All the Pieces in Place

 

Lego is one of the world’s largest toy manufacturers, owned by Denmark’s richest family. But seven years ago it was on the edge of bankruptcy. What turned the fiasco into a success? Icon visits their headquarters in Billund and tells the history of the building blocks that shape our children.

 

At the age of 11, Samuel Johnson wrote to Lego asking: What do I need to be able to work for you? He posted the letter to an address printed on a Lego box-flap. A few months later he received a reply: You need to be good at art, design, and maths; preferably having a design degree from university.

Just over ten years later, Samuel Johnson sends a new letter to Lego – now it’s an email to everyone he can find who works at the company. He’s earned all the necessary qualifications and is now showing his degree project, a construction toy made from paper and recycled plastic, at the large New Designers graduate exhibition in London.

“Every time I chose a new course or changed school, I thought about the letter; that I’d just do what needed doing. In the end, it felt like an unreal dream”, says Samuel Johnson.

That was until three men from Lego came up to him at the exhibition. Several months later, he was a junior designer for Lego in Billund, Denmark.

The company is full of these kind of stories.

The British postman who built Lego worlds at night and put them on the net: today employed as a designer.

The American architect who assembled his own construction sets of famous buildings and sold them at fan events: now responsible for the new Lego Architecture series.

The Danish archaeologist who stopped excavating: now sculpts monster heads for Lego figures.

Lego itself began with the same passion. The inventor, Ole Kirk Christiansen, named the company after the expression ”leg godt” (play well) and the company’s motto is ”Only the best is good enough”. When the first plastic building blocks went on sale in 1949, shoppers were initially cautious; wood was thought to be the correct material for durable toys. Ole’s son, Godtfred, suggested developing the block into a whole toy-system and making it hollow, so that it fastened together better. The modern Lego brick was patented in 1958, and has looked identical ever since.
The company is heavy with history. The brand is loaded with nostalgia and expectations. Lego’s private museum is known for making visitors cry – I had that fire engine! I never got that helicopter! I’d forgotten about that figure! When writer Jesus Diaz from technology blog Gizmodo wrote of his tear-filled encounter with childhood toys, his post found a million readers. Lego was also, during these decades, a successful business that didn’t need to think about money. Sales constantly grew. A company this loved isn’t expected to be able to fail.

But, in spite of this, just a few years ago, Lego was close to collapse.

Sales fell 30% worldwide.

So what happened?

Just as Ingvar Kamprad has kept Ikea’s headquarters in the small town of Älmhult, Lego is still housed in its original factory in Billund, in the middle of Jylland. Now there are new office buildings and factories, and one of Denmark’s biggest tourist attractions – Legoland – around the corner. This is where we’re going to find out the answer.

At the entrance of Lego’s headquarters, there are round pools filled with single-colour Lego bricks. The company sign over the receptionist is built from up-ended Lego figures. The private office rooms are filled from floor to ceiling with construction sets. Everyone in management has a business card with a Lego man on it that looks like them.

Here in Billund, there are 120 permanent designers. No outsiders are welcome in their building. Industrial espionage is huge in the toy industry. If a quick-footed competitor found out what Lego was thinking of launching in 18 months, it could mean disaster. All the windows we pass are darkened or covered with curtains. You need a pass just to get into reception.
Will Thorogood is British, 28 years old, and already Senior Design Manager at Lego. He carries a cardboard box full of Lego into a Stanley Kubrickesque, white meeting-room that contains poufs and a lacquered table.

“I focus on boys aged between 7 and 9, so I’m often 7 in my head. We play a lot and play-fight with the sets. Then you see what needs improving and where they break”, he says, lining up dragons, little ninjas, motorbikes, and skeletons on the table.
Lego launches new conceptual worlds every year. Having their own successful themes means less dependence on successful children and youth films. Their own concepts can also be adjusted to their sales-results.

Will Thorogood’s passion is cars. After his degree in car design at Coventry University, he planned to go into sports cars. Instead, he met Lego at a university careers-day six years ago. Today, Will and his team have launched two large and successful Lego worlds: the underwater universe Atlantis, and the multimedia venture Ninjago. In addition to the construction sets and computer games, a TV series has also been released, as well as special “spinners” for the ninja figures, and trading-card games.

It wasn’t like this 20 years ago. In the 90s, how children played changed dramatically, not least becoming mass-market entertainment. Children’s interests, which had previously focused mostly on toys, were now caught by all that computers, the web, and interactivity could offer. New companies that were experts on games blossomed. Lego also tried to make games, and started it’s own new department to do it, but they never managed to be as good as the specialists.
Mads Nipper has worked at Lego for 20 years. He started in shop sales. Today, he’s vice president of the entire company. He was there when Lego went from constantly-increasing profits to financial nose dive.
“We went the wrong way twice. That’s enough to get completely lost”, says Mads Nipper.

“When children’s play changed, we made our first mistake: we didn’t care enough. The second mistake was that when we did react, we reacted wrongly.”

As sales stagnated, they broadened into several new products besides the building bricks. Lego was to have full control over everything that bore the red Lego logo. If Lego made children’s clothes and wellington boots, they’d buy their own textile factories. When the new Legoland parks opened, Lego was to own and manage them itself.

“We spent money like there was no tomorrow, and didn’t even look at the cash flow. We’d never had to do it before, there’d always been money”, says Mads Nipper.
Market research showed that many potential buyers – children – couldn’t concentrate on building using detailed instructions. In 1998, Lego accounted for three percent of the entire world’s toy sales. Therefore, 97% weren’t considered to be interested in Lego. Instant gratification was the phrase on every toy manufacturer’s lips. Lego met it by making simplified construction sets with more special pieces, so that they were quicker to build.
“The wrong reaction completely. We questioned the company’s basic idea: the joy of building and creating something yourself. It’s the worst thing a company can do – to doubt whether there’s a reason it exists”, says Mads Nipper.
The new sets didn’t work at all. Those who loved building with Lego were disappointed and thought the experience was worse. Those who hadn’t previously liked to build with Lego didn’t want simpler constructions either, they’d just as soon buy a finished toy.
Lego heir, Kjeld Kirk Christiansen, had been MD for 25 years when he stepped down in 2004. The responsibility passed to the then 36-year-old consultant Jørgen Vig Knudstorp, who’d won Christiansen’s confidence.
A new decision was pushed through: Lego would focus on Lego. All side-industries were sold. The amusement parks were bought by Merlin Entertainment, which is second only to Disney in this field. Lego manufacturing in Switzerland, Korea, and the United States was abandoned. Now there are four factories around the world – Denmark, the Czech Republic, Hungary, and Mexico.
In one year, a billion krona was saved and over 1000 employees lost their jobs.
“We make the world’s best construction toy. It’s true. We know about the design, the experience. But that doesn’t mean that we’re also the best at making games and clothes”, says Mads Nipper.
The best decision taken in the 90s was opening up to ”intellectual properties” – making Lego based on other conceptual worlds. The first Star Wars construction sets were launched in 1999, a perfect Lego universe populated by clearly good or evil characters, and with an abundance of crafts and ships to build. The collaboration was one of the company’s – and Star Wars creator George Lucas’s – smartest ever moves. It made the Star Wars world fresh for the noughties generation who didn’t have a clue who Mark Hamill was, and resulted in Lego’s first blockbuster game. The company TT Games, which was set up by a former Lego employee (now owned by Warner Brothers), developed Lego Star Wars which was released in 2005 and has sold five million copies so far.
This year, Lego also begun collaborating with Disney and Pixar. But what the kids like is never a given. Some ventures, the film Prince of Persia for example, have been disappointments, while critically panned Indiana Jones and the Kingdom of the Crystal Skull from 2008 was a success. Few seven-year-olds saw the movie, but millions of them bought construction sets and games. And the original story isn’t followed so carefully either. For example, when the ark opens in 1981’s Raiders of the Lost Ark, deadly demons pour out; while in the game there’s disco music, and everyone starts dancing.
Among BatmanPirates of the Caribbean, and Harry Potter, the Harry Potter series is special because a third of the buyers are girls. The distribution is usually 20/80. Why they don’t sell as much to girls as they do to boys, Lego doesn’t know. They only know that the big Duplo blocks sell equally well to girls and boys, but that the girls then choose Lego City and Harry.
We’re not surprised that earlier efforts came to nothing when we see them later at the Lego museum. Instead of inspiring fantasy worlds, we find the all but ready-made pink homes of Belville and the glitzy Clikits for building handbags and jewellery with.
“We’ve failed seven times launching special girl-Lego. A few have been big failures, others just haven’t sold well enough. But we’re not going to give up”, says Mads Nipper.
Today, Lego is picky about new collaborations.
“Does this bring something to our brand, or does it dilute us? Recently, we said no to making a line of eye-glasses for children. They were a good brand and good frames, but how would we benefit from it?”

Will Thorogood shoots a blue ball from the mouth of Ninjago’s ice dragon. The design process, from the first ideas and sketches, to the characters and the different stories, was full of tests on boys of the right age.

“We test children here in Billund once or twice a week. We bring them here from schools all round the area.”
Do you pay them in toys?
“Yes, we do! We drew lots of scenarios with ninjas and their enemies before we found distinct characters – four ninjas in different colours, with different powers that represent the various elements and their particular weapons. Their opponents are evil skeletons, who also have small boots so that they can stand up.”

How do you generate ideas?

“Sometimes I sketch, but usually I build straight away in Lego. Characters are sculpted in clay and made in many different versions”, says Will, showing us skeleton heads to fit Lego men.

“Models like this can then be made using a 3D printer, which scans the entire object and then copies them by building them up, layer by layer, from a kind of plastic powder”, he explains.
After several tests of details and facial expressions, it’s this kind of 3D print that’s then used by the factories for reference when the figures are manufactured. Cool weapons are also important; Will shows pictures of Ninjago’s arsenal which, besides the usual swords and spears, also contains a mace spiked with bananas. A theme is always followed up with new construction sets for at least a year after its launch. Some sets stay in the portfolio, others become one-off releases.
“We follow all fantasy and films and all games. We have our own library and subscribe to lots of magazines on popular culture and history, but also on design and models”, says Will.

When in 2002 director Michel Gondry made the video for the White Stripes “Fell in Love with a Girl” as a Lego animation, the band requested a collaboration: they wanted to sell Lego versions of Jack and Meg White with the single. Lego declined, with the explanation that the toy they made wasn’t aimed at an adult audience. When the video became a huge success, they changed their minds, but now the band said no. Today’s company most likely wouldn’t have turned down the collaboration.

And there’s another explanation for Lego’s recovery. After 70 years of being a completely closed family business who always thought they knew best, Lego has, in the past six years, opened the doors to their fans. A new group that offers insights is called AFOL, Adult Fans of Lego.

“Five percent of the Lego buyers in the world are ‘alternative buyer groups’ – adults over 18. They buy a lot of Lego and have a lot of knowledge”, says Christian Thor, who’s responsible for the New Business Group. A big part of his job consists of travelling round to fairs and talking to enthusiasts to get new ideas. Many new designers are scouted at fan events around the world, such as Lego World in Holland, Brickworld in Illinois, or BrickCon in Seattle.

One result of this approach is Lego Architecture, initiated by a fan. Three years ago, Chicago architect Adam Reed Tucker was selling his own Sears tower construction sets at a Lego fair. Now he’s the official Lego entrepreneur. Book chain Barnes & Noble in the United States have taken on the series which to date consists of sets of 13 famous buildings – most recently the world’s tallest, Burj Khalifa in Dubai.
“Adam is a phenomenal builder who is now able to devote his professional life to his passion”, says Thor.
When the adult Lego fans make requests, what do they want?

“Sports and architecture are common, as well as construction sets reissued or made in different colours. Sometimes we’re completely surprised, like when we started Lego Cuusoo in Japan where fans can vote for their own favorite set. The winner was deep-sea submarine Shinkai 6500. We’d never have guessed on our own that there was demand for a Japanese submarine.”

Are you allowed to put together your own construction sets and sell them?

“As long as you don’t sell it in our name. The entrepreneurs who make construction sets that don’t fit our brand are still interesting because they teach us what not to do”, he says.

Two examples are Brickarms, which makes historically accurate replicas of weapons and war scenarios, and The Brick Testament, which illustrates the entire Bible in Lego form.
“Fantasy Weapons are okay for Lego, children often play games about conflict, but not modern weapons. It was important for the founder, Ole, not to pretend that real war is an amusing children’s game. We also stay away from religion and politics”, says Christian Thor.
Those who receive Lego’s approval can get the title Lego Certified Specialist, like artist Nathan Sawaya – A Wall Street lawyer who made art from Lego in his free time. He began to show them on the net, and today he exhibits at art museums worldwide.
The company keeps a careful eye out for new talent. Some works that have recently received appreciation are a replica of Westminster Abbey, built by eight American Lego fans for the British princely wedding last summer, and artist Jonathan Lopes’s copy of his neighbourhood in Brooklyn with perfectly reproduced details.

Today, Lego is again an enormous money machine. The most recent accounts show profits of 2.8 billion krona. The owning Christiansen family now keep themselves entirely in the background. When Oprah Winfrey requested an interview with Kjeld Kirk Christiansen last year, American Lego was overjoyed, until Kjeld said no. No interviews are now given by either the former managing director or anyone from the family. They don’t feel they need the publicity.

Who are Lego’s competitors?

“Lego is the biggest construction toy in the world, but the consumer compares us with everything in the shop, not just other construction toys. We compete with brand name toys, like Fisher-Price and Playmobil, who invest in development and novelty. The shops are full of cheap plastic toys, and you can get a big box for 100 krona. Our boxes cost five or six times more than that, but Lego is played with for years and is inherited by brothers and sisters, generation to generation”, says Mads Nipper.

Lego no longer has a patent on its bricks. The last patent expired in 1978. Lego has brought lawsuits, including against Canadian copy Mega Bloks, without being able to get its appearance patented (the round bumps have a function and therefore can’t be patented, according to the ruling). Nowadays, anyone is free to manufacture copied Lego bricks. But despite this, Lego sells best. According to them, they don’t have a problem reaching agreements with toy sellers for them to exclusively sell Lego, not copies, either.

“As long as the copies aren’t sold in our name, which creates brand confusion, it doesn’t matter. Why do people buy a coffee for 40 krona at Starbucks when they can brew their own for 50 öre? What makes Lego special is something other than the bricks themselves”, says Mads Nipper.

This magic makes people like Samuel Johnson continue to evolve the company’s culture. Following the letter he wrote as an 11-year-old schoolboy, and his eventual post at Lego, his goal has shifted.

“My dream is to see my own Lego creations in the shops. Next year I’ll have six of my own models on the market”.