Lego Worlds Video Game and the Corporate Drive to Diversify

Have you heard of the latest Lego rockstars? Arvind and Sanjay Seshan – better known around the world as The Seshan Brothers — provide programming lessons for Lego Mindstorms robots to more than 100,000 users in 160 countries through their website, EV3Lessons.com. In November the teen brothers, who live in the Fox Chapel area of Pittsburgh, Pennsylvania, traveled to the World Robot Olympiad finals in Delhi, India, to demonstrate a Lego printer they invented, called PIX3L PLOTT3R. Let’s face it, Legos aren’t just for elementary kids anymore. They are sophisticated, high-tech and sure to inspire innovation.

Lego, the 84-year-old Danish toymaker behind these interlocking bricks, has been turning that innovative spirit inward to expand its business model and its offerings. It plans to launch Lego Worlds, a new video game, on February 21, 2017.

Wharton professor David Robertson, who is co-author of Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry, talked recently about Lego’s business strategy on the Knowledge@Wharton show on SiriusXM Channel 111 (You can find the full podcast in the “Related Links” tab). Here are six key takeaways from Robertson’s discussion:

1. Lego Worlds will compete with Minecraft, a popular video game created by Swedish game designer Markus (Notch) Persson and published by Mojang, the firm he co-founded with two others. Interestingly, Lego two years ago partnered with Minecraft to roll out digital versions of its toy products including its Star Wars series, The Dungeon and The Iron Golem.

1. With Lego Worlds, the $5.4 billion Lego Group is converting a potential threat from online games into a business opportunity. It is taking its bricks and the stories that power them to the Internet to grow its business. “Lego realized that if all it offered were the bricks, then anybody could make those bricks. The patents had expired in the 1980s,” Robertson said. “It was really [about] the stories that animated those bricks. If you could tell the story and get kids involved with the story, then you make the bricks irresistible.”

1. Still, it is a risk, and Lego has spent a few years developing it. According to Roberts, Lego was worried that it could unwittingly aid pedophiles lurking in a multiplayer environment, because kids could accidentally reveal their address and phone number while playing the online game. “What do you do if a kid builds their phone number and address out of Lego on their house?” he asked. “The multiplayer online gaming world is hugely profitable, but hugely dangerous for Lego.”

1. Lego Worlds is the latest among the company’s other diversifications in recent years, such as the Lego Movie series including Star Wars and Batman franchises, TV shows and other merchandise. Those represent a bounce-back from tough days Lego saw in 2003-2004, when it almost went bankrupt under the weight of wrong calls, especially a move to run Lego theme parks.

1. By getting into online gaming and branching out in many other ways, Lego is following the advice of innovation experts like Robertson: Do lots of experiments and see what works and what doesn’t. “Lego Worlds is by no means the only strategic initiative that they are taking in this digital area,” Robertson pointed out. Another is a focus on ‘digital experiments,’ such as an iPad game that allows players to build something, take a picture of it and it later shows up in the game, such as in racing a car after building it. Lego is also creating Lego Discovery Centers or indoor playgrounds in malls by repositioning failed department stores. One is coming up next year at a mall in Plymouth Meeting, Penn., and he expected Lego to also explore that plan at a few recently shuttered Macy’s stores.

1. Lego Worlds, Discovery Centers and more represent a changing business model. Lego is beginning to resemble a media company, said Robertson. In the future, he expects it to compete more against Disney than against Minecraft. Even as it grows in multiple directions, Lego is still owned by its carpenter-turned-founder Ole Kirk Christiansen and his family, and they retain creative control on all that they source from partner firms.

Related Links

• Pittsburgh Post-Gazette
• Christmas Card Robot
• K@W: How Lego Is Building a Non-brick Empire
• About Lego Group
• Brickipedia
• Wall Street Journal: Lego Restructures with Eye to Expansion
• Announcement of Lego Worlds Video Game
• David Robertson’s Brick by Brick

Conversation Starters

What is Lego Worlds and how does it signify product diversification for Lego? Why is this such a critical move for a family business that is built on colorful plastic blocks that snap together?

Experts like David Robertson encourage corporate innovation through experimentation. What are the risks of this approach? The rewards? Do you think that advice also applies to you in terms of your own innovative thinking? Explain.

Did you play with Legos as a kid and even more recently as the company’s offerings have become more sophisticated? Did you ever think about the business behind the blocks? Choose one aspect about Lego’s corporate life to explore further. Discuss it with a group. You can use the “Related Links” tab for help.