3 branding lessons from Lego

Ten years ago Lego was on the verge of bankruptcy, but managed to pick up the pieces. Here’s what brand managers can learn from the effort.

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The family-owned company had been heading closer to bankruptcy since 1999. In 2003, sales dropped globally by 29 percent. By January 2004, Lego announced a huge deficit, saying it was losing one million dollars a day.

The problem went much deeper than the balance sheet. Lego had forgotten its roots. Its products were moving further and further away from what people loved about the brand.

But then the unexpected happened. Lego’s owner and CEO, Kjeld Kirk Kristiansen—grandson of founder Ole Kirk Christiansen—stepped down and appointed Jorgen Vig Knudstorp as Lego’s new CEO. Knudstorp wasted no time in turning the company around.

Business owners and brand managers can learn valuable lessons from the Lego story. Knudstrop’s strategy boiled down to three core principles:

1. Really know your customers.

Lego may have been honored with the Best Toy of the Century award (twice), but it committed the biggest business blunder of them all: It completely lost touch with its core customers.

Sure, the company had done lots of research on play, but it had failed to reach the families and kids who use its products. As a result, Lego failed to keep pace with the changes in kids’ lives and began sliding into irrelevance.

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