The Lego Turnaround: How an Iconic Brand Rebuilt Itself—and What Leaders Can Learn
Every leader knows the pattern. Growth brings complexity, complexity brings inefficiency, and before long the business feels bloated and distracted.
Lego is a striking case study. An iconic brand, loved by generations, yet in the early 2000s it was on the brink of collapse. Costs spiralled, expansion distracted from the core product, and customer focus was lost.
Yet within a few years, Lego rebuilt itself into a powerhouse. The way they did it holds lessons for every CEO and MD wrestling with operational drag, unclear priorities, or faltering margins.
This article is part of my Touchline Coach series, where I explore how real-world examples can provide practical frameworks for leaders.
Lego’s Near Collapse: What Went Wrong?
Over-Expansion and Complexity
By the late 1990s Lego had strayed into too many directions:
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Highly specialised sets with too many unique bricks
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Theme parks that drained cash
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Media and gaming projects that didn’t reinforce the core
This diluted the brand and created operational inefficiencies.
Ignoring the Core Customer
In chasing new markets, Lego alienated children—the very audience that defined its success. Sets became too complicated, requiring lengthy instructions rather than encouraging free play.
Inefficient Operations
Manufacturing costs soared as Lego produced thousands of unique parts. Warehousing and supply chain inefficiencies compounded the problem.
By 2003, Lego was losing $1 million per day.
The Lego Turnaround: How They Fixed It
In 2004 Jørgen Vig Knudstorp, a former McKinsey consultant turned CEO, led the recovery. His approach was grounded in focus and discipline.
Cutting Complexity and Refocusing on Core Strengths
Lego simplified its product range, cutting unique bricks by 30%. Instead of endless niche products, it doubled down on proven themes like City, Technic, and Star Wars.
Reflection for leaders:
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Where has your business created unnecessary complexity that adds cost without value?
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If you stripped back to your “core themes,” what would remain?
Reconnecting with Customers
Knudstorp repositioned Lego around children and parents, re-emphasising creativity and imagination over over-engineered builds.
Reflection for leaders:
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Have you drifted from the customers who first made you successful?
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Are you building for your core audience, or chasing one that won’t sustain you?
Streamlining Operations
Lego adopted leaner manufacturing, optimised its supply chain, and outsourced selectively to reduce costs and improve margins.
Reflection for leaders:
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Which processes in your business create unnecessary drag?
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Where could you streamline without undermining quality?
Strategic Brand Expansion
Instead of diversifying blindly, Lego formed smart partnerships—franchises like Harry Potter and Star Wars—that strengthened rather than diluted its identity.
Reflection for leaders:
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Are your growth initiatives reinforcing your strengths—or distracting from them?
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Which partnerships could extend your reach without compromising your brand?
The Lego Blueprint for Leaders
Lego’s recovery wasn’t luck. It was about discipline, focus, and reconnecting with fundamentals.
For CEOs and MDs, the questions are universal:
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Where is complexity suffocating your business?
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Which customers have you stopped listening to?
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How much inefficiency is hiding in your operations?
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Does your growth strategy amplify your strengths, or pull you away from them?
If these questions resonate, you might like my other articles on Touchline Coach®, where I share practical insights and case studies to help leaders simplify, refocus, and build momentum.
Lego’s transformation proves that even near collapse doesn’t have to mean the end. With the right focus and execution, any business can rebuild strength and unlock growth.
