Latest / Building Brands with Fexingo: Identity, Reputation, and Long-Term Business Equity / How Lego Built a Brand on Creative Play and Resilience
Transcript
- Lucas: There aren't many brands that nearly go bankrupt and then come back to become the most powerful in the world. But Lego did exactly that. Luna: And by most powerful, you mean literally — Brand Finance ranked Lego the world's strongest brand in 2024, ahead of companies like Ferrari and Coca-Cola. Lucas: Right. And that's a remarkable turnaround from where they were in 2003, when the company was losing about $240 million a year. They were expanding into too many product lines, making everything from jewelry to clothing to theme park rides. They had lost focus. Luna: So what was the moment that changed everything? Lucas: It came down to a single leader: Jørgen Vig Knudstorp. He was a former McKinsey consultant who joined Lego in 2001, and by 2004 he became CEO. His first move was to go back to the brick. He literally said, 'We need to simplify.' He cut 70 percent of product variations and refocused on the core construction toy. Luna: But that sounds risky — stripping away all that variety. Didn't they worry about losing shelf space? Lucas: They did, but Knudstorp argued that Lego's real competitive advantage was the brick system itself — the infinite creativity it enables. The problem was they'd been trying to compete with electronic toys and action figures, which they weren't good at. He also introduced a revolutionary idea: Lego would no longer design products based on what executives thought kids wanted. Instead, they'd focus on what kids actually did with the bricks. Luna: That's so obvious in hindsight, but so many companies get it wrong. They design for the buyer, not the user. Lucas: Exactly. Lego started spending time with children, watching how they played. They discovered that kids love the satisfaction of building something that looks like the real thing, but they also love the pride of creating something original. So the product mix had to balance licensed sets — like Star Wars or Harry Potter — with more open-ended sets that encourage free building. Luna: And that's where the turnaround starts to show results. By 2005, they were profitable again. But the real explosion came later, with things like the Lego Movie in 2014. Lucas: The Lego Movie was a masterstroke. It wasn't just a promotional film — it was a genuinely good movie that celebrated the brand's core value: creativity. It grossed over $460 million worldwide and boosted Lego sales by double digits that year. But what's interesting is that Lego didn't just slap its name on a film. They co-created a story that reinforced why the brick matters. Luna: And they've been careful about licensing since then too. They don't just license any property — they choose IPs that fit the building experience, like Star Wars, which is inherently about construction — spaceships, droids, all that. Lucas: That's a key point. Every licensed set has to pass what they call the 'Lego filter.' Does this add to the creative play experience? If the answer is no, they don't do it. That discipline is rare. You look at other toy companies and they'll slap a brand on anything. Luna: But let's talk about the adult fan base. Lego isn't just for kids anymore. They have sets aimed at adults — the botanical collection, the architecture series, the massive Millennium Falcon. That's a huge part of their brand strength now. Lucas: Yeah, the adult market is a fascinating piece. Lego realized that kids who grew up with the brand in the 80s and 90s are now adults with disposable income. They created sets that appeal to nostalgia but also challenge the builder. Some of these sets have thousands of pieces and take dozens of hours to complete. It's almost like a meditative activity. And Lego doesn't market these sets as toys — they market them as an experience. Luna: Right. And that's helped them stay relevant across generations. But I'm curious — how do they manage the tension between staying true to the brick and innovating? They can't just keep making the same square blocks forever. Lucas: That tension is real. Lego has introduced new elements over the years — like curved pieces, specialized parts for minifigures, and even robotics with Lego Mindstorms. But they've always made sure that new pieces are backward-compatible with the classic brick. So you can still build a 1978 set with a 2026 piece. That's an incredible feat of product design and brand consistency. Luna: And they've also expanded into digital with games and movies and even a Lego streaming series. But they've managed to avoid the pitfalls that other brands face when they go digital — they don't cannibalize the physical play experience. Lucas: They treat digital as a complement, not a replacement. Take Lego Builder, their app — it's not a game where you build virtually. It's a digital instruction manual for physical sets. It enhances the physical experience. Even their video games, like Lego Star Wars, are about solving puzzles and building, not just fighting. The brand philosophy runs through everything. Luna: I think what's remarkable is that Lego has maintained this consistency while also being incredibly innovative. They were early to embrace sustainability too — they're investing over $1 billion to find a sustainable alternative to the oil-based ABS plastic they've used for decades. Lucas: That's going to be one of the biggest challenges for the brand going forward. They've tested over 600 materials trying to find a replacement that matches the clutch power and durability of the original brick. They haven't found it yet. But it's a long-term bet on brand trust — if they compromise on quality, they risk everything. Luna: It's a high-stakes game. But if any brand can pull it off, it's Lego. They've survived near-death before. Lucas: Yeah. And that's the thread through the whole story — resilience and discipline. Lego could have tried to be everything to everyone, but instead they chose to be the best at one thing: creative play through the brick. That focus is what made them the strongest brand in the world. Luna: It's a lesson for any business, really. Know what you stand for, protect it fiercely, but don't be afraid to evolve how you express it. Lucas: Exactly. And on that note, I want to say something honest. This show exists because of listeners like you who find value in these conversations. We keep it ad-free and independent, and a handful of people help make that possible through buy me a coffee dot com slash fexingo. If these episodes have moved your work forward in some small way, that's the door. Luna: Yeah, it's a small gesture that keeps us going. And we're grateful for every bit of support. Lucas: So back to Lego — what do you think is the biggest risk they face in the next decade? Luna: I think it's the sustainability challenge, honestly. If they can't find an alternative to oil-based plastic that meets their quality standards, they could face reputational pressure. But also, the attention span of kids is shrinking. Digital entertainment is so immersive — how do you keep a child engaged with a box of bricks for hours? Lucas: That's a real concern. But Lego's advantage is that they've built a brand that parents trust. Parents want their kids to play with something creative, not just a screen. And Lego has made it cool again — they've partnered with influencers, with video games, with movies, all reinforcing the same message. Luna: Plus, they've got that nostalgia factor with adults now. The AFOLs — Adult Fans of Lego — are a massive community that generates free marketing and ideas. Lucas: And Lego actively engages with them. Through Lego Ideas, fans can submit designs, and if they get enough votes, Lego produces them officially. That's genius — it gives the community a stake in the brand, and it also provides a pipeline of proven product concepts. Luna: It's a perfect example of co-creation. And it strengthens the emotional connection. When you build a set that was designed by a fan, you feel part of the story. Lucas: Right. That emotional connection is why Lego has been able to command premium pricing. A Lego set isn't cheap, but parents buy it anyway because they know it's not just a toy — it's an investment in their child's development. That's the ultimate brand equity. Luna: And it's why, even after near-collapse, they came back stronger. Because the brand was always about something deeper than plastic bricks. Lucas: Exactly. And that's the takeaway for anyone building a brand: find the core truth that your product enables, protect it, and then build everything around that. Lego's core truth is that creativity is universal and timeless. And they've never let go of that. Luna: Even when it meant cutting 70% of products and walking away from easy money. That's discipline. Lucas: That's brand resilience. And it's why Lego isn't just a toy company — it's a master class in how to build a brand that lasts.