Lego Goes Vertical towards Open Innovation
I have previously written about vertical integration, which is becoming increasingly popular. Check this post: If You Can’t Innovate Across Silos, Don’t Expect To Succeed With Open Innovation.
At Lego, vertical integration with a strong focus on customers now gets credit for being one of the main reasons for their huge success in these years.
“We have made a significant cultural shift internally, where we have gone from considering our customers as necessary intermediaries for reaching our end users to see them as very important partners,” says Sr. VP, Mads Nipper in the Danish business daily, Borsen.
Mads Nipper mentions that very close information sharing and close partnerships with large customers like Wal-Mart, Target and Toys-r-us has proved invaluable to Lego.
This interaction has not only given Lego more shelf space, which is crucial for toy makers. In addition, Lego now also involves both its customers and some of its key suppliers in the development of new products.
As an example, Lego invites up to 20 of their largest and most important customers to their headquarters very early in their development process in order to discuss what the new products should be and whether the pricing ideas are right.
I have often stated that Lego does a great job on user-driven innovation. You can read this post: Why User-Driven Innovation Should Not Be Confused With Open Innovation.
I think their current focus on vertical integration can help them become even better at open innovation. This can help them move beyond just getting feedback from customers and then do everything themselves. Now, they seem to bring in external partners in the innovation and development processes. It will be interesting to see what will come out of this.
The main question I have is why didn't I get invited by Lego? As a child I remember building things and always wishing for different shaped parts. Back then, besides blocks, the most radical pieces included window, doors, and yes, the cone shapped 'thrusters' that came with the saturn 5 rocket. Today, the variety of pieces are endless. Wish I was a kid again.
Now, personal stories aside, if there is one company that would truly benefit from open innovation (crowdsourcing, to use a different term), it would be Lego. With a good system in place, big kids (like me) could propose pieces, and upload sketches of pieces we would like to see lego make. Other lego users could vote on their favorite proposals or suggest their own.
I like what they are doing as a good first start. I must admit, however, that I would still call the idea of using your largest customers to "innovate" (if you want to call it that) new solutions a pretty standard practice for sophisticated companies. I would be intrigued by how many of their customer innovations are evolutionary or if any have been revolutionary. I suspect that these are small changes and improvements (these sound more like user groups than brainstorming) that may impact shelf space but may not make a lasting impact to their bottom line.
I have to agree with George: why has it taken lego so long to tap into the amazing name and goodwill of little boys and big boys alike around the world? So great first step, Lego, but you can do more.
@Kendall, you're right this is fairly standard, but let's hope they can continue this process so we can really see co-creation/crowdsourcing/open innovation in action. As both you and George point out; Lego definitely has a potential for this.