Why Lego Almost Went Bankrupt in 2003?
Lego has been associated with core family values and constant innovation and development. However, in the early 2000s, the company almost went bankrupt due to its innovation strategy. In 2003, the company lost $300 million and the prognosis for the next year was even more frightening (Time 2012). This was a result of the company’s focus on innovation. Lego introduced new products and diversified the range of its products. Nonetheless, this change was not supported by the change in distribution and logistics. Therefore, the expenditures were rising whereas revenue decreased. The company did not develop new marketing strategies to sell their innovative products. This was the major mistake that led to significant losses.
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Key Elements Underlying Lego’s Successful Innovation Strategy
At present, the company has a thoughtful innovation strategy. The company’s management has taken into account the faults of the strategy used in 2003. It was acknowledged that new theme products were popular when the original stories and characters used were popular. However, customers soon lose interest in specific theme products. Therefore, now the company produces a quite limited number of products to satisfy the need. The company also outsourced its production to the Check Republic and Mexico and set up a network of its retail stores (Time 2012). Therefore, Lego developed an efficient distribution and logistics which helped the company reduce costs and increase revenue. The company also produced numerous board games and even DVD films. All these strategies support new products and make them popular among customers. Thus, innovation strategy has become more organized and, therefore, more efficient.