Lego Executive Chairman: Create a Separate Structure

By Scott Kirsner |  November 3, 2015

The former chief executive of Lego Group, Jorgen Vig Knudstorp, says that established companies, at their core, do two kinds of work: exploitive and exploratory.

Exploitive work involves finding ways to wring more revenue from today’s products and services, and exploratory work involves cultivating concepts that could one day turn into new products and services. “Companies need to tinker,” says Knudstorp, who stepped down as CEO of the privately-held toy company at the end of 2016, but now serves as executive chairman. 

This interview is from our CEOs on Innovation report, in the Fall 2017 issue of InnoLead magazine.

This interview is from our CEOs on Innovation report, in the Fall 2017 issue of InnoLead magazine.

We caught up with Knudstorp at a conference organized by the MIT Media Lab in Cambridge, Mass.

InnoLead: It sounds like you believe that to really innovate, you need to create a structure that is somewhat insulated and separated from the day-to-day operations, like a skunkworks?

Knudstorp: What we do is a little bit of a separation. We have something we call a Future Lab. It is outside our normal cycle of introducing new products. When I come home, I’m going to review the Christmas 2017 portfolio. Future Lab is outside of that regular product planning process — it’s experimental stuff. Last year, we launched a product called Lego Fusion, which we’ve now taken off the market. But it was an experiment in linking physical to digital. You’d scan something with your phone, and bring it into a videogame.

And of course, the MIT Media Lab has always been for us a place to come and get inspired, and we have other collaborators like the Media Lab.

InnoLead: So Future Lab, when they have an idea with high potential, do they eventually hand it over to an existing business unit?

Knudstorp: Yes. As an example, in 2010 or 2011, we launched board games made out of Lego bricks. Future Lab came up with that idea. We had wheels, figures, and bricks — what’s missing? One guy said, it’s a die. If you could change the sides of the die, you could reinvent gameplay. They worked on that for three or four years, and then we took it to market. Right now, we have a popular line called Ninjago, and they [brought that board game to market first.] The board games we [sold] for three years and then we ran out of ideas, so we took it off market.

Lego executive chairman and former CEO Jørgen Vig Knudstorp

Lego executive chairman and former CEO Jørgen Vig Knudstorp

InnoLead: So stuff that comes out of the Future Lab doesn’t have to stay on the market forever? It can last for just three or four years, without being seen as a failure?

Knudstorp: Yes. For us, creativity is taking something you know and reconfiguring it. [Our business] is all based on the brick… but in new iterations. We are very structured about saying, what kind of play is it, who is it for, and then playing around with how we can create new combinations. People say, “Yeah, but that’s innovation in a company that does physical products.” But if you think about the Google search engine, that is the combination of two well-known ideas — the search engine, and the idea of how do you index scientific journals [to see how many people cite a particular article.]

A lot of creativity and invention is bringing stuff together that we haven’t seen before. When you take that mindset, you suddenly start opening up a kaleidoscope. You might say, we have this idea here, and how would that match with ten other concepts? You combine them.

This idea of creativity being a white canvas is probably a too-romantic notion. You look at Picasso, the creative genius of painting. He was an extremely skillful painter of classical paintings and portraits for twenty years. Then he said, what if I take these geometric figures into painting?

The slides above come from this presentation from David Gram, Head of Marketing and Business Development at Future Lab. Gram says, “We cultivate intrapreneurship — a startup attitude in Future Lab. We see ourselves as a small, independent company within the company. We don’t want big budgets. If you get big budgets, then you create big projects, and then you get a lot of politics. At the end, you might be shut down. Spend almost zero cash. Get something in the market, prove it, have it validated, get a lot consumer feedback. We’re building the cultural change that needs to be built for this new business model to be accepted into the core business.”