LEGO Group - Leveraging digital technologies to transform the business model and become one of the most successful toymakers - I Can Infotech

Leveraging digital technologies to transform the business model and become one of the most successful toymakers

Key facts

  • The LEGO Group¹ engages in the development, production, marketing and sale of play materials. It provides toys as well as experiences and teaching materials for children in approximately 130 countries.
  • Founded by Ole Kirk Christiansen in 1932, LEGO is based in Billund, Denmark. It is a subsidiary of KIRKBI and is currently privately held.
  • In 2014, LEGO earned €3.8 billion in revenues and €1.4 billion EBITDA, with a margin of 37.1%. It currently employs approximately 13,000 people.

Uniqueness

Lego company digital transformation strategy

  • After a period of expansion (1970-1991) LEGO suffered a steady decline (1992-2004) and by 2004 LEGO was close to bankruptcy.
  • Reaching a tipping point, LEGO started restructuring and a digital transformation programme focused on new revenue sources coming from movies, mobile games and mobile applications.
  • LEGO’s design capabilities have been increasingly handed over to their fans e.g. through the Digital Designer (a web-based 3D design tool to create own designs). It’s USP towards learning and development differentiates it from competitors and convinces parents from millennial generation about the usefulness.

Value

  • LEGO achieved an EBITDA margin of 37.1% in 2014, an increase of 15% since 2007.
  • Revenues for LEGO have grown at a CAGR of 20% from €1.6 billion in 2009 to €3.8 billion in 2014.
  • In 2014, the first LEGO movie achieved revenues of approximately $468 million with a production budget of only $60 million.
  • LEGO has recovered steadily post 2005 and it is now seen as “the Apple of toys”.

Approach

lego company digital strategy

  • LEGO’s new business group has become the incubator of the company, an open platform that allows fans and partners to experiment with “micro businesses”.
  • LEGO was able to transform itself by launching new digital based businesses such as movies, LEGO Mindstorms, video games and applications, connected to their block systems that are more appealing to digitally savvy customer groups.

LEGO Group is one of more than 100 case studies identified as part of the World Economic Forum’s Digital Transformation of Industries initiative.  An overview of the DTI program can be found here.

1. Sources: Lego Corporate Information, FT, LA Times, Global Toy News, WEF/Accenture Analysis

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