Thread by @digitallynativ

A thread about LEGO

On overcoming adversity 🧯

On product principles 🧒

And on building a distribution channel, brick by brick 🧱

2/ It's 1916 in the sleepy village of Billund, Denmark

A young carpenter named Ole Kirk Christianson leverages his love for woodworking and opens a carpentry business

He finds modest success, producing ladders & stools

But in 1924 an accidental fire burns his shop down

3/ Christianson rebuilds his workshop, bigger and better than before.

This financial risk turns into a disaster when the US stock market crashes in 1929, and a global recession ensues

Ole pivots his shop away from making expensive furniture

towards inexpensive Toys

4/ The move to toys doesn't immediately pay off

In fact, Ole and his son Godtfred fall into bankruptcy

and also suffer personal loss as Ole's wife passes away in 1932

Christianson's family decide to bail him out financially

So that he can give his business one last shot

5/ Ole and Godtfred emerge with new resolve and focus for their Toy business. They decide to rebrand, and choose the name "LEGO" which is in reference to the Danish phrase: "Leg Godt" which means "Play Well"

Godtfred hangs a sign in the shop: "Only the best is good enough"

6/ Their emphasis on quality and exacting standards pays off

LEGO becomes a success in Denmark with several hit toys

But WW2 gets in the way of their growth, as Germany occupies Denmark

and disaster strikes the Christianson's yet again, as another fire ruins their factory

7/ Wartime production consumes many traditional raw materials, including wood

So Christianson looks forward and turns to new/cheaper technology:

Plastics

In 1946 he purchases the first plastic injection molding machine in Denmark for 10% of his business' annual revenue

9/ The big LEGO breakthrough happens when in 1947 Christianson comes across a British toy:

"Kiddicraft Self-Locking Building Bricks"

Christianson creates his own version of the plastic brick which he calls "Automatic Binding Bricks"

10/ Ole and Godtfred immediately recognize the value of what they've created: A "System of Play"

They created a means for children to leverage their own imagination and build endlessly

In 1955 the stud-and-tube coupling system is created to the brick to add model stability

11/ In 1958 LEGO receives a patent for their plastic brick

This is also the year that Ole passes away and Godtfred assumes control of LEGO Group

In 1960 the LEGO factory burns down (yes, again)

Production of wooden toys is discontinued, adding focus to their 'System of Play'

12/ Godtfred distills LEGOs product focus into 10 key attributes:

These attributes extend the System of Play and ensure that LEGO consistently generates products and extensions that captivate children's attention and imagination

This, while also building upon LEGOs brick IP

13/ by 1980 LEGOs product strategy has been so successful that according to a survey nearly 70% of Western European homes with children under 14 report having LEGO bricks in the home

LEGO has moved from a product to a brand, and now a distribution channel

14/ in 1996, a year after Godtfred passes, lego.com is established. LEGO is one of the earliest brands to embrace eCommerce and digitalization

Over the next decade, LEGO signs licensing deals with:

Warner Bros
Lucas Films
Ferrari
Disney

15/ The licensing deals and subsequent LEGO sets are incredibly popular

They spawn successful video game franchises

and in 2014 The LEGO movie

The film has a $60M budget

it grosses $468M worldwide

Lego becomes the 3rd largest toy producer in the world, selling 19B bricks/yr

16/ LEGO has now become one of the largest and high margin distribution channels worldwide

They are able to maintain this status by adhering to their Product Principles, and by constant research and innovation

60% of the LEGO portfolio is new each year and backward compatible

17/ This approach also allows LEGO to sustain near 30% Operating Margins

In 2019 the company generated $6.1B in revenue and $1.71B in Net Income

Sustained product margins built around their brick IP and progressive product approach are 72%, driving their profitability

18/ The LEGO story is an example of the power of a simple idea that leads to more complex systems

It's an example of the power of sustained excellence, perseverance and focus over long time horizons

as a result of these efforts, LEGO has become synonymous with Play

19/ Postscript:

Fun Facts: LEGO is the largest producer of wheels in the world

Any brick made after 1955 is compatible

There are over 400B LEGO bricks in the world

6 2x4 LEGOs can make 915M combinations

Manufacturing standards are so tight, only 18 bricks/yr fail inspection