Innovation at the Lego Group (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Organizational Development
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Innovation at the Lego Group (A)
The case tells the story of a company where innovation is tremendously important, but not working well. In 2003, the LEGO Group had a number of positive attributes: it had a well-respected brand with some very good toy lines. It had a passionate customer base that in many areas was more sophisticated than its internal designers. And it had been able to extend the brand into many areas such as toys, games, clothing, theme parks, movies, and many others types of play, earning significant revenues (but not profits). But, in 2003, the company had gotten itself into deep trouble. Over the previous 5-10 years, the toy industry had been changing dramatically in ways that did not favor the LEGO Group. These changes, coupled with some poorly planned investments and a downturn in the sales of some important toy lines, combined to almost put the LEGO Group out of business. The company lost nearly DKK 1 billion in 2003 and its cash dwindled dangerously low. This was the largest loss in the history of the company, and many analysts believed that bankruptcy and perhaps even the breakup and sale of the company were likely. The company quickly sold off assets, reduced headcount, and outsourced production to cut costs and generate cash. But it knew, to turn around the company, it had to improve its overall innovation system. It had to improve the time to market, success rate, and profitability in its innovation system. The case presents a number of representative challenges that LEGO was facing during 2004 and beyond. Learning objectives: 1) How to restructure an innovation system. 2) How to encourage all types of innovation (innovation in pricing, business model, channel to market, branding, customer experience, etc.) and coordinate these innovations across the company. 3) How to involve external parties such as customers, complementary product producers, and external inventors in your innovation system.
Swot Analysis of "Innovation at the Lego Group (A)" written by David Robertson, Robert J. Crawford includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lego Innovation facing as an external strategic factors. Some of the topics covered in Innovation at the Lego Group (A) case study are - Strategic Management Strategies, Product development and Organizational Development.
Some of the macro environment factors that can be used to understand the Innovation at the Lego Group (A) casestudy better are - – there is increasing trade war between United States & China, increasing commodity prices, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions,
increasing household debt because of falling income levels, there is backlash against globalization, etc
Introduction to SWOT Analysis of Innovation at the Lego Group (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Innovation at the Lego Group (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lego Innovation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lego Innovation operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Innovation at the Lego Group (A) can be done for the following purposes –
1. Strategic planning using facts provided in Innovation at the Lego Group (A) case study
2. Improving business portfolio management of Lego Innovation
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lego Innovation
Strengths Innovation at the Lego Group (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lego Innovation in Innovation at the Lego Group (A) Harvard Business Review case study are -
Successful track record of launching new products
– Lego Innovation has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lego Innovation has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Training and development
– Lego Innovation has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Innovation at the Lego Group (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management
– Lego Innovation is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Lego Innovation has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Innovation at the Lego Group (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Organizational Development field
– Lego Innovation is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Lego Innovation in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Lego Innovation is one of the leading recruiters in the industry. Managers in the Innovation at the Lego Group (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Lego Innovation in the sector have low bargaining power. Innovation at the Lego Group (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lego Innovation to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Lego Innovation has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lego Innovation to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Lego Innovation has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Innovation at the Lego Group (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Lego Innovation
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lego Innovation does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Lego Innovation are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Analytics focus
– Lego Innovation is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by David Robertson, Robert J. Crawford can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Innovation at the Lego Group (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Innovation at the Lego Group (A) are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lego Innovation is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Innovation at the Lego Group (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Lego Innovation has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High operating costs
– Compare to the competitors, firm in the HBR case study Innovation at the Lego Group (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lego Innovation 's lucrative customers.
Products dominated business model
– Even though Lego Innovation has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Innovation at the Lego Group (A) should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– After analyzing the HBR case study Innovation at the Lego Group (A), it seems that company is thinking about the frontier risks that can impact Organizational Development strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Increasing silos among functional specialists
– The organizational structure of Lego Innovation is dominated by functional specialists. It is not different from other players in the Organizational Development segment. Lego Innovation needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lego Innovation to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Lego Innovation needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Interest costs
– Compare to the competition, Lego Innovation has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Aligning sales with marketing
– It come across in the case study Innovation at the Lego Group (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Innovation at the Lego Group (A) can leverage the sales team experience to cultivate customer relationships as Lego Innovation is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Innovation at the Lego Group (A), in the dynamic environment Lego Innovation has struggled to respond to the nimble upstart competition. Lego Innovation has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Innovation at the Lego Group (A) HBR case study mentions - Lego Innovation takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Innovation at the Lego Group (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Innovation at the Lego Group (A) are -
Building a culture of innovation
– managers at Lego Innovation can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Organizational Development segment.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lego Innovation in the consumer business. Now Lego Innovation can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lego Innovation can use these opportunities to build new business models that can help the communities that Lego Innovation operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lego Innovation can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Lego Innovation can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Lego Innovation has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lego Innovation in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Organizational Development segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lego Innovation can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Innovation at the Lego Group (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Organizational Development industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lego Innovation can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Lego Innovation can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Lego Innovation to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Manufacturing automation
– Lego Innovation can use the latest technology developments to improve its manufacturing and designing process in Organizational Development segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lego Innovation to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Lego Innovation to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Lego Innovation to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats Innovation at the Lego Group (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Innovation at the Lego Group (A) are -
Environmental challenges
– Lego Innovation needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Lego Innovation can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Lego Innovation needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lego Innovation in the Organizational Development industry. The Organizational Development industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Lego Innovation in the Organizational Development sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Lego Innovation.
Easy access to finance
– Easy access to finance in Organizational Development field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lego Innovation can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Lego Innovation is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Lego Innovation can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Lego Innovation business can come under increasing regulations regarding data privacy, data security, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Lego Innovation will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Innovation at the Lego Group (A), Lego Innovation may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
Weighted SWOT Analysis of Innovation at the Lego Group (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Innovation at the Lego Group (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Innovation at the Lego Group (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Innovation at the Lego Group (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Innovation at the Lego Group (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Lego Innovation needs to make to build a sustainable competitive advantage.
