Renewal

Case Study

  LEGO
Strategies   

Sujal Kumar – 20BMS0351

Shubhi Agarwal - 20BMS0348
 • A renewal approach to strategy refreshes the
vitality and competitiveness of a firm when it is

What?
operating in a harsh environment.

• When circumstances are so difficult that the

current way of doing business cannot be
sustained, changing course to preserve and free
up resources—and then later to redirect toward
growth—is the only way to not merely survive
but to eventually thrive again.

• Hence, the renewal approach is characterized by

two distinct phases: survival and pivot to growth.
 • Harsh conditions can pose a threat to the
survival of a firm.

When? • These conditions can arise from a protracted

mismatch between a firm's approach to
strategy and its environment or by an external
or internal shock.

• Though a firm may not notice the distress

signals immediately, protracted competitive
underperformance in terms of margins or sales
growth, sharp drops in free-cash flows, and
reductions in available capital are all indicators
that the long-term survival of the firm may be
at risk.
 • A company must first notice and react to the
deteriorating environment as early as possible.

How???
• Then, the firm needs to economize to decisively
address its immediate impediments to financial
viability or even its very survival.

• To do so, the company must focus the business,

cut costs, and preserve capital while also
freeing up resources to fund the next part of
the renewal journey.

• Finally, the firm needs to reset its strategic

compass and pivot to one of the four other
approaches to strategy.
 • Once upon a time, Lego was the most

Overview
beloved toy for children all over the world.

• But as time went by, the company started to

face a lot of problems. It was in 2004, Lego
was in trouble.

• The toy company had just reported its

biggest-ever loss of $285 million. Things were
not looking good for the beloved Danish
brand.

• But just eight years later, Lego became the

most valuable toy company in the world.
They achieved a revenue of $4.5 billion and
profits of $1.5 billion. 
 • In the beginning of the 90's Lego sales where an all-
time high, the company was rapidly expanding.

The
• Basically, Lego's became a household name.

• The company was expanding too quickly but without

focusing on innovation.

great  • By 1993, their growth had hit a wall.

• Their massive increase in sales was mostly due to a

rapid globalization strategy. The growth was sugar-

90's coating a lot of the problems arising. Given that sales

were good, they lost track of their profitability.

• Lego needed to find new ways to expand its market.

• The US market was changing and
tech was changing the way the kids
played.

• The US market had become 

heavily focused on licensed toys like
star-wars, Disney etc.

• After sales declined in the mid-90s

and the company faced its first-ever
loss in their history in 1998 of $48
M.
 • The new CEO, Jørgen Vig Knudstorp, focused
on stopping the bleeding and transforming the
company to be more customer-driven.

The
• Enter Paul Plougmann,  "a turnaround
expert".

• The company began a product expansion

 Turn-Around
phase with the belief that the brick was
becoming obsolete.

• A partnership with Lucasfilm in 1999 proved to

be a game-changer.

• They tapped into the vast Lego fans community

and implemented crowdsourcing and open
innovation.
• The designers where tasked with a
project to build an entire building
system, bypassing bricks.

• The result?

• Lego Star-wars exceeded
predicted sales by a whooping 500%.

• Knudstorp's leadership and clear

vision played a significant role in
achieving the remarkable
turnaround of the company.
 • Sometimes even the successful
companies can hit roadblocks and 

Conclusion
lose tracks but  with innovation smart
partnerships and a willingness to
change even the biggest problem can
be overcome.

• Renewal strategies can be an effective

way to bring new life and energy into
a business.

• When implemented correctly, renewal

strategies can help a business remain
competitive and successful.