What is Lego's Business Model

As always, the business model breakdown is available in our Youtube channel!

Lego is not a video game or movie company, yet there are several Lego games and movies on the market. The company is one of the largest toy brands in the world, and today we'll dive deep to understand how Lego structures its business model around a simple and iconic, yet genius toy: the plastic brick.

💎 Value Proposition

Chances are, you've stepped encountered or played with a Lego set at some point. Lego became famous for producing play sets based on the famous, yet simple, plastic brick. Lego's value proposition revolves around creativity, fostering a "infinite play" experience. Each block and each Lego set connects with others, making the possibilities almost endless.Although the plastic brick is simple, Lego is renowned for its high standards of quality control, ensuring that each piece is durable and fits perfectly. Key insights - Lego delivers high quality products, fostering creativity through the "infinite play experience".

⚙️ Operational Model

Lego's operations have evolved significantly over the years. The company delivers its value proposition through various channels, including Lego Stores, retail outlets, its website, apps, theme parks, and media such as video games and movies.

Despite its diverse initiatives, Lego's core business remains centered on the plastic brick. Key activities include product development, manufacturing, and supply chain distribution. Media production has also become increasingly important in recent years.Lego supports its operations with factories strategically located worldwide, including in Mexico, Hungary, and China. A robust distribution network is crucial for ensuring customer satisfaction.Partnerships are a critical aspect of Lego's business model. Think about it - themed sets like The Office Lego Set and games like "Lego Batman" are created in partnership with license owners.

💸 Revenue Model

As mentioned above, Lego has different initiatives going on - games, theme parks and movies. All those initiatives most likely have one purpose - to increase the sales of the Lego sets, the main revenue stream. Yes, there are other revenue streams, such as the park fees admission and Lego merchandise. However, Lego sets are still the main source of revenue to the company.

Regarding costs, Lego has most of the costs related to the manufacturing and distribution channels. Other costs can be related to research and development, licensing fees (for the themed sets like the Star Wars Lego set) and stores and parks maintenance.

📊 Customer Segment

Lego's main customer segment is composed of kids. However, in recent years, Lego has been targeting the AFOL (adult fans of Lego). Events like Brickfest attract attendees of all ages, showcasing Lego's broad appeal.Additionally, many individuals who grew up in the 80s and 90s are now parents, integrating Lego into their daily lives with their own children. This multigenerational engagement helps to show Lego's brand power.

🔍 Main Takeaways

Build projects that boost the core business
Lego is neither a movie producer nor a video game company, yet it has its own Lego movies and video games. By engaging customers through these channels, Lego has successfully expanded its reach and increased the sales of its core products—Lego sets and pieces.

Adopt a multichannel approach focused on customer experience
Lego interacts with customers through various channels, including retail stores, e-commerce, apps, and theme parks. This multichannel strategy ensures that customers can have a complete Lego experience, whether they're shopping online, visiting a store, or enjoying a day at Legoland.

Innovation supports the core business
For Lego, innovation in the form of themed parks and digital experiences complements rather than replaces its core products. Lego sets and bricks remain central to the brand. The company's innovative approach, including new experiences and product lines, supports and enhances the core business, ensuring its continued success and relevance.

You can download Lego's complete Business Model Canvas here