What LEGO Can Teach Us About Growth

LEGO nearly lost its way by doing too much. Here’s what its turnaround can teach growing businesses about finding focus and regaining momentum.

In 2003, LEGO had a problem most businesses would quite like to have. It had too many ideas.

Over the previous decade, the company had expanded far beyond the plastic brick. There were theme parks, clothing, video games, television, and watches. Blink and another ambitious product range appeared.

On the surface, LEGO looked like a business doing exactly what growing businesses are meant to do.

Innovate. Diversify. Find new audiences. Create new revenue streams.

All the things we’d usually associate with a healthy business looking for its next stage of growth.

But behind the scenes, it was becoming significantly difficult to manage.

Sales fell sharply in 2003. Losses were mounting. The business was carrying significant debt and years of expansion had created an incredibly complicated operation underneath one of the world’s simplest products.

LEGO was doing more than ever. It just wasn’t translating into growth.

And there’s an important difference between the two.

It’s a distinction plenty of established businesses eventually encounter. The company is still busy, still successful and possibly still growing. But growth has become harder to generate than it used to be.

That’s the growth plateau: not necessarily a business in decline, but one whose old sources of momentum are no longer producing the same results.

When business growth starts working against you

Growth rarely makes a business simpler.

You start out knowing pretty much what you do, who you do it for and why people come to you. Then the business grows and, naturally, you start adding things.

A client asks for something slightly different, so you offer it. A new market looks promising, so you give it a go. The team gets bigger. New services creep in. Before long, there’s a lot more business to run.

And none of that is necessarily a bad thing. Most of it probably made perfect sense at the time.

Over ten or twenty years, all those sensible decisions can leave you with a business that’s become difficult to understand.

It certainly did with LEGO.

By the time Jørgen Vig Knudstorp became CEO in 2004, LEGO had around 7,300 employees and a huge number of product variations. But for all that choice, a relatively small number of products were doing most of the heavy lifting.

The rest still needed designing, making, managing and selling.

That was the problem. LEGO wasn’t short of ideas. It had become very good at having them.

What it needed to get better at was deciding which ones were actually worth keeping.

LEGO didn’t need another big idea

When Knudstorp took over, the temptation could easily have been to find the product that would save LEGO. 

After all, when business growth starts to slow, the natural response is often to go looking for the next big thing that might get things moving again.

Instead, the company started asking more fundamental questions.

Which products are actually making us money?

What do our customers really come to us for?

What are we still doing simply because we’ve always done it?

The answers led to some pretty difficult decisions.

Product complexity was reduced. The supply chain was overhauled. Costs were brought under greater control. LEGO pulled back from areas that were taking attention and investment away from what made it successful in the first place.

The change was dramatic. In 2004, LEGO was sitting on a pre-tax loss equivalent to around £150 million. Just a year later, it was reporting a profit of roughly £65 million.

The return to profit mattered, of course. But what LEGO did next tells us much more about how it regained momentum.

Less complexity created room for better ideas

LEGO didn’t respond to its crisis by becoming conservative.

Once the foundations were stronger, it became much clearer about where innovation belonged. Instead of looking for growth everywhere, it concentrated more of its attention around the thing it was already unusually good at.

The brick remained at the centre.

LEGO could still explore new ideas, partnerships and experiences. They just needed to build from what people already loved about the business.

Star Wars and Harry Potter were good examples. They gave LEGO entirely new worlds to play in, but the brick was still at the centre of it all.

That was the shift. LEGO wasn’t trying to wind the clock back. It was getting clearer about what deserved to stay at the heart of the business, then finding new ways to build around it.

By 2015, the turnaround was hard to ignore. LEGO was bringing in roughly £3.5 billion a year, with operating profits of around £1.2 billion — a long way from the business that had been fighting to steady itself just over a decade earlier.

When business growth quietly starts to slow

For most businesses, there isn’t a single moment when it becomes obvious that momentum has stalled. It happens slowly, hidden amongst all the signs that the business is still doing perfectly well.

On the face of it, everything still looks pretty healthy. The team is busy, the work is good and the business is ticking along. It’s just having to work much harder for results that used to come more naturally.

This is exactly where businesses can make the same mistake LEGO made before its turnaround.

They add.

Activity can be reassuring because it feels like something is being done. New ideas are being tried, decisions are being made and everyone is working hard to get the business moving again. 

But sometimes the better place to start is with what you already have.

What has your growth left behind?

There’s a useful question for any business that’s been around a while:

If we were building this company today, knowing what we know now, would we build it like this?

Would you offer all the same services? Go after the same customers? Tell the same story?

Probably not.

Businesses change. The problem is, everything around them doesn’t always change at the same pace.

The website might still be talking to an audience you’ve outgrown. Marketing might be pushing a service that’s no longer that important. Something that made perfect sense five years ago might still be hanging around simply because nobody’s had a reason to question it.

It’s why we’re cautious when a business comes to us convinced it needs a new website or marketing campaign. It might. But we’d rather understand what’s changed in the business first.

Because growth has a habit of leaving things behind.

Old services. Old assumptions. Old messages. Old ways of doing things.

None of them looks particularly troublesome on its own. Give them a few years to pile up, though, and suddenly the business becomes much harder to explain, market and grow.

That’s one of the more useful things about hitting a growth plateau. It gives you a pretty good excuse to question some things you probably haven’t questioned in years.

Regaining momentum isn’t the same as chasing growth

LEGO’s turnaround is a great story. But it wasn’t really about doing less. It was about knowing what deserved its attention.

When growth gets harder, it’s tempting to jump straight to the answer. A new website. A new audience. A bigger marketing push. Any one of those could be exactly what the business needs.

The important bit is knowing why.

That means asking the right questions first, that’s where good strategy earns its keep.

Get that bit clear and everything that follows has more purpose. Your positioning gets sharper. Your website tells a better story. Your marketing has something much more useful to say.

LEGO had plenty of ideas. It just needed to get clearer about which ones mattered.

And sometimes, that bit of clarity is all a business needs to find its next move.