Open Innovation at LEGO



welcome my name is Henrik Berg Jebsen student of value chain management adviye University College campus Holsteins and I'm here today to talk about open innovation at the LEGO Group so why the LEGO Group well the LEGO Group have successfully turned around their business by going from closed innovation to open innovation and doing so with the use of crowdsourcing so let's talk about what the different innovation models are and what crowdsourcing is so what is closed innovation well closed innovation is the process of companies attaining a competitive advantage by funding large research laboratories on their own that would then develop technologies forming the base of new product development a classic example of this is IBM which for decades gained their competitive advantage by investing billions of dollars in their reach research and development departments to which they would gain their competitive advantage by providing products that other companies were not able to do if we then take a look at open innovation open innovation represents a more modern approach where companies utilize not only their own research but also the research of other companies as well as licensing out ideas that are not within their core competences an example of open innovation can be found in the online community quirky where everybody can upload ideas and then harness ideas from others and harness development from others in order to develop their product idea so what does crowdsourcing well crowdsourcing is a process that involves outsourcing tasks to a distributed group of people it can occur both online and offline but most popularly it occurs online the difference between crowdsourcing and ordinary outsourcing is that it's outsourced to an undefined public rather than a specific group such as paid employees a good example of this is InnoCentive where everybody can come with ideas and suggestions for existing companies to solve a particular problem so why did the LEGO Group have to change well for decades the LEGO Group had been using closed innovation for their product development but in the early 2000s they were going broke and needed a drastic change to happen this change came in the form of appointing a new CEO which is Yong V Newstalk who initiated a change process that built upon the ideas of open innovation for turning around the business so what did they actually do well first of all the LEGO Group needed to sell off their non core activities so they could get more back to basics what they did in terms of this was for Champa to sell off their amusement parks to the Merlin Entertainments group another thing they then did was to enlist the help from their fans so they invited fans over to assist with new product development as well as setting up the lego Ambassador Network and licensing out some of the ideas so you started seeing Lego Star Wars Lego Harry Potter themes like that would start emerging the next step was then the creation of Lego Cuusoo which is an online community based on open innovation and crowdsourcing where anyone can upload an idea and if you then get 10,000 votes the LEGO Group will send it through the review process and possibly into production however open innovation hasn't just been a success for the LEGO Group there has also been cases where open innovation has failed such as the 50 million euro loss incurred when LEGO universe had to be shut down due to lack of success all in all however changing from closed to open innovation has definitely had a financial impact on the LEGO Group one could also argue that the LEGO Group might have gotten very lucky as the situation could have looked very different if they had waited just a few years and started to exchange the business when the financial crisis hit at the same time however one could also argue that the LEGO Group couldn't have done this sooner as the development of the Internet has been crucial for the methods of open innovation that the LEGO Group has decided to use such as especially Lego Cuusoo the case of Lego Cuusoo will also be interesting to follow in the future as there are certain risks involved with having such an online community such as the fact that it's an open showcase and it'll ever be easy for other companies to steal ideas from Lego Cuusoo another issue is whether 10,000 votes is actually a high enough mark to ensure a commercial success with the products that Lego Cuusoo will then deliver a third issue is whether or not fans could get upset with if they get the number of votes they were supposed to get yet still get denied from the LEGO Group so to sum up one could say that the cons of open innovation at the LEGO Group has been that not all the projects initiated have been successful LEGO Universe is a very good example of this and another possible con is that there are certain risks involved with Lego Cuusoo that could have a great impact in the future at the same time however it's hard to overlook the pros of having open innovation at the LEGO Group they've managed to turn around the business to go from negative to positive results they've managed growth through the financial crisis they're harnessing ideas from a very loyal fan base and they've been able to expand the fan base thank you for your time

2 Comments

  1. Farhan Fadzil said:

    You're better than George!

    June 28, 2019
    Reply
  2. Julia Yeo said:

    good job!!

    June 28, 2019
    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *