External factors: During the early 1990’s, the big box toy discounters drastically lowered their prices, birth rates diminished and children has less time and interest for certain toys. Internal factors: company focus was on growth. It started tossing out more and more new and diverse products and ideas in the same way Disney did (i.e. Branded children wear, Book, movies, and tv ideas, complex building sets with a great variety of unique components). Sales did not grow contrarily to costs leading to the company’s first losses. Explanations: Management style, company complexity, derive from core values.
Key elements: focus on core products, reduce complexity, careful cash management, reengaging with customers and the community of loyal LEGO fans.
Recognize the importance of innovation but also the importance of channelling it. Product design must be constructed with help of market research, user feedback, and relevance to quality creative play.
Diminish the number of unique brick components (de-complexification) and bring production back in-house in order to assure quality control.
Necessary changes in management team. It is primordial that decision-making is based on logic (cfr Digital Business class).