LEGO Lost Its Way. What Saved It Was Surprising

When you are a small business, the great thing about looking at big business is that we can copy what they have already figured out. This fascinating tale of how LEGO went from near bankruptcy back to dominance can teach we entrepreneurs a lot.

Who doesn’t love LEGOs?

Apparently, not so long ago, a lot of people.

Back in 2003, LEGO was in a heap of trouble.

It had been one of the most beloved toy brands in the world for decades. But by the early 2000s, LEGO was losing money fast, well over $300 million a year. They were drowning in debt and sales had collapsed. Market share was in freefall.

So what happened?

It turns out that they forgot who they were.

Trying to grow, LEGO had launched theme parks, video games, watches, clothing, even a line of toys that didn’t involve bricks. It all flopped. The more they diversified, the more confused customers became. The magic was fading.

Some $800 million in debt, LEGO was facing bankruptcy. Its new CEO, Vig Knudstorp, even stated: “We’re on a burning platform, We’re running out of cash … [and] likely won’t survive.”

Back to Basics

Despite the strong headwinds, the new CEO came in and asked a simple but powerful question:

“What do we do better than anyone else?”

The answer was obvious: bricks.

So they made one of the boldest turnaround moves in modern business: They went back to basics and cut everything else.

• Slashed their product lines by nearly half

• Canceled the side projects

• And doubled down on what made them great

Follow the Leader

And most importantly, LEGO started listening to their core audience again. As Mads Nipper, LEGO’s former Marketing Chief, said:

“Kids will never lie to you about whether something’s fun or not”

Aside from children, there was one other significant audience LEGO had been ignoring, namely, the highly motivated “adult fans of LEGOs (AFOLs).” AFOLs were asked to submit ideas and vote on new products, and not a few of those ended up becoming very successful.

And so it was that between getting back to basics, enthusiastic kids, and their nostalgic AFOL parents, LEGO rediscovered its magic.

By 2015, Lego had become one of the most profitable toy companies in the world. And not because they added more, but because they got radically clear about who they were and why people loved them.

The Takeaway

When you are growing a business, big or small, it is easy to get distracted with new ideas. Indeed, we entrepreneurs are famous for that! And yes, growth is good, great even. But it is equally true that remembering why people love your business in the first place, and working in your zone of genius, is no less important.

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Steal This Strategy

📖Book – Brick by Brick
Deep dive into Lego’s near-bankruptcy and epic return.

🎥 Video – The Lego Comeback Story (YouTube)
A 10-minute breakdown of what changed—and why it worked.

🎙️ Podcast – Business Wars: Lego vs Mattel
Entertaining series on how Lego nearly lost it all.

🌐 Website – LEGO IDEAS
Submit your own idea and become a LEGO designer!

About Steve

Steve Strauss is the best-selling author of The Small Business Bible (and 17 other books), Inc.’s small business columnist, a lawyer (non-practicing), and an entrepreneur. He sold his last venture, TheSelfEmployed.com to Mark Cuban & Zen Business. Need a ghostwriter or a newsletter for your business? Contact Steve!