How LEGO Learned How to Winch

by | Monday, March 3rd, 2014
Image credit: www.atvcourse.com

Business experts will tell you that inertia — “paralysis or passive resistance” — kills companies. Other thought leaders suggest that active inertia — “relentless pursuit of the tried and true” — causes business failure. Neither is correct.

What does inertia have to do with LEGO and winching, you might be asking. Bear with me, I will get there. But I need to make a simple point first….

INERTIA DOESN’T CRIPPLE COMPANIES, CRUMMY IMPLEMENTATION DOES

Few companies, if any, suffer from inertia. There is little to no evidence of companies being too paralyzed to take any action at all. Executives and employees are always busy doing something, even if only to justify their job. Alas, they are often accelerating the wrong activities and they aren’t doing the right activities well. They spin their wheels like a car stuck in mud.

And active inertia (“relentless pursuit of the tried and true”) is rarely a company’s problem. Faced with mounting competitive pressure, most companies get desperate and unleash a flurry of new, oft ill-conceived initiatives to try to stop the bleeding. By doing so, they spin their wheels even faster and dig an even deeper hole.

What causes companies to fail nearly every time is crummy (or sloppy) execution — akin to spinning wheels in mud. Crummy implementation cripples companies, not inertia. The biggest barrier to innovation is EXECUTIONAL EXCELLENCE. The world is littered with great ideas, poorly implemented.

WINCHING IMPROVES IMPLEMENTATION AND EXECUTION

My family hails from Michigan and South Carolina, a state that boasts its own Mud Run Guide. Here’s what I know: when your car gets stuck in mud, you are almost always better off if you stop digging your wheels into the ground. Leave the wheel-spinning to half-wits. To get out of a mudhole, you need to add traction or use a winch.

A winch is a handy hand- or motor-powered machine used for hoisting and hauling. Winching improves traction and power….implementation….and executional excellence.

LEGO LEARNED TO WINCH

Today LEGO is the world’s #1 toy company. Sales are up despite a sluggish global toy market. Profits have grown 40%. But that wasn’t always the case.

Faced with declining margins and value in the 80s and 90s, LEGO did what most ailing companies do. They got desperate and unleashed a flurry of new, oft ill-conceived initiatives to try to stop the bleeding. They binged on unbridled innovation – launching theme parks, clothing, jewelry, TV programs, electronics, video games, learning labs, publications, and ill-conceived strategic alliances.

By 2003, LEGO was on the brink of bankruptcy. The company was virtually out of cash with annual losses mounting upwards of $300 million and a $400 million loss projected for 2004.

How did LEGO recover from a 10-year period of declining performance? Company leadership stopped spinning their wheels and focused on improving execution.

They shortened go-to-market product development time, organized to increase accountability and decision-making, shed unrelated businesses, built “change-readiness,” established global in-region manufacturing facilities, improved their safety record, and dedicated themselves to smarter 12 C’s of Commercialization performance. Instead of desperately pursuing uncontrolled innovation — spinning their wheels — they focused on improving their innovation success rates. In other words: they found a winch and added traction.

ANOTHER EXAMPLE OF THIS PHENOMENON

Another example of the “wheel-spinning without a winch” phenomenon: Kodak.

Contrary to media reports, Kodak didn’t suffer from inertia (“paralysis”) OR active inertia (“relentless pursuit of the tried and true”). The company was never short on new ideas. Kodak developed countless technology innovations over the years including the digital camera in 1975 but they failed to successfully commercialize it. They held $3 billion worth of patents, valued at more than five times the company itself. They suffered from numerous reorganization efforts, making it incredibly difficult to implement smart long-term strategy. Their eager and rash M&A and alliance deals — from Scitex to Imation to Verizon and Creo — lacked strategic due diligence and led to integration headaches. Kodak was undeniably IN MOTION, spinning its wheels like a car stuck in mud.

Alas, Kodak never fully understood that their problem was crummy execution. They never sought or found a winch. They never improved implementation to gain better traction.

RESEARCH STUDIES AGREE

A 2013 Accenture study found that only 18% of CEOs have seen their investments in “innovation” pay off — fewer than one in five. And according to research conducted by the Doblin Group, a startling 96% of all innovations fail to return their cost of capital.

The key to increasing innovation ROI lies in improving innovation success rates. A 2005 study by Boston Consulting Group concluded that companies that concentrate on IMPROVING THEIR INNOVATION SUCCESS RATES achieve the greatest gains. Instead of spinning your wheels, you need to learn how to winch and add traction.

SPINNING YOUR WHEELS? LEARN HOW TO WINCH.

Are you in an innovation rut? Instead of spinning your wheels and digging a deeper hole, get better at business execution. Create sound action plans but remember that execution and making strategy work is more difficult than the task of strategic planning (developing the strategy is never more important than the results). Hold people accountable, involve the right people in decisions, build “change readiness”, practice the 12 C’s of Commercializing Innovation. In other words: figure out a way to add traction. Learn how to winch.

It’s basic physics. Winching can lessen the strain on any rig and increase torque. Winching can help companies that overestimate their capabilities. Winching can help your company overcome the most difficult of situations. Learn how to winch and you will always recover. Return on innovation depends on it.

1 comments
Cathy Mosca
Cathy Mosca

Hi Kirsten, this is Cathy Mosca. I have grandchildren now, and I'm often immersed in Legos. What the company does is brilliant. Each collection of sets comes with characters, a story, and a web-based game. The Lego pieces kids build aren't static, but launching pads for hours of imaginative play. My grandson always finishes putting a set together the way it's supposed to be, then immediately making planes and creatures out of pieces removed from the whole. I recommend the movie! It's all about the question which is better: follow-the-directions or put-it-together-on-the-fly.    

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