Lego made 3 changes that saved its business from bankruptcy and made it the world's most powerful toy company

LegoREUTERS/Mariana BazoA woman walks past a window display of Lego at a Saga Falabella department store.

Just a decade ago, Lego was on the brink of bankruptcy.

The company was facing mounting competition from internet and video games, writes Jonathan Ringen at Fast Company.

But a decade ago, Lego CEO Jørgen Vig Knudstorp began making changes that have made Lego the world’s most powerful toy company.

Here are the key changes.

1. Cutting costs.

Executives were pouring money into unsuccessful ventures like a morning cartoon, “bigger, more macho minifigures,” and Legoland theme parks.

This was draining Lego’s cash reserves and distracting from product innovations.

Knudstorp began cutting costs by killing unsuccessful business ventures.

He also brought in hospitality experts to drive profits at theme parks.

We went to Legoland.Jackie BaekThe company worked to improve Legoland.

2. Finding out how kids play.

Lego was able to turn around business by exhaustively researching customers in its “Future Lab” run by scientific researchers.

Researchers found a big difference between American and European parents, according to Ringen.

“American parents don’t like play experiences where they have to step in and help their kids a lot. They want their kids to be able to play by themselves,” Future Lab leader Anne Flemmert-Jensen told Fast Company.

Meanwhile, European parents are more hands-on.

“We see among European parents, it’s ok to sit on the floor and spend time with the kids,” she said.

3. Playing up the educational image

Lego changed marketing so it would be seen as both a toy and an educational tool.

This strategy has been effective.

Buying Lego’s toys makes millennial parents feel like they’re investing in their child’s development, according to Goldman Sachs.

“We consider Lego as an example of a company appealing to millennials’ value for child development and creative play,” the analysts write.

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