1F Key challenges hindering the organization’s performance
Key Challenges
Our company and industry analysis has identified three key strategic challenges Lego faces:
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Adapting to digital disruption in the industry
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Staying true to their brand values
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These challenges are explained in-depth by Chiara and Zeynep:
1. Customer Journey
The customer journey map identified two main pain points in a user’s journey (Rosenbaum et al., 2017). Though Lego's wide variety of products are effective in reaching a large customer base, the abundance of choice might result in choice overload (Luwisch et al., 2021). When customers get overwhelmed by the amount of options from which they can choose, it makes it more likely that they don’t end up purchasing anything at all. Research conducted by Spenner and Freeman (2012) found that consumers prefer simple customer journeys which curated product offerings provide.
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The second pain point is regarding the limited engagement a consumer has with the Lego set after it has been built. Lego estimates that 97% of people with Lego owners keep or give their bricks away (Mace, 2019). Though the remaining 3% seems like a small amount, Lego produces approximately 36 billion Lego bricks a year and thousands of Lego bricks are found during beach cleanups (Williams, 2020). With consumers becoming more environmentally conscious (Hutchins, 2021), tackling this sustainability challenge is especially important. Transitioning to a circular economy is also one of Lego’s key missions.
2. Digital Disruption
The next strategic challenge identified is catering to the trend of children becoming more interested in digital entertainment, and growing up faster due to technology (Auxier et al., 2020). They must remain informed about customer trends to satisfy their needs or else they risk losing customers to their competitors who have more technology-based business models as demonstrated in our Competitors' Analysis.
3. Brand Values
However, as Lego adapts to digital-focused consumer preferences, they face a risk of abandoning their brand identity. Lego’s key mission is to develop skills that are vital for their future success and well-being, thus ensuring that their toys have an educational purpose is key. Recently, Lego has launched products in new areas such as the video game industry, which could be seen as counterproductive to their mission as video games only bring entertainment value and can even cause adverse health effects if their usage is not kept in check (Ayenigbara, 2018). The increasing trend of toys that are based on movie or TV content has also led to Lego’s multitude of collaborations with entertainment companies. Though these cater to changing consumer habits in the digital age, it is important that Lego does not stray too far from its own identity and values. Losing sight of their identity almost led to Lego’s bankruptcy in 2003 when they over-innovated into adjacent markets, like electronic games (Wharton, 2012).
References
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Ayenigbara, I.O., 2018. Gaming Disorder and Effects of Gaming on Health: An Overview. Journal of Addiction Medicine and Therapeutic Science, 4(1), pp.1–3. Available at: https://www.peertechzpublications.com/articles/doi10.17352-2455-3484.000025-jamts.php [Accessed March 8, 2022].
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Auxier, B. et al., 2020. Parenting children in the age of screens. Pew Research Center: Internet, Science & Tech. Available at: https://www.pewresearch.org/internet/2020/07/28/parenting-children-in-the-age-of-screens/ [Accessed March 8, 2022].
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Handley, L. (2020) Lego is the world's most reputable company as tech giants lag, survey says, CNBC. CNBC. Available at: https://www.cnbc.com/2020/03/03/lego-is-the-worlds-most-reputable-company-disney-follows.html [Accessed: March 5, 2022].
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Hutchins, R., 2021. Environment: Build your own: "there's real desire from retail and consumers to support sustainable". ToyNews. Available at: https://www.toynews-online.biz/2021/02/16/environment-build-your-own-theres-real-desire-from-retail-and-consumers-to-support-sustainable/ [Accessed March 8, 2022].
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Lego (2022) Brickset: Your Lego Set Guide. Available at: https://brickset.com/sets [Accessed: March 5, 2022].
Luwisch, C. et al., 2021. The Lisbon EMBA. Available at: https://www.strategosinstitute.com/uploads/cf17cf06ff987718f7a8d8edfb65bc2e6abe59cb33bfd8b079f41b20964e04af.pdf [Accessed March 5, 2022].
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Mace, M., 2019. Lego launches reuse platform for old plastic bricks. edie.net. Available at: https://www.edie.net/news/5/Lego-launches-reuse-platform-for-old-plastic-bricks/ [Accessed March 4, 2022].
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Rosenbaum, M. S., Otalora, M. L. and Ramírez, G. C. (2017) “How to create a realistic customer journey map,” Business Horizons, 60(1), pp. 143–150. doi: 10.1016/j.bushor.2016.09.010.
Spenner, P. & Freeman, K., 2012. To Keep Your Customers, Keep It Simple. Harvard Business Review. Available at: https://hbr.org/2012/05/to-keep-your-customers-keep-it-simple [Accessed March 1, 2022].
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Wharton, 2012. Innovation almost bankrupted Lego - until it rebuilt with a better blueprint. Knowledge@Wharton. Available at: https://knowledge.wharton.upenn.edu/article/innovation-almost-bankrupted-lego-until-it-rebuilt-with-a-better-blueprint/ [Accessed March 6, 2022].
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Williams, A., 2020. Study suggests Lego bricks could survive in ocean for up to 1,300 years. EurekAlert! Available at: https://www.eurekalert.org/news-releases/546237 [Accessed March 8, 2022].
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