transformational strategy aimed at revitalizing the firm through innovation. To further engage the fans, the company created the LEGO Ideas website, through which the fans could create their own designs for new LEGO products. Successful designs were made and paved way to the engagement Lego users. LEGO also created digital designer software where customers could build and design models virtually.
4. Strengthening the Brand: To rebrand LEGO, the company focused on the values of creativity, imagination, and the assurance of the product’s quality. Key initiatives included:
   • Licensing Partnerships: A key factor that was adopted by the firm involved merchandise licensing by partnering with famous franchises such as the Star Wars, Harry Potter, and Marvel which helped in providing additional market and product appeal.
   • LEGO Movie: The film “The LEGO Movie” which came out in 2014 did well and pulled in more than 469 million dollars globally. It helped increase the sales and reminded people on the LEGO brand and the importance of creativity and imagination.
5. Customer Focus: According to Knudstorp’s strategy, he focussed more on assessing and meeting customer’s need. Market research was carried out to identify key customer expectations and preferences. This customer orientation strategy enabled LEGO to come up with products that their targeted audience would admire.

Results

LEGO’s efforts paid off greatly. By 2015, LEGO became the world’s largest toy maker by revenue, even surpassing Mattel. Here are some key highlights of LEGO’s success:

• Revenue Growth: LEGO’s revenue grew from $1.8 billion in 2004 to $5.2 billion in 2015, with an annual growth rate of 10.7%.
• Profitability: LEGO turned a net loss of $220 million in 2003 into a net profit of $1.2 billion in 2015.
• Brand Value: According to Brand Finance, LEGO’s brand value rose from $4.5 billion in 2010 to $7.6 billion in 2015, making it one of the world’s most valuable toy brands.

Insights for MBA Students

LEGO’s turnaround offers several important lessons for MBA students studying change management:

1. Focus on Core Strengths: A company should always focus on its strength of core products it offers. For LEGO, it meant emphasizing on the company’s iconic LEGO bricks and eliminating business lines which were not generating revenues.
2. Simplify Operations: Reducing Complexity in Production and Operations makes way for cost cutting and faster productivity. To adapt to this change, LEGO simplified its product portfolio, and outsourced non-strategic activities, which accounted for the company’s revival.
3. Foster Innovation: Innovation is one of the key concepts that should form the context of any change strategy. Using the LEGO Ideas as a way of interacting with customers and incorporating digital elements the firm reaffirmed its line of products and cemented the LEGO brand.
4. Customer-Centric Approach: Customer needs and preferences are very important in any enterprise and must be met efficiently. Through innovative market research and focus on the clients LEGO was able to find its way back to the fans.
5. Strengthen the Brand: Brand awareness is a foundation for customer retention and subsequent business development. Strategic alliance and enhanced product advertisement efforts were the main contributors to the reconstruction of LEGO brand.

Management Homework Help: Your Partner in Solving MBA Case Studies

Case studies are a key part of learning in MBA programs at top U.S. universities. Analyzing and researching real-world business cases, like those of LEGO, can be tricky. When looking at a company’s case, it is important to consider all parts of the business, such as manufacturing, operations, finances, supply chain and labour. Professors use such exercises to evaluate students’ intelligence, research skills, and ability to analyse. However, some students may find these cases complex and challenging. Let’s explore the top issues students typically face.

Top Issues Students Face in Solving Case Study Questions

1. Analyzing Complex Data: MBA case analysis involves large sets of data that need to be scrutinized for deriving meaningful conclusions. Many students fail to analyse financial statements or market research or data analysis.
2. Applying Theoretical Concepts: Another typical issue that often arises is how to overcome the gap between the theories learned and the real-world situation. Students fail to connect management concepts and theories to real world business problems which results in incomplete analyses.

How Management Homework Help Can Assist

Our Management Homework Assistance service is designed to support students in overcoming these challenges by offering:

• Expert Guidance: Our team of tutors providing MBA Case study Help comprises management experts and lecturers who give guiding tips on how to understand the case requirements and solve the business problem effectively.
• Detailed Solutions: We provide detailed strategies on tackling intricate management problems and explain why the proposed solutions are justified in the business context to enhance case comprehension
• Concept Clarity: We explain the key management concepts and how to connect these concepts to the business problem in hand to find meaningful conclusions and make strategic decisions.
• Resource Access: We have access to numerous case studies and resources, assignment samples and academic articles that are helpful in solving complex business cases. Books such as “Leading Change” by John P. Kotter and “Change Management: The People Side of Change” by Jeffrey Hiatt and Timothy Creasey are very much useful as they explain the process of adopting change and insights of managing the human aspect of change.

FAQs

Q1: How did LEGO manage to overcome its financial crisis?

In LEGO, the strategies that have been implemented include: adapting a strategic focus on core products, enhancing operational efficiency, reviving innovation, brand strengthening, and meeting customer’s expectations. All these strategies aided in helping the company to get back on its feet.

Q2: What are the key lessons from LEGO’s turnaround for MBA students?

Some of the main lessons include: emphasizing on core competencies, avoiding production complexities, pursuing innovation, keeping the customer’s needs and demands in mind, and building the brand.

Q3: What challenges do students face when solving MBA case studies?

The top challenges include analysing complex business scenarios and applying theoretical concepts to real-world scenarios.

Q4: How can the Management Homework Help service assist with case studies?

The service we provide here includes explanation, elaborated step-by-step approach, understanding of the concepts being used, and access to appropriate resources to enable students to tackle and solve the case study questions in the appropriate manner.

Conclusion

The role of change management can be clearly understood and seen from LEGO’s actual performance; a remarkable example of change. Therefore, LEGO did not only learn from its crisis but came out stronger and successful by refocusing on its strengths, making things simpler, promoting innovation, and always keeping the customer needs in mind. For MBA students, this case highlights that for making a brand successful and survive in the highly competitive market, it should think strategically to bring change, be flexible, and put the client’s needs and preferences at the forefront. Through management homework help service, MBA students can learn the complexities of case studies and ways to find strategic solutions

References

Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry by David C. Robertson and Bill Breen:

LEGO Annual Reports

Amy Posted on 13-Jul-2024 14:30:00