An industry in which you might not expect to see active consumer participation is the Toy Industry. However, there is a company which uses open innovation to gather new, original, and creative ideas, namely the LEGO Group. You might know LEGO from playing with it when you were a little kid, or from the pain you might have had if you once stepped on a LEGO brick.
As you might know, LEGO also has some adult fans. It is not a surprise that some adults still find LEGO amazing, because one can build whatever he or she wants. LEGO managers became more aware of innovations by these adult fans (Antorini et al., 2012). Therefore, the managers realized that some of these ideas could be interesting to the target market as well (Antorini et al., 2012). The LEGO Group also learned from a hacking experience that the engagement of fans could contribute to the coolness of the LEGO brand (Hatch and Schultz, 2010). This was the beginning of what is now called ‘LEGO Ideas’.
How does it work?
If you have a fantastic idea for a new LEGO set, you can go to the website of ‘LEGO Ideas’ and submit your idea. You can also see other ideas, vote, and give feedback. If a project gets 10,000 votes, it enters the LEGO review phase, where the idea is reviewed by the LEGO Review Board. The project needs to meet high standards, such as playability, safety, and fit with the LEGO brand. If a project is picked, it enters the production phase. The whole process is quite rigorous, which matches with the motto of LEGO Group: ‘Only the best is good enough’ (lego.com, 2017).
The business model of LEGO does not only exist of the ‘LEGO Ideas’, so not all value is created by customers. LEGO Group also has employees, a top management, a Management Board, a Corporate Management and a board of directors (lego.com, 2017). However, to give insights into ‘LEGO Ideas’ specifically, I will only address this part of the business model, based on the three components identified in Johnson et al. (2008).
Customer Value Proposition. The CVP of ‘LEGO Ideas’ can be viewed in two ways. First of all, this platform can deliver value to customers who participate in the platform in terms of intrinsic rewards, such as fun and enjoyment, and extrinsic rewards, such as money. Secondly, people who do not participate in the platform can also benefit from this platform, because the most popular ideas are produced.
Profit formula. The company itself can benefit from this platform, because the most popular projects are produced. ‘LEGO Ideas’ is also associated with costs, such as market analysis, reviewing of ideas, and financial rewards.
Key resources and processes. The most important key resources are the people who submit their ideas. These people create value for customers and for the company. Without them, the platform could not exist. Manufacturing is an important key process to deliver this value.
‘LEGO Ideas’ meets the joint profitability criteria, because the platform maximizes the joint payoffs of the involved partners. LEGO Group benefits from the platform, because the most popular ideas are produced. The popularity on the website is likely to reflect the popularity in the market, which can increase the sales. Moreover, LEGO Group conducts additional market research. People who submit their ideas probably have intrinsic motivations, and in addition, they receive several rewards if their ideas are produced, including 1% of the net sales of the product (ideas.lego.com, 2017). Therefore, by working together, greater value is created.
The platform also meets the feasibility of required reallocations criteria. In the figure below, the Institutional Arrangements and the Institutional Environment are briefly discussed.
Antorini, Y.M., Muñiz A.M., & Askildsen, T. (2012). ‘Collaborating With Customer Communities: Lessons From the Lego Group’. MIT Sloan Management Review, 53(3): 73-79.
Hatch, M.J., & Schultz, M. (2010). ‘Toward a theory of brand co-creation with implications for brand governance’. Journal of Brand Management, 17(8): 590-604.
Johnson, M.W., Christensen, C.M., & Kagermann, H. (2008). ‘Reinventing your business model’. Harvard Business Review, 86(12): 50-59.
LEGO (2017). LEGO Ideas Guidelines and House Rules. Available at: https://ideas.lego.com/guidelines. Accessed on: 12/02/2017.
LEGO (2017). Management. Available at: https://www.lego.com/nl-nl/aboutus/lego-group/management/. Accessed on: 12/02/2017.
LEGO (2017). The LEGO Group. Available at: https://www.lego.com/en-us/aboutus/lego-group. Accessed on: 12/02/2017.