Lego’s $50 Million Open Innovation Failure

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The headline screams like a disaster. It’s not really that bad. Yes, Lego took a loss around that size when they decided to shut down their online game, Lego Universe, but they also learned some valuable lessons.

Jyllands-Posten, a Danish newspaper, did a story on the closing of Lego Universe, a so-called Massive Multiplayer Online Game (MMOG). It was a good article with interesting comments from Lego executives that were useful to extract some lessons on (open) innovation that go beyond Lego.

Lego admits they did things wrong with Lego Universe. A big mistake was that they required people to buy a DVD in a store before they could start playing the online game. The reason for this was that extensive research had shown Lego that kids really want a physical product that they can touch and feel.

Ok, the use of market research sounds fair enough, but Lego’s approach still highlights an important lesson on innovation. Extensive research can be dangerous.

In this case, it not only created a barrier for using the game although it should be noted that successful MMOG’s use a similar model. However, it seems as if Lego also started to rely too much on research as they allowed it to impact the game as well. This is in stark contrast to Apple for which Steve Jobs famously stated that they do not use market research to create their products.

I think companies need to find a proper balance on market research. It can be relevant, but it is interesting that Mads Nipper, a Lego executive, notes that they should probably have gone a little wild and “just” have sent out the game, listen to the users and then develop it further from there.

The second lesson to extract on this story is that you cannot do everything by yourself. Even though Lego is a pretty big company with around $3 billion in revenue and healthy profits, Lego early on realized they lacked key competences and thus needed a partner. Some companies with big pockets might be tempted to just do things themselves although the open innovation mindset seems to be growing in most industries.

Hopefully, failures like this one will not allow companies – in this case Lego – to fall back into the trap of believing that since the partner approach did not work, they should just do everything by themselves in the future. I don’t think so, but executives and open innovation leaders must be aware that an event like this might make internal open innovation skeptics stronger.

A third lesson is that you need to take chances. Yes, Lego lost a big chunk of money, but in the long run, you need to take chances to win. Perhaps Lego even learned that they should have taken even bigger chances – Nipper’s comment on going a bit wild – and this lesson might help them on future challenges.

If you like to read more about Lego and their open innovation initiatives, you should check out this blog post: You Gotta Love Lego – Crowdsourcing meets Open Innovation!

Republished with author's permission from original post.

Stefan Lindegaard
Stefan is an author, speaker, facilitator and consultant focusing on open innovation, social media tools and intrapreneurship.

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