Lego faces a challenge when it comes to new technology.

On the one hand, the arrival of robotics, voice controls and the internet of things are unquestionably changing the nature of toys.

“Parents really don’t want us to move into digital.”

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“You can make the toys move and play together, a bit like Toy Story coming to life in your bedroom,” David Gram, Lego’s intrepreneur in residence told the audience at the Disruption Summit Europe.

3D printing, which will make it possible for children to print their own toys will also be “a challenge” for a maker of moulded plastic toys, says Gram. Lego is under constant pressure to make sure it does not get left behind.

On the other hand, a large portion of its customers don’t want change. Many parents see Lego as the last defence against their children becoming entirely absorbed in screens.

“When we talk to parents they say they really don’t want us to move into digital,” says Gram.

Gram, who has been at Lego for nearly nine years, is very conscious of the ethical responsibility he has, and worries about children becoming too passive through watching pre-packaged entertainment on computers and mobile phones. Torrence test scores, a standardised way of measuring creativity, have been declining since the 1990s, Gram says, and he believes there is a connection between this and the growth of digital media.

Also, Lego knows better than most companies how the wrong bet on innovation can nearly kill a company. In the 1990s Lego tried to diversify into areas like food, clothing, theme parks and video games, all of which lost money. It retired designers who had been with the company for decades, in favour of hiring hotshot innovators from design colleges. They designed sets with so many complicated bespoke parts that it brought the company to the brink of bankruptcy.

Though Lego has returned to profitability, thanks in part to the successful Lego movies, the company is understandably wary when it comes to change.

Gram believes in being a “diplomatic rebel” within the company — pushing for change but never breaking too many rules. One of the case studies he likes to talk about is the way Lego learned to tap into the trend for outsourcing.

Lego wanted to tap into its adult fans. They call them AFOLs (adult fans of Lego).

Lego has a lot of adult fans — the company calls them AFOLs (adult fans of Lego) — who like to create their own designs and will even sell them on sites like Etsy.

The innovation team wanted to tap into this idea creation (rather than sue them for infringement of trademark which was another, more expensive and potentially PR-disastrous option). They pitched the idea of creating a site where Lego fans could present designs, get the community to vote on their favourites and Lego would turn the winning ideas into real products.

Management said no. Surely Lego already had the best designers in house? And what would stop competitors pinching the best ideas in an open forum like that?

But the innovation team eventually got permission to try the idea in a very contained way, in Japan, a market seen as relatively isolated because of the language barrier. The project was operated at arm’s length from Lego, on a crowdsourcing platform called CUUSOO, and launched in 2008.

CUUSOO website

It was a success. A model of Japan’s deep-diving submersible, the Shinkai 6500, became a hit both on the CUUSOO site and later with Lego fans the world over. In fact, it is coveted — rare Shinkai 6500 sets are still fetching more than $400 on eBay today.

The crowdsourcing site also gave birth to many other now-famous Lego sets, from Ghostbusters to Minecraft, and by 2014 it had proved so popular that the activity was switched to operate squarely under the Lego brand as Lego:Ideas.

The Lego:Ideas case is still blueprint for managing innovation at the company. These are the lessons Gram believes any company can take from it:

The ideas:

  1. Be a “diplomatic rebel”. You have to accept the idea that people will initially hate your new idea. They will find it threatening or too much work and you will have to make a big effort to bring them round. Use all those soft skills to build goodwill — praise people, acknowledge their help, give people a chance to shine.
  2. Be disciplined. It is fine to do a lot of experimenting but make sure each experiment is testing a hypothesis and that you learn from each one.
  3. Radical exploration may have to happen outside the corporate walls. If the project is something too far from the company’s core business it might work best as a separate startup to begin with.
  4. Think big but start small. Corporates often create steering committees for new projects which are big, expensive and slow, killing off any innovative nimbleness. These committees are really hard to disband if the company needs to change direction. It is best to innovate with as small a team as you can possibly get away with.
  5. Start testing straight away, even before there is any kind of product. Lego creates what Gram calls “pretotypes” which are a stage earlier, even, than prototypes.
  6. “When you tell an engineer to build a prototype they want it to really work, which can take months,” says Gram. Instead, Lego often tests with materials thrown together in a few hours. For example, it tested a mobile phone concept in a low-tech way, by printing a big picture of a mobile phone on cardboard, cutting out the screen and getting a team member to stand in the cutout window, acting out various scenarios. This way, they could test the basic idea in front of an audience of children almost instantly, before anyone had to spend time on a single line of code.
  7. Work in 2-week sprints. Gram’s team starts by defining a hypothesis they want to test. They build the pretotype, test it and then on the Friday of the second week they evaluate the results. The short bursts of testing help limit risk. “The team can go in the wrong direction for a maximum of two weeks,” says Gram.
  8. Build a “safe house” for the team. It is hard to measure an innovation team by traditional key performance measures — what they do might not initially increase sales or have any kind of measurable impact. So insulate them from that and find different ways to evaluate success. Gram’s solution at Lego is to have the team spend two days of every month reflecting on their projects, checking to see if they are going in the right direction and whether or not the rest of the company is understanding what they are doing.

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