Question

Scenario:

The family-owned and family-run global toy firm LEGO had spent around a decade reinventing itself, launching new products, committing to continual innovation, employing top designers. It switched from a hierarchical structure to teams. It introduced robotics and computer games, diversified into theme parks, and pursued new profit lines from licensing and from partnering with major movie franchises. It was quick to see the internet’s potential for marketing purposes as well as for interactive games and products, and enabling customers to network with one another. The COO of the late 1990s/early 2000s implemented newly fashionable approaches to business innovation. The “seven truths of innovation” he identified were: hire diverse and creative people; head for “blue-ocean” (unexplored) markets; be customer-driven; practice disruptive innovation; foster open innovation or “wisdom of the crowd”; explore the full spectrum of innovation; and build an innovation culture. Yet in 2004 the company almost went bankrupt. Sales fell around 30% in 2003, and the company was running a negative cash flow of DKr 1 billion (US$160 million). Total debt had reached DKr 5 billion ($800 million). This was not just a case of cashflow delays, it was an existential crisis that asked big questions of governance, strategy, management, approach to product development, manufacture and distribution processes. There were also pressing issues to attend to in the product mix, quality of senior management, the cost base, logistics, success rate and speed to market of innovations, adherence to founding values and “brand stretch.” On governance and leadership, they had to decide whether to appoint a non-family chief executive: a strong candidate had emerged with a plan for a turnaround based on greater discipline and simplification of a complex global empire. Recovery, even survival, was not guaranteed and the owners faced major strategic decisions that had to be taken under the pressure of urgency.

Read the scenario and answer the questions:

From this scenario and LEGO group case.

1. It is important to be “too innovative” Describe how to introduce new ideas and promote non-family executives, if a market is being squeezed by new inventions, how do you judge if it is becoming obsolete or will find a new niche. (7 marks)

2. Examine how can communication be improved, and analyze the operational assumptions against qualitative and quantitative measures. (4 marks)

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Note: Please do not copy from internet plagiarism is strictly prohibited

Answer 1

1. It is important to be innovative and progressive to be able to cater to the desires of customers. Also, the Troy industry as we see it, has evolved hugely over time. Customer wants change rapidly. And thus it becomes imperative to introduce new products to attract customers and grow the business. However, in this scenario, we notice that the company took up innovation without making any internal changes in the structure which could support the growth of the business. The Lego company always had chief executive from the family and did not source any external professional to manage the success the company was reaping. This, it was unable to handle the gains and this caused it's downfall. The company must begin to consider applying new strategies to facilitate company growth and match the changing needs of market.

2. Communication can be improved by increasing co-ordination and cooperation in the organization . Therefore, increasing teamwork and bringing about an overall organization cultural change will help improve communication - both vertically and horizontally. Operational assumptions are related to the fact that the chief executives have always been from the foundet family. A non-family person has never been given a chief role in the organization. However, it is being assumed that this is the reason the company is not doing well. However, they are not analysing the root cause of the losses being incurred. They must investigate the processes, understand lacunae, take customer feedback, analyse the wastes in the process and then only decide on the improvement or change to be made. Data must be collected and analysed in order to make confirmed decisions. Thus, decision making must be on qualitative and quantitative data and not on assumptions or beliefs.