Though the overall toy market is declining, LEGO's revenues and profits are climbing - largely because the company revamped its innovation efforts to align with strategy.

The case tells the story of a company where innovation is tremendously important, but not working well. In 2003, the LEGO Group had a number of positive attributes: it had a well-respected brand with some very good toy lines. It had a passionate customer base that in many areas was more sophisticated than its internal designers. And it had been able to extend the brand into many areas such as toys, games, clothing, theme parks, movies, and many others types of play, earning significant revenues (but not profits). But, in 2003, the company had gotten itself into deep trouble. Over the previous 5-10 years, the toy industry had been changing dramatically in ways that did not favor the LEGO Group. These changes, coupled with some poorly planned investments and a downturn in the sales of some important toy lines, combined to almost put the LEGO Group out of business. The company lost nearly DKK 1 billion in 2003 and its cash dwindled dangerously low. This was the largest loss in the history of the company, and many analysts believed that bankruptcy and perhaps even the breakup and sale of the company were likely. The company quickly sold off assets, reduced headcount, and outsourced production to cut costs and generate cash. But it knew, to turn around the company, it had to improve its overall innovation system. It had to improve the time to market, success rate, and profitability in its innovation system. The case presents a number of representative challenges that LEGO was facing during 2004 and beyond. Learning objectives: 1) How to restructure an innovation system. 2) How to encourage all types of innovation (innovation in pricing, business model, channel to market, branding, customer experience, etc.) and coordinate these innovations across the company. 3) How to involve external parties such as customers, complementary product producers, and external inventors in your innovation system.

The (B) case describes the specific steps that the LEGO Group took to improve innovation. They include: 1) Restructuring the company to make responsibility for each part of the business clearer. Each toy line was given responsibility for its own sales and profitability, and the Concept Lab, which before had lacked focus, was separated and charged with developing new ideas that were "obviously LEGO but never seen before." 2) The definition of innovation was redefined through the LEGO innovation matrix. 3) A new stage-gate process was implemented. 4) A new way of working with external inventors and complementary product producers was integrated into the structure and process. 5) Users were involved in the development of new toys, in particular the new generation of LEGO Mindstorms. Through these and other activities, the LEGO Group dramatically improved its performance, returning to profitability in 2005 and achieving very healthy profits in 2007. Learning objectives: 1) How to restructure an innovation system. 2) How to encourage all types of innovation (innovation in pricing, business model, channel to market, branding, customer experience, etc.) and coordinate these innovations across the company. 3) How to involve external parties such as customers, complementary product producers, and external inventors in your innovation system.

The case describes an attempt by Steve Gundrum, the CEO and President of Mattson, to improve the company's innovativeness. Mattson, located in Silicon Valley, California, is an independent developer of new products for the food and beverage industry. Mattson creates, develops, and brings to market new beverages, snacks, frozen meals, and many other food and beverage products as a contractor to the large producers in the industry. Gundrum believes there's an opportunity to improve his innovation system by borrowing from the leading-edge software firms that surround him. To test new methods of developing products, Gundrum creates a contest - to develop a better cookie - and commissions three teams: one using Mattson's traditional hierarchical team structure, one using open source (OS) development, and a third using extreme programming (XP). The Mattson Project Delta (A), (B), and (C) cases explain what happened. Learning objectives: The study and discussion of this case can help students understand more deeply the importance of team composition and structure in the innovation process. It also shows the power of reaching across industry boundaries to find new ideas, not just for products but for business process and structure as well. The key lessons in this case are that: 1) Team structure and management can make a big difference in both creativity and productivity. 2) Problem solving (internal generation of new answers to problems) and solution finding (external exploration for existing solutions to problems) can each be valuable in different situations and at different stages in the innovation life cycle. 3) Managers have many options when choosing a team structure. Further, the case provides a nice language for talking about team structure. 4) Prototyping can be applied not just for new products, but new structures and processes for innovation.

The case describes an attempt by Steve Gundrum, the CEO and President of Mattson, to improve the company's innovativeness. Mattson, located in Silicon Valley, California, is an independent developer of new products for the food and beverage industry. Mattson creates, develops, and brings to market new beverages, snacks, frozen meals, and many other food and beverage products as a contractor to the large producers in the industry. Gundrum believes there's an opportunity to improve his innovation system by borrowing from the leading-edge software firms that surround him. To test new methods of developing products, Gundrum creates a contest - to develop a better cookie - and commissions three teams: one using Mattson's traditional hierarchical team structure, one using open source (OS) development, and a third using extreme programming (XP). The Mattson Project Delta (A), (B), and (C) cases explain what happened. Learning objectives: The study and discussion of this case can help students understand more deeply the importance of team composition and structure in the innovation process. It also shows the power of reaching across industry boundaries to find new ideas, not just for products but for business process and structure as well. The key lessons in this case are that: 1) Team structure and management can make a big difference in both creativity and productivity. 2) Problem solving (internal generation of new answers to problems) and solution finding (external exploration for existing solutions to problems) can each be valuable in different situations and at different stages in the innovation life cycle. 3) Managers have many options when choosing a team structure. Further, the case provides a nice language for talking about team structure. 4) Prototyping can be applied not just for new products, but new structures and processes for innovation.

The case describes an attempt by Steve Gundrum, the CEO and President of Mattson, to improve the company's innovativeness. Mattson, located in Silicon Valley, California, is an independent developer of new products for the food and beverage industry. Mattson creates, develops, and brings to market new beverages, snacks, frozen meals, and many other food and beverage products as a contractor to the large producers in the industry. Gundrum believes there's an opportunity to improve his innovation system by borrowing from the leading-edge software firms that surround him. To test new methods of developing products, Gundrum creates a contest - to develop a better cookie - and commissions three teams: one using Mattson's traditional hierarchical team structure, one using open source (OS) development, and a third using extreme programming (XP). The Mattson Project Delta (A), (B), and (C) cases explain what happened. Learning objectives: The study and discussion of this case can help students understand more deeply the importance of team composition and structure in the innovation process. It also shows the power of reaching across industry boundaries to find new ideas, not just for products but for business process and structure as well. The key lessons in this case are that: 1) Team structure and management can make a big difference in both creativity and productivity. 2) Problem solving (internal generation of new answers to problems) and solution finding (external exploration for existing solutions to problems) can each be valuable in different situations and at different stages in the innovation life cycle. 3) Managers have many options when choosing a team structure. Further, the case provides a nice language for talking about team structure. 4) Prototyping can be applied not just for new products, but new structures and processes for innovation.

This is an MIT Sloan Management Review article. By sharing components and production processes across a platform of products, companies can develop differentiated products efficiently, make their manufacturing processes more flexible, and take market share away from competitors that develop only one product at a time. The platform approach also enables companies to manufacture products in high volumes that are tailored to meet the needs of individual customers. A platform is a collection of assets--components, processes, knowledge, people, and relationships--that a set of products share. The platform planning effort involves two key tasks. First, product planning, where marketing managers determine which market segments to enter, what the customers in each segment want, and what product attributes will appeal to those customers. Second, system-level designers decide which product architecture to use to deliver the different products while sharing parts and production steps across the products. Three key ideas underlie the platform planning process. First, customers care about distinctiveness, how closely the product meets their needs. At the same time, the cost of a firm's internal operations is driven by the level of parts held in common among a group of products. Second, given a particular product architecture, there is a trade-off between distinctiveness and commonality. Third, product architecture dictates the nature of this trade-off. By developing and aligning three tools--a product plan, a differentiation plan, and a commonality plan--managers can balance the need for distinctiveness with the need for commonality. The process must involve all key functions and be guided by top management.