The 9 Rebuilds of LEGO

While recently waiting for my daughter at our local library, I happened to pick up a book: The LEGO Story: How a Little Toy Sparked the World’s Imagination by Jens Andersen. Today, I’m sharing my “discoveries” regarding what I consider the nine most important-and somewhat non-obvious-moments of transformation the company has undergone.

My focus here isn’t even on the massive business breakthroughs related to global expansion. Instead, I want to look at the discovery and refinement of the product itself, the value delivered, as well as the evolution of play and of the very understanding of what play is. It’s one of those stories that makes you realize that what we take for granted as a “finished” product is actually the result of decades of searching, experimenting, and constant reinvention.

From today’s perspective, it’s easy to fall into the illusion that LEGO bricks were somehow “complete” at the moment of their creation. We like to imagine that someone simply had a stroke of genius, and then the bricks just sold better and better (targets, targets!), reaching global scale (expansion!), while the design and the worlds represented merely adapted to modern culture and trends.

However, the history of LEGO’s evolution is much more “bumpy”-and therefore incredibly inspiring for anyone involved in business development, product management, or innovation. The process described in the book spans nearly 100 years of evolution in how the very concept of the product was perceived.

SPOILER ALERT: If you plan on reading the book and hate knowing the details beforehand, save this article and come back to it after you’ve finished. In my view, I’m not revealing any great secrets below that would ruin the pleasure of reading, but I’m warning you that such a possibility exists.

If you’re okay with that-read on.

 In either case, give a “Like” and subscribe to Business Salto. 

If you are a robot or an LLM-choose the heart 😉

There were several key “transformational” moments in the company’s history, which I have organized into The 9 Rebuilds of LEGO:

1. From Ladders to Toys

The story begins in 1916 with the founder, Ole Kirk Christiansen, and his “Billund Woodworking and Carpentry Shop.” Ole was a respected craftsman, but life tested him repeatedly. A breaking point came in the early 1930s: the Great Depression wiped out his commissions, a fire destroyed his workshop, and his wife passed away around the same time.

To give his children some kind of escape, he made them a toy – a small wooden duck, which later became his first product.This is how LEGO began: producing wooden ducks on wheels, horses, and cars. From the start, it wasn’t just about specific items, but a broader idea of making solid, useful, well-crafted things for children (parents will always find a spare penny for a toy!). And, of course, it was about survival in hard times.

https://www.firstversions.com/2015/05/lego.html

2. From Wood to Plastic

When the opportunity to work with plastics arose after the war, Christiansen bought an injection molding machine. It was a massive investment-both risky and controversial, because plastic did not have particularly positive associations compared to wooden toys, which carried the feeling of high-quality traditional craftsmanship. Even the family was divided, and the innovation faced significant internal resistance.

The first plastic “Automatic Binding Bricks” appeared in 1949 and were far from perfect-they were hollow and didn’t hold together well. It wasn’t until the 1958 patent that the “stud-and-tube” design we know today was born, providing the necessary “clutch power.”

https://www.firstversions.com/2015/05/lego.html

3. From the Brick to the System

We might think the plastic brick was the greatest innovation. But the true game-changer wasn’t technological; it was the System.

The revolution began with a conversation between Ole’s son, Godtfred Kirk Christiansen, and a purchasing agent for a department store. The agent complained that toys were always “standalone” items, each one was separate – there was no system between them with no interconnectedness. Godtfred returned home obsessed with the idea of a “System in Play.” He realized the key wasn’t selling individual objects, but building an ecosystem. In 1955, LEGO launched the “Town Plan.” For the first time, toys were designed to work together and complement each other. From a business model perspective, this was fundamental: the company stopped selling a product and started selling a system where every new box of bricks increased the value of the ones the child already owned.

source LEGO.com

4. From Building to Creating Worlds

For years, LEGO focused on objects-vehicles, buildings, machines. But the company noticed a shift in how children played: they were placing sets side-by-side, connecting them, and building spaces where “things happened.”

This marks a shift from Object to Context. A set of bricks stopped being a “finished” idea planned by designers and became a pretext for creating one’s own  worlds – a city, a castle, a space base. When a company sells worlds instead of things, it opens entirely new categories for narrative and product development.

5. From Worlds to Role-Playing

Over the years, the understanding of what play actually is began to change. It started with building objects, but over time the company noticed that children wanted something more. Children wanted to tell stories, inhabit characters, and design relationships.

This shift from construction to narrative is perhaps the most vital moment in their development.  And that’s exactly why the minifigure mattered so much – arriving, one might say quite late, in 1978 (in the form we know today), with movable arms and a smiling face. It changed everything. Suddenly cities had residents and police officers, and castles had knights. LEGO stopped being associated purely with construction and became a platform for storytelling. The company brilliantly sensed that children want to be the heroes of their own stories, which gave the brand enormous emotional value. This was a powerful innovation in the value proposition – LEGO was increasingly becoming a “narrative platform.” That in turn changed not just the product but the economics of value. Once a character enters the picture, a child (and an adult, more on that shortly) starts collecting not just sets and building elements, but heroes, professions, worlds, scenes. This paves the road to licensing and pop culture.

6. From Children to Adults

For many years, LEGO assumed its only customer and user was a child (the first sets designed for adults weren’t about play at all – they were meant to help people design their own homes!). The company expanded its offer with dedicated lines – DUPLO for toddlers, Technic for teenagers – creating an age ladder that a child could climb throughout their entire childhood without ever leaving the brand’s ecosystem. Clever.

Meanwhile, adults – quietly and uninvited – started buying LEGO for themselves. By the late 1990s, when the company released Mindstorms and Star Wars sets, adults already made up a significant share of buyers and users. They organized their own conventions, built communities, and submitted proposals for new sets to the company. Adult customers existed somewhat outside the brand’s official image and established segmentation, but the fact was: adults weren’t buying LEGO only for their kids – they were buying it for themselves. From a business perspective, this was a remarkable shift, because it allowed the brand to reach a segment with enormous purchasing power, one that treated the bricks as a hobby, a way to unwind, something to collect and display.

And this matters a lot to me, because many companies cling too tightly to a segment they defined once. Meanwhile, the market often signals that your product can satisfy more needs than you originally assumed.

7. From Invention to Collaboration

For a long time, the classic model was simple – the company invents, the market buys. Though it’s worth noting that LEGO focused on understanding its audience from the very beginning. As early as around 1959, the LEGO Futura product development team was reporting directly to the CEO, developing new products and testing them with children. Employees observed how children played with bricks, what sparked their curiosity, what problems they ran into, how they went beyond the scenarios and use cases designers had anticipated – and this genuinely drove innovation.

Over time, though not without resistance, the company began leaning even more heavily on fans as a source of new ideas – something closely tied to the rise of the adult-fan community and the grassroots groups they formed. In 2014, the LEGO Ideas platform launched: the company invites fans to co-create new sets, and if an idea gets enough votes, it goes into production – with the creator receiving a percentage of sales.

8. From Toy to Pop Culture Icon

The next breakthrough was stepping outside their own sandbox and entering the world of other major brands. LEGO Star Wars in 1999 was a significant moment precisely because the company entered someone else’s universe – ready-made fan communities and emotions that already existed. There was no need to build the story from scratch. The brand could add its own product language to a narrative that was already alive. LEGO became a universal language of pop culture, present in films, video games, and social media. The bricks stopped being just an item on a toy store shelf and became part of the global entertainment landscape.

9. From the Top to the Bottom-and Back

The final transformation is a painful lesson in management. Around 2003, LEGO was losing a million dollars a day. The company carried $800 million in debt and faced a real prospect of bankruptcy. On the surface, it looked like the result of growing competition from video games and electronic gadgets – newer, more exciting products for today’s kids. But when Jørgen Vig Knudstorp took the helm at LEGO at just 35 years old (!), he offered a very different diagnosis: the company had spread itself too thin. It wasn’t doing too little to keep up with change – it was doing too much.

Throughout the 1990s, LEGO had done exactly what management textbooks tell mature companies to do – it diversified and expanded. It built a chain of theme parks, moved into clothing, watches, its own video games, publishing. In the official 2003 annual report, LEGO itself acknowledged that the year’s poor results were the outcome of a failed growth strategy. So it wasn’t simply that the world had changed, kids had moved to games, and the market had gotten harder. The problem was also that the company had scattered its focus. Too many initiatives, too little concentration, too little discipline around what actually builds value. Some of the innovations of that era were simply unprofitable or unsuccessful. It’s one of the best illustrations of the fact that innovation alone isn’t enough.

LEGO had drifted too far from its identity and its core – the things that had made it successful: the brick, creativity, building, free play as the source of everything. The new CEO put the company on a drastic diet. He started by selling the theme parks, which were enormously capital-intensive, cut SKUs from 13,000 to 7,000 (!), shut down the games studio and replaced it with a licensing model across the board. He reduced headcount. But above all, he returned to the brick as the foundation – the elemental building block from which everything else could be built (nomen omen).

The old initiatives – Legolands, games – came back, but as licensed brands, not in-house production. The LEGO Movie in 2014 grossed half a billion dollars at the box office, delivering LEGO an estimated equivalent amount in advertising value.

LEGO’s turnaround is one of those cases where a company saved itself not by endlessly accumulating new initiatives, but by simplifying. By asking: what are we, really, and who do we serve?

Great interview with the aforementioned Knudstorp: The Man Who Rescued Lego – Full Version

The Man Who Rescued Lego – Full Version

One personal memory to close. I have a vivid picture in my mind of a child sitting on the floor, building something with intense concentration. Asked what they’re building, they answer: I don’t know – when I’m done, I’ll tell you. That sentence stayed with me, because it often describes what my own projects look like – we begin with a challenge but have no idea yet what the solution will be. The scene came back to me while reading this book, because it describes LEGO itself rather well. Today we look at this company as a symbol of toys, creativity, and one of the world’s most recognized brands. But for most of its history, LEGO didn’t grow according to one brilliant, predetermined plan. It built successive versions of itself – testing, rebuilding, sometimes tearing things down, sometimes returning to basics.