LEGO Had Grown Bored of Its Own Brick

In 2005, the company that makes the world's best-loved toy sold all four of its Legoland theme parks for 375 million euros, along with a factory in Switzerland, and the man who sold them had been brought in the year before to save the company. The market expected a launch. It got a sale, and then a series of cuts, and then, that same year, a profit of 702 million kroner where there had been a hole.

The hole had been large. In 2003 the group ran a deficit of 1.4 billion kroner, and for 2004 it reported a net loss of almost two billion, so large that the owner, the founder's grandson, put 800 million of his own money into the company to keep it afloat. Nobody had stopped loving the bricks. The trouble was that the company had spent years making almost everything else.

By the early 2000s LEGO was everywhere. Theme parks on two continents, clothing, watches, video games, toy lines with nothing left to build because the pieces came ready-made with a story attached. Every expansion had, at the time, a justification you would have signed yourself. Diversification. New markets. Do not depend on a single product. The future. The people inside, who had lived with the brick for decades, had come to see it as old-fashioned, and when the people who make a product get bored of it, the catalogue starts growing in every direction where they are not bored.

The rescuer was Jørgen Vig Knudstorp, a former consultant in his mid-thirties and the first person from outside the founding family to run the company in a quarter of a century. He did the opposite of what a market expects from a savior. He launched nothing. He sold, he cut the lines that had nothing to do with the brick, and he turned the entire company back toward the one thing it did better than anyone on earth. Ten years later, in the first half of 2015, LEGO was the largest toy company in the world by revenue, ahead of Mattel, with the same product its own people had judged too old to matter.

The mechanism concerns all of us, whatever our size. Diversification looked like prudence. "Let's not depend on one product" sounds like wisdom in any meeting, and nobody in the history of business has been fired for proposing it. In reality it was flight from the company's own definition, dressed in the language of strategy, and flight costs more than dependence, because every new direction takes money, people and attention from the thing you knew, until that thing, left unattended, begins to decline as well, at which point diversification looks, in hindsight, as if it had been right all along.

The press liked to tell the return to the brick as nostalgia. Behind it stood a rereading of the company's inner law, of what it knew how to do and what people came to it for, followed by two decades of discipline in which every new product had to answer one question, whether it builds or not. A brand is not a list of things you do. It is the thing you do so well that people take the rest on trust, and the moment you let it go, there is nothing left for them to take on trust.

The uncomfortable part is that the company was not saved by a new idea but by a man willing to shrink, in a business culture that treats shrinking as defeat and launching as proof of life. The rescuer who launches nothing does not make magazine covers. He appears in the accounts a year later, and in the accounts ten years later, where nobody looks to see who was right.

In a company your size, diversification looks humbler than a theme park. It takes the form of the service added because a competitor has it, the product line opened because "the market demands it," the department doing things unrelated to what you know, each with its reasonable justification and each taking a little from your brick, so slowly that the decline shows nowhere until it shows everywhere.

Before you add anything new to the offer, go looking for your brick. What is the thing you are so good at that you have started to find it boring? And if someone came in from outside tomorrow to save you, what would they sell first? I will ask you for one thing. Fit the thing your company does better than anyone into a single sentence and put it on the wall before you get bored of it, because at LEGO the lesson cost two billion kroner and the parks.