Chips off the old blocks
IN 1932, WITH the Great Depression rocking the industrialised world, a master carpenter in Denmark named Ole Kirk Christiansen desperately needed a way to earn a living.
As other businesses closed, Christiansen doubled down on wood, starting a company that manufactured stepladders, ironing boards along with an entirely new product line: wooden toys. He called the company Lego. The name derived from the Danish words “leg” and “godt”, meaning play and well. Though Lego’s first toys were simple yo-yos, trucks and ducks on wheels, the company would eventually become one of the most respected brands in the world. With its connectible plastic bricks, Lego came to reflect the evolution of childhood imagination around the world, a remarkable feat given that its founder didn’t have much schooling.
But now that childhood playtime is rapidly shifting to screens, Lego is trying to hold on to Christiansen’s legacy. The task is enormous.
This month, after revenue dropped 5%, Lego laid off 1 400 employees, 8% of its 18 200-strong global workforce. Another toy Goliath, Toys “R” Us, has just announced it will file for bankruptcy, though it promised its 1 600 stores would remain open. The famous retailer struggled to compete with Walmart, Target and online giant Amazon.
Even in its earliest days in the 1930s, Lego faced intense challenges, according to David C Robertson, the author of Brick by Brick, a 2013 history of Lego. Christiansen, a widower, ran the business on his own, while raising four sons.
He got some help from one of his sons, though: Godtfred Kirk Christiansen, who had been building toy models for the company as a teenager, became a Lego manager in 1940. But two years later, the factory suffered a fire, which destroyed its entire inventory and blueprints for new toys.
Christiansen nearly ended his gambit, according to Robertson, but soldiered on.
By the late 1940s, Lego finally produced what it called “automated binding bricks”, a precursor to the bricks of today.
Ole and Godtfred grew interested in them from British inventor Hilary Fisher Page’s plastic, stackable cubes with two rows of four studs. But the Christiansens modified the size of the bricks, sharpening the edges. The only problem was that they weren’t all that sturdy and children hadn’t yet embraced plastic toys.
By 1953, the “automatic” pieces got a formal, new name: Lego Bricks. But the bricks were selling poorly, Robertson wrote. They didn’t snap to each other very well.
Then, in January 1958, Lego obtained a patent for an idea it had been working on for years: A stud-and-tube design that allowed kids to snap the bricks together without them coming apart. The new system gave children the chance to build something sturdy, without it wobbling, or coming undone. Lego made sure new bricks were always compatible with old ones.
That very same year, the company’s founder died. Godtfred took over. But it was the bricks that really built the company. Lego executives, observing how children played with their products, realised the firm’s future success was not about the brick, but what the brick could create: buildings, streets, cities, all filled with people, vehicles, street signs, and bushes.
“You can go on and on, building. You never get tired of Lego,” one of its publicity campaigns said.
Its big success came in the late 1990s. Lucasfilm was about to release the first of a prequel trilogy to the original Star Wars movies. And Lego was debating whether to partner with the company to licence a set of Star Wars toys that would come out at the same time as the film.
Astonishingly, Lego executives initially baulked, partly as a result of the company’s fierce independence. But Lego, whose executives took pride in the innocent nature of their toys, also fretted about aligning itself with any violence. The company surveyed parents, who didn’t mind the partnership. The positive polling gave Lego the comfort it needed to push ahead with Star Wars.
The result? Its Phantom Menace Lego Star Wars product line killed – comprising more than 15% of sales. The Star Wars arrangement ushered in similar, profitable licensing agreements. It wasn’t long until Lego rolled out Harry Potter sets.
Yet, Lego found itself on the brink of bankruptcy in the early part of the new century. In late 2003, the company’s sales sank by 30% compared with the year before. Lego was introducing too many product lines, without putting enough attention on its original, core business, Robertson wrote. There were Lego dolls, a Lego kids’ clothing line, and a multitude of other products.
Toy retailers began complaining to Lego that the firm didn’t provide enough inventory of one of the few best-selling items – the Bionicle Legos, which are set in a science fantasy world. The company had also become too reliant on Star Wars and Harry Potter movies, and during the years those films weren’t released, Lego’s revenue dropped.
The media reported Lego might be sold. One Lego executive even had a discussion with Mattel about acquiring the bruised brand, according to Robertson. In 2004, the tenure of Kjeld Kirk Kristiansen – the grandson of the founder – ended. But he remains the majority shareholder of the holding company that owns Lego.
Eventually, Lego trimmed. It shut down several theme parks and killed off poor-performing product lines. Its newest offerings is an $800 (R10 661) Star Wars Millennium Falcon. Inside the box: more than 7 000 bricks. – The Washington Post