LEGO: A digital transformation

success story

Submitted By:
Pratyush Ballepu (MJ22GL050)
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 Background
LEGO was founded in Denmark by Ole Kirk Christiansen in 1932. Initially, the company
focused on the manufacture of wooden toys. After the LEGO brick's patent expired in 1988,
the company's growth stalled due to the emergence of competitors offering comparable
products and the popularity of home video game consoles such as the PlayStation and Xbox.

Thus, the company expanded into the video game industry, the television industry, and
theme parks. However, these efforts did not produce the desired effects. LEGO came
perilously close to declaring bankruptcy in 2004. The company's CEO at the time, Jorgen Vig
Knudstorp, advocated for a focus on digital transformation and the establishment of new
revenue streams from mobile apps, movies, and mobile games.

Digital Transformation
Recent modifications have been made to LEGO's business model and toy selection. When SAP
was introduced, it entirely redesigned the company's internal enterprise platform, which
facilitated the streamlining of the supply chain procedures. The company has started
producing high-tech toys and using the Internet to engage with its clients.

With the online 3D design tool for creating one's own models, LEGO has steadily delegated its
creative obligations to its followers over the years (Digital Designer). Its USP focuses on
learning and development, distinguishing it distinct from competitors and convincing
millennial parents of the product's worth. The LEGO Group's new commercial branch
functions as an incubator, allowing LEGO fans and corporate partners to test their "micro
company" ideas. LEGO was able to reinvent itself by generating new digital-based sectors,
such as software, video games, LEGO Mindstorms, and films that are related to its block
systems and far more appealing to digitally savvy consumers.

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 Digital Product
LEGO's physical and digital products were integrated without difficulty. The corporation
was so responsive to market demands that it produced 3D catalogs featuring virtual
replicas of LEGO products. Customers seek goods that can connect to the internet and
perform additional digital functions.
In 2011, LEGO created "Life of George," a game that merged a physical toy set with digital
software to assist children improve problem-solving skills via both conventional and non-
conventional techniques.

For market research objectives, LEGO Fusion was initially released in the United
States in 2014. The smartphone-based brick-design scanning application is
another instance of the blurring boundaries between the physical and digital
worlds.

In 2015, the company entered the video game market with the release of LEGO

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Dimension. LEGO Dimension is a science fiction action-adventure video game that
contains characters from well-known film franchises such as The Simpsons,
Ghostbusters, and Back to the Future.

Through the LEGO Life social network app, users are able to submit short videos of
themselves playing with LEGO bricks, which can increase their own fame and the overall
popularity of the LEGO brand.

In an effort to promote and sell its products, LEGO has been significantly more active on
social media. Due to user-generated content, the company soon ascended to become the
second most popular brand on the video-sharing site. The firm created a LEGO click
campaign that heavily featured social media, mobile, and video. To engage clients, the
campaign featured a short film that went viral and directed them to a forum where they
could provide feedback and share their ideas on social media.
The LEGO Group was able to engage with baby boomers who grew up with its toys through
the use of social media. As a result, the LEGO Architecture product line, which featured
replicas of famous structures created from LEGO bricks, became an instant popularity.
The LEGO Group has developed a website titled "LEGO Suggestions" to solicit unique ideas
for new sets of bricks from the general public. The online presence and user base of LEGO
are largely attributable to the platform's capacity to serve as an incubator for the brand,
allowing LEGO to steal new ideas from people participating in the design selection process.

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LEGO has introduced a robot-building kit called LEGO Boost, which can be used by children to
construct their own robots with the provided tools. With the use of a smartphone app,
motors, and sensors, the kit trains children on how to create their own robots to execute any
desired task.

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Digital Transformation Impact
The emergence of digital technology prevented LEGO from going out of business
and subsequently transformed the company into the "Apple of Toys."
There is a chance that the digital transformation will have a monetary impact on
the organization. In 2017, the company's operational profit margin was 37.1
percent, up from 25.1 percent in 2007 and much above the industry average.
From 2009 (when they brought in 1.6 billion euros) to 2014 (when they brought
in 3.8 billion euros), sales increased at a compound annual growth rate of 20%.
The corporation has successfully joined the lucrative Hollywood industry as an
added plus. On a budget of less than $60 million, the first LEGO film grossed $468
million worldwide.
LEGO's digital transformation from a manufacturer of wooden toys to one of
plastic bricks and digitally-enabled toys, as well as its ability to inspire new
product ideas from end consumers, make it an exceptional success story. The
World Economic Forum's Digital Transformation of Industries Initiative included
their story among one hundred case studies.

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