LEGO
LEGO Near-Bankruptcy Turnaround
Estimated impact: Revenue grew from $1.1B (2004) to $5.8B (2019); became world's largest toy company
By 2003, LEGO was losing $1 million per day and approaching bankruptcy after a decade of unfocused diversification into theme parks, clothing lines, and video games. New CEO Jørgen Vig Knudstorp (promoted from within at age 35) made the radical decision to return to the core brick, selling off theme parks, cutting 1/3 of products, and rebuilding around what LEGO uniquely did well. By 2015, LEGO had overtaken Mattel as the world's largest toy company.
Decision context
Whether to continue the diversification strategy that had been pursued for a decade or radically refocus on the core brick product, divesting theme parks, clothing, and other extensions.
Biases present in the decision
Reference class base rates
Across all 146 curated case studies in our library:
Lessons learned
- Sunk cost fallacy in the diversification investments was overcome by framing divestitures as "unlocking capital" rather than "admitting failure."
- A CEO without personal investment in the failing strategy was essential — internal promotion of a younger leader bypassed the emotional attachment of the executive team.
- Engaging the fan community (external advisors) provided unfiltered feedback that confirmed the core product was still beloved — the strategy, not the brand, was the problem.
Source: David C. Robertson, "Brick by Brick: How LEGO Rewrote the Rules of Innovation" (2013); LEGO Group annual reports (2004-2015); Knudstorp interview, Harvard Business Review (2009) (Case Study)
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