A March 2008 poll from publishers Random House has revealed that 55% of British parents surveyed believe childhood is now “over by 11”, a fact bemoaned by former children’s laureate, Dame Jacqueline Wilson. It is also a problem for iconic brands like Denmark’s LEGO, the world’s sixth largest manufacturer of toys in terms of sales.
With a company ethos rooted in learning through play (LEGO comes from the amalgamation of Danish words leg godt, meaning play well), if the child in all of us is growing up too soon, where does that leave a traditional toy retailer? Judging from past results, the answer certainly used to be “worried.”

By 2004 the LEGO Group had to take radical new steps to tackle its most serious financial crisis to date. General economic pressure on consumer demand combined with a squeeze on the toy market specifically driven by consumer electronics caused a decline in sales of traditional toys. In addition, the majority of competitors were sourcing their products in low-cost countries like China. The overall effect was intense price competition with pressure on profit margins, all in a declining market. The net loss for the LEGO Group was 1.93 billion Danish krone, or US$394.56 million, compared to a 935-million krone loss in 2003.

Two years ago the company began a restructuring process to shed 1,200 jobs and move production from their traditional Danish and American bases to plants in the Czech Republic and Mexico. Part of the action plan involved selling off the LEGOLAND parks, while the company returned to its classic core products and brand values. While embracing the reality of globalisation, a refocused company strategy aimed to create a sustainable business by differentiating the LEGO brand and placing the emphasis on a truly creative product. The company also said in its  2006 annual report that it wanted to become “exceptionally close to the users.”

That same year LEGO’s then Director Global Innovation & Marketing, Flemming Ostergaard, presented the building blocks of this new strategy at the European Market Research Event via a presentation titled “Leveraging Ethnography and Anthropological Research to Innovate.” Or, as Ostergaard, now Marketing Director of the LEGO concept lab in Billund, put it: “If you want to know how a lion hunts, don’t go to the zoo, go to the jungle.”

In a world where consumer experience is key, LEGO found itself out of touch, according to Ostergaard.

“Being a major toy company, we had the sentiment that we certainly understood our consumers, the children of the world. But I guess what we also found out, with the financial difficulties that we’ve been through, was that maybe we didn’t understand our consumers as well as we thought we did.”

 The answer was to re-interpret the needs of kids via a variety of research techniques, including the novel use of ethnography.

“This idea of actually being out with kids is something completely different,” Ostergaard said. “Just being in their rooms, hanging out with them on their turf and on their terms certainly gave some new insights.”

The subjects were the core customers.

“People of the age of seven to nine in some of our major markets, being Germany and the U.S., we tried to be as close to them as we possibly could. It was more a matter of observing than anything else,” Ostergaard said.

The results of this detailed study were to deliver an insight into some of the core values crucial to the company’s future success, in essence, to sharpen the delivery of the product. Ostergaard is convinced in the process.

“I certainly can say that we are a lot more on the ball, we are a lot more relevant with the products that we come up with,” he said. “It seems like they are also more appealing to kids than perhaps [our products] might have done just five years ago.”

The research produced some surprising results, especially in terms of a refreshing glimpse into 21st century childhood.

“In terms of the ethnographic research that we did, we certainly had a lot of ‘Aha!’ moments, especially moments around privacy,” Ostergaard said. “It seems like kids of today are extremely scheduled, they lead very scheduled lives. Mum knows everything that’s going on. They rarely have a moment when they can just be themselves, when they can breathe. That certainly was an eye opener to us.”

 Such insights allowed LEGO to work on a six-pillar approach to turn their customers’ core values into patterns, or “innovation vectors” as Ostergaard puts it.

“One of the innovation vectors that we came up with was simply one that talks about this,” he said. “Kids need oxygen, kids need privacy, they need to have room where they are on their own and they can do what is relevant to them, and even though it’s something that mum and dad might not always understand, and sometimes might not even like, that’s just a part of understanding the world and growing up.”

 So the need for privacy became an issue to address, Ostergaard said. “That’s a need that we haven’t seen before with the kids. How do we actually go about innovating products that can fulfil that need?”

Meanwhile LEGO has also been keen to involve those of us who never grew up and are known as AFOLs, or Adult Fans Of LEGO. Globally united by website communities, these are the individuals who have made the company’s more technology driven products, such as the NXT MindStorm robots, massively successful. Here, consumer-led innovation has been key, with the company recruiting lead customers to co-design the new product and then allowing post-launch forums to extend its functionality via software releases including modifications and extensions contributed by AFOLs.
The ultimate customer experience, Ostergaard knows, is that his company’s future growth is intrinsically linked to its classic design past.

“LEGO is a fantastic tool for creativity and as simple as it is – and that’s probably the genius of it – it’s what we still need to stay with for years to come. How we apply that in various technology toys, time will tell,” he said.