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LEGO managers identified four categories

of innovation that mattered, with threetypes of innovation in each.

oduct innovationswere new toys and plat-

ms. Four years earlier, with Bionicle's

nch, the toy's development team had

ady innovated in both of those categories.

d invented an industry first, the buildable

on figure. In creating subsequent genera-

s of Bionicle characters, the team was adept

making modest but highly profitable

rovements to the line. And with its ball-

-socket connector, Bionicle also represent-

new building platform for LEGO.

ommunication innovations included nov-

ays of marketing and also connecting to

omers. Greg Farshteys outreach to cus-

ers via Bionicle fan sites, which he and

colleagues used to improve Bionicle's sto-ne, offered a proof-of-concept model for

raging feedback from fans. (LEGO subse-

ntly expanded on Farshtey's example and

it extensively today.)

usiness innovations consisted of new busi-

models (such as new pricing methods or

cription plans) and new channels to mar-

Since its debut in 2001, Bionicle had

ady delivered minor but noteworthy inno-

ons in both areas. With launches in the

peak months of January and August, and

ice tag that required just a few weeks of a

s allowance, Bionicle filled both a season-

nd a demographic gap in the LEGO brand's

ket. Although the attempt to sell the toy

ugh vending machines never panned out,

nicle freed marketers to seek out uncon-ional ways of pushing beyond such con-

ional intermediaries as Walmart and Toys

Us. Perhaps most significant, the range of

nsed products that Bionicle Boys snapped

elivered a healthy stream of royalties back

illund. As a result, other product teams

ulated the Bionicle model of partnering

und LEGO-developed properties to boost

s and profits.

Process innovations were core processes

ere money changes hands) or enabling

esses (such as new-product development).

e again, Bionicle suggested new innovation

hways for LEGO. The Bionicle team's com-

sed development cycles and customer

ght research became staples of the

amped LEGO Development Process.nicle proved it was indeed possible to cut

elopment time in half, which resulted in

stantial cost savings for LEGO. And it

wed that customer research could improve

odds of delivering toys that kids fervently

red. That, of course, augmented the com-

y's sales.

Having defined the different areas of inno-

on that LEGO would pursue, the working

up also recognized that "innovation" does-

necessarily mean "radical"that, in fact,

erent opportunities require varying

rees of innovativeness. The new model

lighted three different approaches to mar-

ing the kinds of change that would help

O advance its goals. The first, simplest

of innovation was to adjust existing toyshat is, to freshen up an evergreen line so

it attracts news waves of kids without

ng significantly more development and

nufacturing costs.

The next, more challenging innovation was

to reconfigure to change existing building

systems or platforms to provide a new cus-

tomer experience. LEGO had a blockbuster

with its Star Wars toys and a minor but

promising success with Slizer. Combining thetwo concepts to produce a set of buildable

action figures with a rich, episodic story line

meant that LEGO had to blaze a new path to

profits, but it was starting from a familiar place.

The result was a hit series of toys that gener-

ated significant sales for almost a decade.

Reconfiguring innovations change the terms

of competition in an existing market.

The most difficult and unpredictable inno-

vation is the kind that redefines a category.Case in point: the 1998 Mindstorms RCX kits,

the company's first foray into robotics. (The

second version of Mind-storms, released in

2006, was a reconfigure innovation for LEGO.)

The LEGO Group's senior management put

all these definitions onto a single pagean

innovation matrixthat it used to map the

kinds of innovations it would pursue.

Reprinted by permission of the publisher. ExcerptedfromBrick by Brickby David Robertson with Bill

Breen. Copyright Random House.

All rights reserved.

Related interview with David Robertson,

co-author, Brick by Brick, on page 3

OK EXTRACT

novation doesnt necessarily mean radical changes, sometimes,

simple makeover of a successful line is enough, says a new book

BRICK BYBRICK:HowLEGORewrote the Rules of Innovationand Conquered the Global ToyIndustry

AUTHOR: David CRobertson with Bill Breen

PUBLISHER: Random House

Price: ~599

THE LEGO INNOVATION MATRIX

REDEFINE

Neverseen

beforeoffering

RECONFIGURE

Combineknown

parametersof

categorytocreate

uniqueandbetter

solutions

ADJ

UST

Continua

llyadjust

parametersin

knownca

tegoryto

optimise

existing

solutions

Core processes> Financial

planning> Sales and

operationsplanning> Performancemanagement

Enablingprocesses> Marketing> Forecasting> Customer

businessplanning

ProductOffering> Products> Packaging> Software> Instructions

Platform> Building

systems> Toy technology> Digital

platforms> Packaging

platforms

Messaging> Campaigns> Web sites> Point of

sales displays> Catalogues

Customerinteraction> Communities

(online or not)> Events> Customerservice

Sales channel> Retailers> Direct to

consumer> Partners

Businessmodel> Revenue

model> Pricing model> Value chain

structure

New teamstructure and

process

New packagingplatform

Viral marketingcampaign

Directinteraction with

fans

Sell throughnon-traditional

channels

Licensingroyalties

Manufactureof new product

elements

Slizerlaunch first

buildable actionfigure

FirstBioniclelaunch(2001)

Ball andsocket joint

2002-2009Bionicle

launches

nnovation road mapREUTERS