DTU ProjectLab - User contributions [en-gb]

Talk:Product development and portfolio management processes at LEGO

2015-09-27T17:51:50Z

Balint03:

Hello, I like the idea for your "case study article". Please make sure to use that structure. I would also suggest to focus on one aspect of Lego, i.e. portfolio management or risk management (in the context of new PD). I do not think it would be appropriate to talk about the Lego PD process "in general" for this class.

'''Adam.pekala (reviewer 1) article accessed 2015-09-22 21:20:'''<br>
The article that you wrote fits in the Case-study requirements and is pleasure to read, especially for a long-time Lego fan such as me. However, there is room for improvement, to make it even better:
#Illustrations are appropriate but they might be a bit larger by default so it would be easier to read without zooming on them. // That’s right, I just used a default 200px version at first, I enlarged them now.
#Language is suitable for such kind of article, however there are few spelling mistakes or grammar drawbacks (double spell check once again, read through and look for grammar order) // Thank you I hope now it is better.
#Stage-Gate chapter explains how the model work at Lego, but to me, there are some inconsistencies between the description and provided figure (around point 4, to be more precise) // That’s also a good point and true, I missed that point.
#Generally the structure is consistent but it would be even better with better ‘flow’ between the paragraphs (maybe some linking words?) // It is always hard to write something in a way to be logic and consistent, especially, when you are really in a topic and you can not read, as somebody for the first time. I tried to use some more links and inner references in the article, hope now it is better.
#In comments it would be really interesting to get some personal overview on the analysed case. // I am not sure what do you mean “in comments”? Here in the wiki system or personally for you? 
#Bibliography seems to be really well-chosen but it would be nice to read more about at least the main sources used – it might serve as further reading for interested readers. // I add annotated bibliography, thanks.
You have fit in the requirement of words number an after adding some smooth changes it will be almost ideal (right now being around ~2600 - but since you cover the topic, I think it is all-right). Keep working and polish it up. Looks like more than a great base! // Thanks for the useful comment and carefully reading, I appreciated it!

'''Alex161 (reviewer 2):''' <br>
I like so much the Lego case study and it is very nice to read. I found the structure of the article well structured, with an enganging style and not hard to follow.
I think the main points of the article are well illustrated with figures. It is understandable.
Looking at the content i think your ‘’case study ‘’ is related with the course , maybe I would say that the part about the risk is a bit small compared with the size of the topic ( Risk management ). It follows a logical flow and i liked the started summary. Maybe you can add an annoted bibliography for each source.
In general this is a very positive feedback I liked so much reading your article .

// Thank you very much for the positive words and I am happy that it was interesting for you as well. You are right, that the optimizing and risk part is a bit short, but there I am not talking about the risk management of LEGO, as you said, it would be to large topic. Under the term risk, I just would like to highlight the risk of deleting something from the previous product portfolio and apply 60% of new products.
// I add some annotated bibliography, thanks to mention it!

==Review 3, S145166==

A very interesting article Balint! // Thanks Peter, I am happy that it was enjoyable for you!

'''Formal'''
Very nice use of images and well labelled
*there is a cite error on all the figures // Yes, I found, there was a cite in the figure description as well and apparently it seems the wiki system does not like it. I corrected now.
*some grammar/spelling mistakes - read through again // I did, hopefully now it is better. Otherwise I will ask you to help a bit directly. 
*Its more standard to put the Overview above the contents list // I guess it is a matter of taste, for me it is more decent. But namely, that way is more standard I put above the TOC.

'''Content'''
Well explained theories clearly linked to portfolio management
Good references from reliable sources
*Just add an annotated bibliography for further reading // I add some with a short description, thanks. However, not for all the references, because some of them was also a reference in the referred literature.
*And links to other relevant APPPM articles eg. portfolio management // I add some key words and other link also with a category (however most of the categories, which are relating to this topic are not exist), that was a good idea anyway.

// Thank you for the good words and for the constructive suggestions!

Product development and portfolio management processes at LEGO

2015-09-27T17:47:15Z

Balint03: /* Annotated bibliography */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until the project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and the customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answers to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employees are grouped into teams, which are relating to those projects that they are involved. In the meantime, because LEGO develops platform products, these teams are also organized around various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of them is a key issue to ensure the appropriate performance of the project.

Usually, there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between to develop a solution by a particular platform team or to wait for the other platforms.
Therefore LEGO applies a highly synchronized development process through different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platforms as well. This ensures an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and to prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The possible conflicts are also good opportunities for a better solution and to take into consideration different aspects. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensures for LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensured by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore, the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such as cultural differences and communication issues.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as a strong tool of portfolio management in order to identify relevant ideas, development processes and to prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases. These stages are separated by the so-called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for the production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After that some ideas and pre-decisions are made in the Discovery stage, as the zero step in the product development the following process takes place.

Stage 1 is the planning phase or the so-called scoping, which includes the first strategic meetings with the management teams and boards to identify the overall goals and directions with the necessary resources and demands.

Stage 2 is the build business case, which is more likely an opportunity phase at LEGO. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which is an important part of the portfolio compilation. At this step the main selection and strategical alignment of the possible projects and portfolios are performed.

Stage 3 is the product development phase, where the final selection is made about those projects, which will be included in the next portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with the most economical cost.

Stage 4 is the phase of the testing and validation, in which the prototypes are tested in case of assembling by the possible customers with the defined age range. At the end of this phase, means the end of the product development as well.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to gain valuable experiences.

As it is represented above the development process is structured and routinized at LEGO. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrates different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identifies problems at an early stage, the prioritization of projects is also well established in this practice. A possible disadvantage of such a well-structured scheme is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular projects helps to reduce this drawback. In the meantime, this model excludes most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich" />.

Within the frame of this integrated model, LEGO profits from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and product retailers, which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensures the key values to be presented in every product and to keep high the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new products in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product are major parameters of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during the product initializing. The main reason behind is the fact, that the evaluation and mapping of the new trends and market changes is the responsibility of the marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenges also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all different type of the customers regarding their age and gender. The defined risk in this process is to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around the product architecture, which allows enormous product range without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO supports the project selection process can be detected at the second phase of the Stage-Gate Model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets have a specific story and theme, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in the market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company builds up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition are also observed and explained.

The key strategy of the significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages are carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different type of businesses and include some results of various case studies. Also some popular tools are examined and introduced in the paper.
The study is rich with statistic data and examples, which give a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which is important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-27T17:44:16Z

Balint03: /* Conclusion */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until the project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and the customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answers to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employees are grouped into teams, which are relating to those projects that they are involved. In the meantime, because LEGO develops platform products, these teams are also organized around various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of them is a key issue to ensure the appropriate performance of the project.

Usually, there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between to develop a solution by a particular platform team or to wait for the other platforms.
Therefore LEGO applies a highly synchronized development process through different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platforms as well. This ensures an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and to prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The possible conflicts are also good opportunities for a better solution and to take into consideration different aspects. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensures for LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensured by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore, the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such as cultural differences and communication issues.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as a strong tool of portfolio management in order to identify relevant ideas, development processes and to prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases. These stages are separated by the so-called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for the production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After that some ideas and pre-decisions are made in the Discovery stage, as the zero step in the product development the following process takes place.

Stage 1 is the planning phase or the so-called scoping, which includes the first strategic meetings with the management teams and boards to identify the overall goals and directions with the necessary resources and demands.

Stage 2 is the build business case, which is more likely an opportunity phase at LEGO. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which is an important part of the portfolio compilation. At this step the main selection and strategical alignment of the possible projects and portfolios are performed.

Stage 3 is the product development phase, where the final selection is made about those projects, which will be included in the next portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with the most economical cost.

Stage 4 is the phase of the testing and validation, in which the prototypes are tested in case of assembling by the possible customers with the defined age range. At the end of this phase, means the end of the product development as well.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to gain valuable experiences.

As it is represented above the development process is structured and routinized at LEGO. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrates different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identifies problems at an early stage, the prioritization of projects is also well established in this practice. A possible disadvantage of such a well-structured scheme is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular projects helps to reduce this drawback. In the meantime, this model excludes most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich" />.

Within the frame of this integrated model, LEGO profits from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and product retailers, which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensures the key values to be presented in every product and to keep high the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new products in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product are major parameters of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during the product initializing. The main reason behind is the fact, that the evaluation and mapping of the new trends and market changes is the responsibility of the marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenges also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all different type of the customers regarding their age and gender. The defined risk in this process is to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around the product architecture, which allows enormous product range without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO supports the project selection process can be detected at the second phase of the Stage-Gate Model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets have a specific story and theme, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in the market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company builds up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition are also observed and explained.

The key strategy of the significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages are carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-27T17:37:40Z

Balint03: /* Product launch */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until the project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and the customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answers to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employees are grouped into teams, which are relating to those projects that they are involved. In the meantime, because LEGO develops platform products, these teams are also organized around various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of them is a key issue to ensure the appropriate performance of the project.

Usually, there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between to develop a solution by a particular platform team or to wait for the other platforms.
Therefore LEGO applies a highly synchronized development process through different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platforms as well. This ensures an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and to prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The possible conflicts are also good opportunities for a better solution and to take into consideration different aspects. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensures for LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensured by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore, the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such as cultural differences and communication issues.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as a strong tool of portfolio management in order to identify relevant ideas, development processes and to prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases. These stages are separated by the so-called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for the production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After that some ideas and pre-decisions are made in the Discovery stage, as the zero step in the product development the following process takes place.

Stage 1 is the planning phase or the so-called scoping, which includes the first strategic meetings with the management teams and boards to identify the overall goals and directions with the necessary resources and demands.

Stage 2 is the build business case, which is more likely an opportunity phase at LEGO. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which is an important part of the portfolio compilation. At this step the main selection and strategical alignment of the possible projects and portfolios are performed.

Stage 3 is the product development phase, where the final selection is made about those projects, which will be included in the next portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with the most economical cost.

Stage 4 is the phase of the testing and validation, in which the prototypes are tested in case of assembling by the possible customers with the defined age range. At the end of this phase, means the end of the product development as well.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to gain valuable experiences.

As it is represented above the development process is structured and routinized at LEGO. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrates different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identifies problems at an early stage, the prioritization of projects is also well established in this practice. A possible disadvantage of such a well-structured scheme is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular projects helps to reduce this drawback. In the meantime, this model excludes most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich" />.

Within the frame of this integrated model, LEGO profits from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and product retailers, which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensures the key values to be presented in every product and to keep high the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new products in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product are major parameters of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during the product initializing. The main reason behind is the fact, that the evaluation and mapping of the new trends and market changes is the responsibility of the marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenges also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all different type of the customers regarding their age and gender. The defined risk in this process is to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around the product architecture, which allows enormous product range without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO supports the project selection process can be detected at the second phase of the Stage-Gate Model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets have a specific story and theme, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in the market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-27T17:34:30Z

Balint03: /* Manufacturability */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until the project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and the customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answers to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employees are grouped into teams, which are relating to those projects that they are involved. In the meantime, because LEGO develops platform products, these teams are also organized around various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of them is a key issue to ensure the appropriate performance of the project.

Usually, there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between to develop a solution by a particular platform team or to wait for the other platforms.
Therefore LEGO applies a highly synchronized development process through different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platforms as well. This ensures an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and to prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The possible conflicts are also good opportunities for a better solution and to take into consideration different aspects. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensures for LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensured by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore, the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such as cultural differences and communication issues.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as a strong tool of portfolio management in order to identify relevant ideas, development processes and to prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases. These stages are separated by the so-called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for the production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After that some ideas and pre-decisions are made in the Discovery stage, as the zero step in the product development the following process takes place.

Stage 1 is the planning phase or the so-called scoping, which includes the first strategic meetings with the management teams and boards to identify the overall goals and directions with the necessary resources and demands.

Stage 2 is the build business case, which is more likely an opportunity phase at LEGO. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which is an important part of the portfolio compilation. At this step the main selection and strategical alignment of the possible projects and portfolios are performed.

Stage 3 is the product development phase, where the final selection is made about those projects, which will be included in the next portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with the most economical cost.

Stage 4 is the phase of the testing and validation, in which the prototypes are tested in case of assembling by the possible customers with the defined age range. At the end of this phase, means the end of the product development as well.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to gain valuable experiences.

As it is represented above the development process is structured and routinized at LEGO. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrates different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identifies problems at an early stage, the prioritization of projects is also well established in this practice. A possible disadvantage of such a well-structured scheme is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular projects helps to reduce this drawback. In the meantime, this model excludes most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich" />.

Within the frame of this integrated model, LEGO profits from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and product retailers, which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensures the key values to be presented in every product and to keep high the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new products in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product are major parameters of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during the product initializing. The main reason behind is the fact, that the evaluation and mapping of the new trends and market changes is the responsibility of the marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenges also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all different type of the customers regarding their age and gender. The defined risk in this process is to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around the product architecture, which allows enormous product range without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO supports the project selection process can be detected at the second phase of the Stage-Gate Model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-27T17:31:51Z

Balint03: /* Portfolio optimizing and risk */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until the project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and the customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answers to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employees are grouped into teams, which are relating to those projects that they are involved. In the meantime, because LEGO develops platform products, these teams are also organized around various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of them is a key issue to ensure the appropriate performance of the project.

Usually, there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between to develop a solution by a particular platform team or to wait for the other platforms.
Therefore LEGO applies a highly synchronized development process through different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platforms as well. This ensures an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and to prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The possible conflicts are also good opportunities for a better solution and to take into consideration different aspects. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensures for LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensured by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore, the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such as cultural differences and communication issues.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as a strong tool of portfolio management in order to identify relevant ideas, development processes and to prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases. These stages are separated by the so-called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for the production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After that some ideas and pre-decisions are made in the Discovery stage, as the zero step in the product development the following process takes place.

Stage 1 is the planning phase or the so-called scoping, which includes the first strategic meetings with the management teams and boards to identify the overall goals and directions with the necessary resources and demands.

Stage 2 is the build business case, which is more likely an opportunity phase at LEGO. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which is an important part of the portfolio compilation. At this step the main selection and strategical alignment of the possible projects and portfolios are performed.

Stage 3 is the product development phase, where the final selection is made about those projects, which will be included in the next portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with the most economical cost.

Stage 4 is the phase of the testing and validation, in which the prototypes are tested in case of assembling by the possible customers with the defined age range. At the end of this phase, means the end of the product development as well.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to gain valuable experiences.

As it is represented above the development process is structured and routinized at LEGO. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrates different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identifies problems at an early stage, the prioritization of projects is also well established in this practice. A possible disadvantage of such a well-structured scheme is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular projects helps to reduce this drawback. In the meantime, this model excludes most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich" />.

Within the frame of this integrated model, LEGO profits from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and product retailers, which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensures the key values to be presented in every product and to keep high the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new products in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product are major parameters of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during the product initializing. The main reason behind is the fact, that the evaluation and mapping of the new trends and market changes is the responsibility of the marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenges also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all different type of the customers regarding their age and gender. The defined risk in this process is to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-27T16:57:36Z

Balint03: /* Portfolio management and arrangement */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until the project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and the customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answers to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employees are grouped into teams, which are relating to those projects that they are involved. In the meantime, because LEGO develops platform products, these teams are also organized around various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of them is a key issue to ensure the appropriate performance of the project.

Usually, there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between to develop a solution by a particular platform team or to wait for the other platforms.
Therefore LEGO applies a highly synchronized development process through different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platforms as well. This ensures an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and to prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The possible conflicts are also good opportunities for a better solution and to take into consideration different aspects. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensures for LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensured by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore, the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such as cultural differences and communication issues.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as a strong tool of portfolio management in order to identify relevant ideas, development processes and to prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases. These stages are separated by the so-called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for the production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After that some ideas and pre-decisions are made in the Discovery stage, as the zero step in the product development the following process takes place.

Stage 1 is the planning phase or the so-called scoping, which includes the first strategic meetings with the management teams and boards to identify the overall goals and directions with the necessary resources and demands.

Stage 2 is the build business case, which is more likely an opportunity phase at LEGO. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which is an important part of the portfolio compilation. At this step the main selection and strategical alignment of the possible projects and portfolios are performed.

Stage 3 is the product development phase, where the final selection is made about those projects, which will be included in the next portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with the most economical cost.

Stage 4 is the phase of the testing and validation, in which the prototypes are tested in case of assembling by the possible customers with the defined age range. At the end of this phase, means the end of the product development as well.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to gain valuable experiences.

As it is represented above the development process is structured and routinized at LEGO. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrates different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identifies problems at an early stage, the prioritization of projects is also well established in this practice. A possible disadvantage of such a well-structured scheme is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular projects helps to reduce this drawback. In the meantime, this model excludes most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich" />.

Within the frame of this integrated model, LEGO profits from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and product retailers, which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensures the key values to be presented in every product and to keep high the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new products in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product are major parameters of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during the product initializing. The main reason behind is the fact, that the evaluation and mapping of the new trends and market changes is the responsibility of the marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-27T16:48:31Z

Balint03: /* The LEGO model and the development process */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until the project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and the customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answers to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employees are grouped into teams, which are relating to those projects that they are involved. In the meantime, because LEGO develops platform products, these teams are also organized around various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of them is a key issue to ensure the appropriate performance of the project.

Usually, there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between to develop a solution by a particular platform team or to wait for the other platforms.
Therefore LEGO applies a highly synchronized development process through different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platforms as well. This ensures an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and to prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The possible conflicts are also good opportunities for a better solution and to take into consideration different aspects. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensures for LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensured by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore, the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such as cultural differences and communication issues.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as a strong tool of portfolio management in order to identify relevant ideas, development processes and to prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases. These stages are separated by the so-called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for the production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After that some ideas and pre-decisions are made in the Discovery stage, as the zero step in the product development the following process takes place.

Stage 1 is the planning phase or the so-called scoping, which includes the first strategic meetings with the management teams and boards to identify the overall goals and directions with the necessary resources and demands.

Stage 2 is the build business case, which is more likely an opportunity phase at LEGO. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which is an important part of the portfolio compilation. At this step the main selection and strategical alignment of the possible projects and portfolios are performed.

Stage 3 is the product development phase, where the final selection is made about those projects, which will be included in the next portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with the most economical cost.

Stage 4 is the phase of the testing and validation, in which the prototypes are tested in case of assembling by the possible customers with the defined age range. At the end of this phase, means the end of the product development as well.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to gain valuable experiences.

As it is represented above the development process is structured and routinized at LEGO. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrates different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identifies problems at an early stage, the prioritization of projects is also well established in this practice. A possible disadvantage of such a well-structured scheme is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular projects helps to reduce this drawback. In the meantime, this model excludes most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich" />.

Within the frame of this integrated model, LEGO profits from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-27T16:24:29Z

Balint03: /* The LEGO model and the development process */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until the project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and the customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answers to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employees are grouped into teams, which are relating to those projects that they are involved. In the meantime, because LEGO develops platform products, these teams are also organized around various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of them is a key issue to ensure the appropriate performance of the project.

Usually, there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between to develop a solution by a particular platform team or to wait for the other platforms.
Therefore LEGO applies a highly synchronized development process through different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platforms as well. This ensures an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and to prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The possible conflicts are also good opportunities for a better solution and to take into consideration different aspects. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After some ideas and pre-decisions are made in the Discovery stage, as the zero step in product development the following process will take place.

Stage 1 is the planning phase or the so called scoping, which includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In stage 2 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Stage 3 is the product development phase, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Stage 4 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to use these experiences in the future.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-27T16:13:11Z

Balint03: /* Overview */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until the project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and the customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After some ideas and pre-decisions are made in the Discovery stage, as the zero step in product development the following process will take place.

Stage 1 is the planning phase or the so called scoping, which includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In stage 2 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Stage 3 is the product development phase, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Stage 4 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to use these experiences in the future.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:27:31Z

Balint03: /* The LEGO model and the development process */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

After some ideas and pre-decisions are made in the Discovery stage, as the zero step in product development the following process will take place.

Stage 1 is the planning phase or the so called scoping, which includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In stage 2 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Stage 3 is the product development phase, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Stage 4 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At stage 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015]. .</ref>. In the meantime, after the product launch takes place a review is necessary to evaluate the launch itself and to use these experiences in the future.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:15:46Z

Balint03:

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:14:08Z

Balint03: /* Overview */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]] [[Category: Project prioritization]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:12:00Z

Balint03:

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]] [[Category: Product design]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:10:54Z

Balint03: /* Overview */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]] [[Category: Product Development]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:10:15Z

Balint03: /* Overview */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]] [[Category: [http://www.lego.com/ LEGO]]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:09:37Z

Balint03: /* Overview */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]] [http://www.lego.com/ LEGO]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:06:33Z

Balint03: /* The LEGO model and the development process */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich"/>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:05:29Z

Balint03: /* The LEGO model and the development process */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref> and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:04:26Z

Balint03: /* Manufacturability */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:03:42Z

Balint03: /* Manufacturability */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="OGC" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:01:56Z

Balint03: /* The LEGO model and the development process */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:01:25Z

Balint03: /* The LEGO model and the development process */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T16:00:26Z

Balint03: /* The LEGO model and the development process */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:57:42Z

Balint03: /* Annotated bibliography */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:57:09Z

Balint03: /* Annotated bibliography */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:56:25Z

Balint03: /* References */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:56:09Z

Balint03: /* References */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==

Product development and portfolio management processes at LEGO

2015-09-24T15:54:50Z

Balint03: /* Annotated bibliography */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

''Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.''

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

''Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.''

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

''Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.''

“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritized, portfolio of programs and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:52:13Z

Balint03: /* Annotated bibliography */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.

This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.

This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.

''“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritised, portfolio of programmes and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives)."
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.''

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:50:42Z

Balint03: /* References */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== Annotated bibliography ==

Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.
This book is mainly a great overview of several product development methods and their details. It is rich with case studies and explanations, which development processes were applied in the specific examples.
Namely, that the authors are well-known professors from MIT, the book itself has unexceptional quality within the topic. The text is highly logic and the whole book is well-structured. That helps a lot to understand the enormous topic of product development.
In my study it is a highly important resource, namely that in case of LEGO, product development and portfolio management have a strong connection.

Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.
This study is a result of a survey questionnaire made by IRI (Industrial Research Institute) about different companies best portfolio management practice. The main focus is to define the consequences of a poor portfolio management. They highlight the role of portfolio management in different types of businesses and include some results of case studies. Also some popular tools are examined and introduced in the paper.
The paper is rich with statistic data and examples, which gives a great overview about portfolio management in practice. The so-called stage-gate model as a useful tool of portfolio management is also described, which was important in my case study.

Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.
“The guide provides practical guidance for managers of portfolios and those working in portfolio offices as well as those filling portfolio management roles outside a formal PfMO role. It will be applicable across industry sectors. It describes both the Portfolio Definition Cycle (identifying the right, prioritised, portfolio of programmes and projects) and the Portfolio Delivery Cycle (making sure the portfolio delivers to its strategic objectives).”
The book is really well-structured and it helps to understand the basic and the advanced terms as well regarding to portfolio management. It is also mentionable, that some of the abstract terms are described and explained through short examples and hints.
In my case it is a main literature to understand the essential of portfolio management and to discover the connection of the terms and the business practice.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:17:27Z

Balint03: /* Overview */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords''': Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:16:49Z

Balint03: /* Overview */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

Keywords: Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:16:23Z

Balint03: /* Overview */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

'''Keywords: Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model;'''

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:15:58Z

Balint03: /* Overview */

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

__TOC__

'''Keywords: Portfolio management; LEGO; Product development; Platform production; Manufacturability; Product portfolio; Stage-Gate model;'''

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T15:09:36Z

Balint03:

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

__TOC__

[[Category: Portfolio Management]]

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== References ==
<References/>

File:Stage gate process.jpg

2015-09-24T14:54:42Z

Balint03:

Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G.

File:TeamProject.jpg

2015-09-24T14:54:08Z

Balint03:

Figure 2. – Connection between team and project type

File:LEGO organizational structure.jpg

2015-09-24T14:53:36Z

Balint03:

Figure 1. – Heavyweight project matrix organisation

File:LEGO organizational structure.jpg

2015-09-24T14:51:45Z

Balint03: Balint03 uploaded a new version of "File:LEGO organizational structure.jpg": Figure 1. – Heavyweight project matric organisation

Figure 1. – Heavyweight project matric organisation <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>

Product development and portfolio management processes at LEGO

2015-09-24T14:48:43Z

Balint03: /* The LEGO model and the development process */

__TOC__

[[Category: Portfolio Management]]

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T14:47:57Z

Balint03: /* The LEGO model and the development process */

__TOC__

[[Category: Portfolio Management]]

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation]] <ref>Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T14:47:12Z

Balint03: /* The LEGO model and the development process */

Product development and portfolio management processes at LEGO

2015-09-24T14:45:57Z

Balint03: /* The LEGO model and the development process */

__TOC__

[[Category: Portfolio Management]]

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|400px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|400px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== References ==
<References/>

Product development and portfolio management processes at LEGO

2015-09-24T14:45:10Z

Balint03: /* The LEGO model and the development process */

__TOC__

[[Category: Portfolio Management]]

== Overview ==
[http://www.lego.com/ LEGO] as a well-known company has a great challenge to keep their role on the rapidly variable market, as the developer of one of the most innovative toy world-wide. The name of the company, LEGO was adopted from the Danish phrase “leg godt”, meaning “play well” in 1934. The main product from 1949 is their interconnected plastic bricks and brick sets, which are sold in more than 130 countries <ref name="Lego2015">Lego (2015) - The Lego history. [online] http://aboutus.lego.com/en-us/lego-group/the_lego_history. [Accessed 09. September 2015].</ref>. Throughout of these decades LEGO released a wide-range of different brick sets and made an extremely large product portfolio within this type of toy. In the meantime, a unique product development process and organization of the project teams has developed, which is also called as the LEGO model. Moreover, the extensive product portfolio is around 250 different brick sets which are continuously optimized and renewed, as LEGO`s initiative is 60% novelty in their portfolio year by year.

Therefore, in the frame of this study the focus is on these special processes and models regarding the product development progress, the decision making process in the frame of portfolio management and also the design for manufacturability at LEGO. The relation of the organizational structure and the product development is also analysed in order to define how the different projects are relating to the existing and new product platforms.

The so called Stage-Gate Model is also an important part of the study, which is used by LEGO to ensure the process of ideation until its project implementation and the commercialization of the product. This portfolio management approach is a significant tool to support the project prioritization and early key decisions. Within this process the manufacturability will be also examined as one of the major requirements of the product development.

In addition, the portfolio management and its alignment of the LEGO main strategy is investigated regarding the product variety, market trends, expectations of retailers and customer satisfaction as significant aspects.

== The LEGO model and the development process ==
As it was mentioned above the requirement of a renewable, optimized portfolio year by year means a huge challenge for LEGO in case of product development and portfolio management. To understand how the LEGO model works and answer to this challenge the understanding of their organization in relation of project management and development process is indispensable.

In general, LEGO has a matrix organization profile as it is illustrated in Figure 1.

[[File:LEGO organizational structure.jpg|400px|thumb|right|Figure 1. – Heavyweight project matrix organisation <ref name="Ulrich">Ulrich, K. and Eppinger, S. (2012) - Product design and development. New York: McGraw-Hill.</ref>]]

This organization structure means, that employee are grouped in teams relating to those projects that are involved. In the meantime, because LEGO develops platform products, thus these teams are also organized around these various platforms. Therefore, this structure defines that the project and portfolio management is highly relating to these platforms and the incorporation of these platforms is a key issue to ensure the appropriate performance of a project.

Usually there are several problems due to different platforms in the production development process, like communication issues, existence of portfolios and timing challenges <ref name="Meyer">Meyer, M. H.; Lehnerd, A. H. (1997) - The Power of Product Platforms. New York: The Free Press.</ref>, <ref name="Mikkola">Mikkola, J. H. (2001) - Portfolio management of R&D projects: Implications for innovation management. Technovation, v. 21, n. 7, p. 423-435.</ref>.

The existence of different portfolios always raises challenges for an organisation across different product programs, which is the case at LEGO. However, this might be motivated by the possible economic advantages in production <ref name="Hsuan">Hsuan, J., & Hansen, P. K. (2007). - Platform development: implications for portfolio management. Gestão and Produção, Vol 14, Iss 3, Pp 453-461.</ref>. Timing also can be crucial, namely because of the dilemma between developing a solution by a particular platform team or waiting for the other platforms.
Therefore LEGO applies a highly synchronized development process through the different projects to avoid the above detailed problems. Between the different platforms the developers are shuffled and changed, thus employees can gain various experiences from different projects and platform. This ensure an integrated knowledge about the different platforms and their tasks for every developers, which helps to design suitable products and prioritize the possible projects.

At the beginning of each projects there are different core roles, namely the designer, the project manager and the marketing participant. The objectives and goals are developed along these key roles and their perspectives. The conflicts, which may can arise are also a chance for a better solution and to take into consideration different solutions. However, the marketing department has the main influence whether to initiate a solution or project.

In connection of Wheelwright and Clark work <ref name="Wheel">Wheelwright, S.; K. Clark (1995). Leading Product Development, New York, The Free Press.</ref> (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

[[File:TeamProject.jpg|200px|thumb|right|Figure 2. – Connection between team and project type <ref name="Wheel" />]]

This matrix organisation ensure to LEGO to be faster and more flexible in case of information sharing and handling different conflicts. The performance is mostly based on the overall success of the project, than the individual participants <ref name="Hsuan" />. However, the influence of the project manager is significant. A possible challenge within this organization is the information sharing between different projects. In one hand, this learning process on the employees’ level is ensure by the shuffling of the developers between the different platforms. On the other hand, the appropriate documentation of the particular project can grant the relevant know-how for the next projects.

The highly synchronized and centralized development process of LEGO is supported by the fact, that the development is located in Billund. Therefore the above detailed allocation of teams and advantageous interactions of the platforms are easily performed. This local development means that LEGO can avoid problems from global development, such us cultural differences and communication problems.

=== Stage-Gate Model and its application ===
LEGO uses the Stage-Gate Model (or [https://en.wikipedia.org/wiki/Phase%E2%80%93gate_model Phase-Gate Model]) as strong tool of the portfolio management in order to identify relevant ideas, development processes and prioritize the possible projects until production <ref name="Cooper1">Dr. Cooper, R. G.; Dr. Edgett, S. J.; Dr. Kleinschmidt, E. J. (2001) - Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management (Industrial Research Institute, Inc.) Volume 31, number 4.</ref>.

Mainly, this model is a product development process <ref name="Ulrich"/>, which can be divided into different phases separated by, so called, gates. In case of the LEGO practice the model includes 5 phases and the whole duration is two years, in which one year is dedicated for development and the other one is for production (Figure 3.).

[[File:stage_gate_process.jpg|200px|thumb|right|Figure 3. - Stage-Gate Model of LEGO based on Cooper R. G. <ref name="Cooper2">Cooper R. G., (2001). Winning at New Products, 3rd ed., New York: Basic Books.</ref>]]

Phase 0 is the planning phase or the so called scoping which stage includes the first strategic meetings with the management teams and board to identify the overall goals and directions with the necessary resources and demands.

In phase 1 the build business case, which is at LEGO more likely an opportunity phase. At this stage all the different teams from the various platforms share their ideas and suggestions. The selection of the relevant and valuable concepts are further developed by the teams. The main stakeholder`s requirements and perspectives are also taken into consideration, which an important part of the portfolio compilation. At this step the main selection and strategically alignment of the possible projects and portfolio is performed.

Phase 2 is the product development stage, where the final selection of the projects is made, which are included in the portfolio. The relevant platforms and competent teams are involved here for the further development. At this step all the different requirements, namely the manufacturability, design, different production requirements are taken into account to ensure the most suitable product with less cost.

Phase 3 is the stage of the testing and validation, in which the prototypes are tested in case of assembling and also tested by the possible customers with the pre-defined age range. At the end of this phase, the gate 5 means the end of the product development.

At phase 5 the production and the market launch take place. After the positive validation the production starts immediately and the market launch with the new portfolio as well usually on 1st of January <ref name="Lego2013">LEGO Group. (2013) - Annual Report 2013 (online) http://cache.lego.com/r/aboutus/-/media/about%20us/media%20assets%20library/progress%20report/lego_group_responsibility_report_2013.pdf?l.r=-468849679. [Accessed 09. September 2015].</ref>.

As it is represented above the development process at LEGO is structured and routinized. The platform production type is highly standardized, which routine gives flexibility and quick adaptability for the different product portfolios. Also this standardization of the production is a great requirement for the product development.

The Stage-Gate model, which integrate different product development groups is not a usual model. With this process the portfolio management of platforms during the development process is highly efficient. LEGO can quickly identify problems at an early stage, the prioritization of projects also well established in its practice. A possible disadvantage of such a well-structured schema is the limitation of innovation and flexibility. But the shuffling of the developer participants between the teams and within the particular project helps to reduce this drawback. In the meantime, this model exclude most of the internal iteration processes, which are mostly time and resource consuming parts of the development progress <ref name="Ulrich"/>.

Within the frame of this integrated model, LEGO profit from both methods, which leads a healthy portfolio composition.

== Portfolio management and arrangement ==
Portfolio management in general is a methodology to identify, evaluate and prioritize projects and opportunities and/ or to propose valuable upcoming product development tasks. Thus the major role is to coordinate the main strategic processes and decisions to achieve an effective business balance <ref name="OGC">Jenner, S.; Cilford, K. (2011) – Management of Portfolios. Office of Government Commerce (OGC). The Stationary Office (TSO), ISBN: 978-0-11-331294-8.</ref>.

In case of new product development, which is the scope of this study in relation of portfolio management, the projects can be decided based on the commercial value, the business strategy or to gain a balanced portfolio. With the right combination between derivative and breakthrough products can ensure competitive advantages and to satisfy a wide range of customers with goods <ref name="PMI">Project Management Institute, PMI (2008) – The Standard for Portfolio Management. Project Management Institute, ISBN: 978-1-933890-53-1.</ref>. Because of that, to develop a valuable, renewable portfolio is the matter of balance.

In addition, the appropriate product portfolio is crucial to achieve not just the customer needs, but also the expectations of stakeholders and the product retailers as well. Which requirements appear in the product development as well.

=== Portfolio management of LEGO ===
In case of the portfolio management of LEGO it is very much likely that it is based on not just alone the commercial value, the business strategy or to gain a balanced portfolio, but on all these three together.

The alignment of the core strategy with the portfolio takes place in a quite early stage of the product development (Figure 3.), which ensure the key values to be presented in every product and keep the reputation of the LEGO brand as well.

Moreover, there is a key strategy at LEGO, namely to increase and to achieve around 60% of new product in their portfolio <ref name="Lego2013" />. The main reason of such a requirement is to match the portfolio with the current trends and through this way with the expectations of the customers as well.

In the meantime, to achieve the best profit, during the product development phase (Figure 3.) the expectations of the stakeholders and retailers are also significant parameters of the decision making and project prioritizing for the portfolio management board. However, these new products have great influence on the whole portfolio based on the new and current trends of the market <ref name="OGC" />, which describes how LEGO implements new products with commercial value.

As it is recognized the current trends and timing to launch the product is major parameter of the balanced portfolio. As it was mentioned previously, marketing representatives have significant influence during product initializing. The main reason behind is the fact, that at LEGO the evaluation and mapping of the new trends and market changes is the responsibility of their own marketing team. LEGO uses their own score chart and special workshops in order to identify projects which can be prioritized for production. Through this process LEGO can facilitate a balanced portfolio, which corresponds to the actual trends <ref name="Lindholm">Lindholm, M.; Stokholm, F.; Hildebrandt, S.; Schultz, M.; Klausen, K.; Nikolaj B., P; Jenster, P. (2011) - Lego: Globaliseringen af den gode ide. Gyldendal, København. Den danske ledelseskanon, nr. 3.</ref>.

=== Portfolio optimizing and risk ===
The usual portfolio of LEGO includes around 250 different brick sets <ref name="Lego2013" /> and as it was mentioned above it is continuously renewed and optimized year by year. The proposed novelty of 60% near by the great product development challenge also means a large risk of which products should be replaced and kept in the overall portfolio. This selection process is also a significant part of LEGO`s portfolio management. The identification of the risk of a radically changed portfolio is always a key issue and it should be considered upon the market launch regarding the different expectations of customers and retailers.

The other part of the optimization and risk management of the portfolio is to ensure a balanced range of product complexity to satisfy all the gender and age of the customers. The defined risk in this process to keep the developed product suitable for the production and make it still complex for the assembling, which is a part of the game.

=== Manufacturability ===
In case of production, regarding the theory of product variety <ref name="Ulrich" /> LEGO uses a modular architecture to enable high variety manufacturing. Therefore, their portfolio is developed around product architecture, which allows large product variety without large changing in the production complexity or in the manufacturing system.

The standardized production of the bricks and different LEGO elements results a highly cost efficient production and also ensures to use the same brick within a wide range of products. These elements are mainly produced by injection molding.

Therefore, this production system requires an extremely integrated product development with the manufacturing system. The manufacturability of a product is such a key parameter, that it has to be considered as early stage of the development as possible <ref name="Boothroyd"> Boothroyd, G.; Dewhurst, P.; Knight, W. (1994) - Product design for manufacture and assembly. New York: M. Dekker.</ref>, <ref name="OGC" />. How the portfolio management practice of LEGO support the project selection process can be detected at the second phase of the Stage-Gate model in which stage the project is evaluated regarding the producibleness.

=== Product launch ===
After the carefully arranged development and production process the entering into the market with the new portfolio is the upcoming step.

The main part of LEGO`s portfolio is dedicated to global market, based on the actual trends and the previous successful portfolio <ref name="Lindholm" />. Every brick sets has a specific story and main topic, which can correspond to a movie or book, etc. These stories can define and separate the particular brick sets within the large product portfolio of LEGO. In the meantime, it also helps in market launch and to target the adequate age range with the different brick sets.

== Conclusion ==
Within this study the world leader brand of LEGO is analysed regarding the relationship of its product development and portfolio management practice. The company build up his own best practice based on its eighty years of experience.

The heavyweight organisational matrix of LEGO is examined relating to LEGO`s special platform product development practice. The development process is detailed within the frame of the Stage-Gate Model as a strong tool of LEGO`s portfolio management. The different phases and the role of these stages in the whole portfolio composition is also observed and explained.

The key strategy of a significant novelty within every new portfolio is described with the challenges of stakeholder, retailers and customer expectations. The demand of matching the product portfolio with the actual and future trends is a key parameter in LEGO`s portfolio management, which leads a well-structured project prioritizing and portfolio optimizing management. This practice is also detected in every stages of the product development process.

Within the performed study the role of manufacturability is highlighted also with the importance of integrated product design and development. This is concluded through the fact, that in LEGO`s product development process every stages is carefully treated and considered from the ideation through the project selection, development and production, until the market launch with the new product portfolio. In the meantime, assembling as a main factor of customer satisfaction is a key parameter equally like the unique stories, which are created for each products. These are the fundamental core features of LEGO`s management, brand and of course its portfolio.

The whole process is framed and supported through LEGO`s portfolio management practice, which is just as integrated and complex as the LEGO game itself.

== References ==
<References/>

Talk:Cross cultural teamwork

2015-09-22T21:18:52Z

Balint03: /* Reviewer 2 (s141943) */

Anna: As a feedback to your topic idea, I would suggest that you focus on a specific tool to deal with the issues related to cross cultural teamwork. This will help you narrow the scope and create a more tool oriented and specific article.
Remember that your article has fall into one of the two categories: method or case study.

=Reviewer 1 (s150793)=

I really like the topic that you have chosen because I find it very interesting. Here are my suggestions:

*Structure: For me, the structure of the article doesn’t really follow the “methods” structure. I would suggest to start with an Introduction (1) of the theme, as you have done, but in my point of view it should also include points 4 and 5, as they develop “Cross cultural teamwork” background. The next part could be the Application (2) of techniques to reduce “Cross cultural teamwork” problems. This could be analysed from the three perspectives that you have selected: Project Human Resource Management (2.1), Project Communication Management (2.2) and Project Stakeholder Management (2.3). The last part of the article (3) before the References (4), could talk about the limitations and drawbacks that “Cross cultural teamwork” have in Global Project Management.

*Length: The introduction that you have made is interesting but I would maybe reduce a bit the first points of your article and pay more attention in the application part. You already have around 2800 words and as you have indicated, you want to develop some points more. I would try to focus on the main ideas so that the article doesn’t end very long.

*Images and tables: I think that the use of other images and some tables will help the readers to understand the main points. For example, your 4th point (Challenges faced in cross-cultural teamwork) could be more visual if you use a table.

*Writing style: The text is easy to understand but maybe some sentences are a bit long.

*References: If you try to use more high quality references such as books and articles, your article will be more accurate. You should also reference all the passages of the text to reflect the sources where the information comes from. Remember also to reference all the figures. You should also write a brief summary of each source.

=Reviewer 2 (s141943)=

*Regarding to your questions:
1.: It is! Great topic, nice choice. However, it is a wide topic and I would suggest to specify more.

2.: It makes sense, but it is too long I guess, also some parts are well structured, but on a level of a book, or longer study.

3.: I will write about this at the table of contents.

4.: To narrow it more and find a specific focus regarding the cross-cultural challenges. The topic is exciting, but it is to wide. The reader can easily loose the point. In the meantime, be aware to repeat cross-cultural issues and solutions for them to many time at different part of the article. Of course problems and solutions, which are relating to communication appear everywhere, but try to keep the whole text simple.

5.: I would use Cross-cultural business management, or if you narrow it, Cross-cultural human resources management, etc.

*In general:
Really good and extremely relevant (in practice and in academic level as well) topic. The language and the grammar is good, however as you mentioned a read through will be good.
Take references and use some tables or maybe figures where they can save some space or explanations. Also because this topic is huge, the references can help for those who would like to go further after your article.
I guess it will be a really good article and I am curious about it.

*Contents:
It is really structured I see and the points make sense definitely. However, I would suggest a more compact structure.

For example you have a nice abstract. And after the introduction as the first. Within the introduction the 5th and after as a subsection the 4th.
3+5 as intro: in here I would not use subsections that much, just explain roughly, why this problem come up as you did (GPM, outsourcing, etc) and which kind of issues come with it (section 5 here is integrated) and the 4th one can be a subsection.

Section 6 is a bit alone.. and it seems to me like general suggestions. So I would integrate this one under the following sections.

Section 7. It seems as a huge section. And so far your article is quite large. I would rather make it simple and mention the 7 areas and after narrow it to 2 or 1. For me the human resources management and the communication is the most exciting. Especially the HR. But this is the matter of taste.

Conclusion

References.

*Abstract
Really good and nice appetiser for the article. If you make the article more compact and you narrow the topic, rewrite a bit.

*Introduction:
As I mentioned above, I would suggest to change the structure and make this part rough, without that much details, maybe more tables and references to avoid to write down everything.
Also the very beginning of this part is realy good, but with more references it will be more professional.

As I said I would integrate section 5 into this introduction part. And here I would try to focus on how the various cultures meet with the organisational culture. Here there is a good point to mention some examples from 5.2. Later with one of the “solution”, which are try to get rid of these issues (sec. 7.1, 7.2 or 7.3) can refer back.

*Sec. 6.: I would make a table from the point or make it a bit rough, because it is more like a general guidance. Also it could be great to mention why GPM uses these virtual teams, and what they are. Just with some words.

*From section 7, If I were you I would rather chose the first, or the second, or this two together to detail.

*I would suggest a conclusion at the end, to highlight the main points.

Talk:Modularisation: A modern process for project management

2015-09-22T21:13:39Z

Balint03:

Josef: Thank you, I like the idea. I would suggest to focus on either "product modularization" or "process modularization" to give your article more focus. Of course, the relationship between the two is also very interesting, but that may get a bit too broad for your article to discuss all three aspects in one "go".

'''Adam.pekala (reviewer 2) article accessed 2015-09-22 22:00:'''<br>

The article is very nicely started with good abstract and key words. It gives a really nice overview on what the article is going to be about and creates a desire to read through – well done!
#It is good that you keep the article illustration heavy – they are well-chosen and appropriate. However, the alignment of the illustrations is something to work on (double check underlines and positioning)
#Sections are made correctly and it seems that they really correspond to the article. However, lack or very small introduction to the explanations and sub-topics makes it hard to read and provides the reader with a feeling of an inconsistent text. It is something to look into.
#From a construction-guy perspective – I definitely agree with prefab as modularization. How about quickly looking into new concepts of modularized blocks of flats (with apartments as a whole) or small detached houses that one can assembly with modules to his or her needs? Might be interesting, if you find time and/or space (I know that these are small/quick examples).
#The flow of the article seems to be disturbed at some point. There is, to my mind, some inconsistency of placing the sections (e.g. ''Sustainability and LC'' in-between ''Benefits'' and Limitations). Try to work this out to better fit in the method description theme.
#Try to use more of the WIKI functions. Links and links to bibliography and source seem to be a necessity so it would be great to have that in your article as well.
#The structure of bibliography will probably change as you continuously work on the article. Remember to give some description about the sources you used or further reading.
Summing up, it seems to be a good base and you seem to have planned to develop it more. I am really looking forward for the automotive industry part – I am a car enthusiast and would love to learn something about modularization in this industry. You have already hit the 3000 words mark – be careful. Good luck!

=Reviewer 2 (s141943)=

*In general, I really liked the article in many ways. In my opinion it is really well-structured and it keeps the focus. Also, I think you followed Jozef suggestion and specified the topic, but still mentioned the modularization processes.
The logical flow is also appropriate, easy to understand. However, I would suggest to refer more within the article. I will write at some sections about this, but in general in my point of view it keeps the focus of the reader and the content of the article together and more compact. Also refer to the figures if you have at least in a bracket (Figure #).
The language and the grammar is good, totally understandable, with academic level.
In addition, the topic is relevant and actual, so it is really worth to write about it. Great topic choice. Especially I like that these products, like at the smartphone case are uniform and modularized, but in the meantime, they give the feeling of a unique product for the customer, because they can “build it up” for themselves.

*Title:
I would just suggest: Modularization: A modern trend for project management – but in the meantime your original title is good also.

*Overview:
I guess it is a good overview. In the meantime I would write a bit, that you focus more on the product modularization, with a bit less with the process modularization.

*Keywords:
I like that you have them!

*Contents:
Well-structured. Pay attention about the capital letters everywhere: 3.2, 5.3

*History:
Great first picture, cite it.

*Product architecture:
Good section, at the end I would write some words about the stages in the Figure and how the modularization concept associated with them.

*Integrated Architecture and Modular Architecture:
I would suggest to write maybe 1 or 2 sentences of introduction for this 2 concepts, and which are the main differences. After refer to the table, that you have. Also where this 2 concepts can meet, which one is better, etc. A bit more explained comparing.

*Conventional product development
Good section! At the end of this section, you can refer to section 3.3 and that you explain the connection/ comparison later. It make these parts more coherent I think. Refer to the figure if you have here.

I would suggest to make just one section title: 3 Modules and Modular design and no subsections, because they are good, but rather short as well.

*Modular product development:
Comparing and reflecting back to the conventional concept. But of course if you did previously, it is not necessary here.

*Again I would write a longer, but just one title for the section: Modular… MFD and Design Structure Matrix.

The sentence: “Modular Function Deployment tool is used as a step by step process of how to investigate which part of the architecture should be modularised and which should be standardised.” Is written twice.
After the bullet point I would suggest ti write some explanation about these point and some conclusion about the method. Why it is good, worth to use, etc…

*DSM:
A bit more explanation how this actually works and/ or a picture about this matrix can be good.

*For title: Application in the industry

*Modular construction:
The first part about the section focus and limits is perfect!
About the prefabricated elements, maybe a link is worth to make for those who doesn`t know this.
Also at the end some advantages for this industry by the modularization as a conclusion can be good.

*Modular smartphones:
Great part! Actual and relevant. The google example is also great. A picture (about the phone prototype) and reference link can be really nice here.

*Benefits offered by….
Great part again, nice points, that you have mentioned here. Again I would suggest to refer to some industrial examples that you have already mentioned previously to make it more coherent. In aaddition, maybe a customer satisfaction point is also worth. But it is just a suggestion.

*Sustainability…:
Really good part that you put here. I would start to refer back to the smartphone example and after talk about it in general. The quote is really impressive here! Great.
Maybe it is worth to make a 7.1 section: 6 RE Philosophy.

*The other parts are not ready, but that’s great that you mention limitations and further development, especially the further development.
In the meantime, a conclusion, like a summary can be here as section 10, before the annotated bibliography.

*Reference, I am sure you have them and I know it takes time to insert into the wiki system. Don’t forget to put them under some pictures as well.

*I hope I helped, and even if I have a lot of comment, as I said before, it is a good article/ first draft with a nice topic.

Talk:Integrated Cost and Schedule Control

2015-09-22T21:12:00Z

Balint03:

Anna: I like the topic you have chosen.
I would just like to comment on the fact that describing one method in great details can sometimes be more valuable than mentioning three different ones but without going into as many details. However, if you do have time to describe all 3 in depth this would of course also give a great end result.

'''Adam.pekala (reviewer 3) article accessed 2015-09-22 22:30:'''<br>

The abstract is engaging and provides the reader with desire to go in-depth with the topic. Is this the matter of questions used – I don’t know – it works.
#It is really well structured article with appropriate sectioning and consistent flow between the section
#Article’s language is appropriate for an academic paper, however, you should get rid of all abbreviations. ‘I am’ instead of ‘I’m’ looks more professional and academically correct.
#Almost in every case the placing and interaction of text and tables/illustrations is correct, however, in some cases it still needs to be resolved. In some places (e.g. EVM technique section) text goes in-between two tables – it does not look too elegant.
#What is the source of the examples? Are those self-made? If not, do you have the copyrights?
#The article covers the topic and fits in the methodology description case. To my mind, a section of conclusions and your personal-opinion might be a good thing to add.
All in all the article presents the method well and I learned a lot. Pleasure to read. You have wrote more than 3000 words but in a case of consistent article that covers a wide range of methodologies within one topic it seems more than fine. Well described bibliography! Polish everything up and soon you will be done.

=Reviewer 2 (s141943)=
*In general, I guess you hit a really relevant and important topic. I saw that you accepted Anna´s suggestion which was a good idea in my opinion.

The grammar is good and academic, however I would rather write instead of shouldn´t and can´t the should not and can not versions. It appears around 3 times in the article, so it is a minor issue.

The logical flow is good and really great within the section. It was good to read and the parts are build up on each other. I also liked that you refer to the different section within the article. Also, that you refer to the figure is a great point.
However, I would suggest a bit different overall structure for the article.

The cite and acknowledgement is precise and appropriate I would mention also that I like the links in the text in some cases. In addition, use “…” for the quotes.

*Abstract:
Great start, good explanation. The last 2 phases really good, I liked it. It shows why this topic is relevant and worth to read. Maybe I would emphasize a bit more the importance to monitor the actual state of the project, because it is hard to monitor, but you did later, so it is ok.

*Table of contents:
I write my suggestion: 2.2.1/ 2.3.1/ 2.3.2 I guess there is no need for them

1 Background
2 Application…. (not just one word maybe)
2.1 Schedule control
2.2 Cost control
2.3 Integrated….
2.3.1 EVM Techniques
3. Benefits and advantages
4 Limitations
5 Conclusion
6 References

*Background:
Really good in general, I also liked the quotes and that you refer to the figure. However, I would write the second quote with my own words and just refer to the figure and literature. I guess this 2 big quotes are too close to each other. But it is a matter of taste I would say.

Also the part where you talk about Judgment of experts, analytical techniques, etc is really good and logical. It would be more visible with bold letters… to make it more structured and followable.

*Application…..
Great intro for the section! No other comment.

*Schedule Control:
Really good intro. I like the form and that you keep this one through the other main parts of the article. I really appreciate such a consistency.

For table 1: maybe write some words about the techniques in general, or pick one why it is better than the other, or an example with some of them. Otherwise for me it look like a big (and informative) table is standing alone.

*Cost control:
Again great intro and figure is also illustrative here.

*Integrated Cost and-…..
Maybe here for the bullet points I would write more with my own words than use quotes. Otherwise it is good. I have already indicated to make EVM technique as a subsection. Because in this way your focus is more visible from the first point.

*Table 3 and the calculations:
I am not sure that it is worth to detail the calculation process with table 3 and the equations. If I were you I would rather explain in details the process and the interpretation of the results, than the actual equations. But, it is again a matter of taste. If you would use this mode, I would suggest to put somewhere a list of parameters/ abbreviations.

I liked the example very much! Good that you put here and even better that you make a comparing with EVM.

*Limitations:
Great part again, especially I liked that you talked about the QCQ/ QCM limitation, which can be crucial in case of a construction project. Good point!

*I miss a conclusion from the end.

*Reference:
Nice reference in quality and quantity as well.

Talk:Cross cultural teamwork

2015-09-22T19:55:05Z

Balint03: /* Reviewer 2 (s141943) */

Talk:Cross cultural teamwork

2015-09-22T19:54:32Z

Balint03:

Anna: As a feedback to your topic idea, I would suggest that you focus on a specific tool to deal with the issues related to cross cultural teamwork. This will help you narrow the scope and create a more tool oriented and specific article.
Remember that your article has fall into one of the two categories: method or case study.

=Reviewer 1 (s150793)=

I really like the topic that you have chosen because I find it very interesting. Here are my suggestions:

*Structure: For me, the structure of the article doesn’t really follow the “methods” structure. I would suggest to start with an Introduction (1) of the theme, as you have done, but in my point of view it should also include points 4 and 5, as they develop “Cross cultural teamwork” background. The next part could be the Application (2) of techniques to reduce “Cross cultural teamwork” problems. This could be analysed from the three perspectives that you have selected: Project Human Resource Management (2.1), Project Communication Management (2.2) and Project Stakeholder Management (2.3). The last part of the article (3) before the References (4), could talk about the limitations and drawbacks that “Cross cultural teamwork” have in Global Project Management.

*Length: The introduction that you have made is interesting but I would maybe reduce a bit the first points of your article and pay more attention in the application part. You already have around 2800 words and as you have indicated, you want to develop some points more. I would try to focus on the main ideas so that the article doesn’t end very long.

*Images and tables: I think that the use of other images and some tables will help the readers to understand the main points. For example, your 4th point (Challenges faced in cross-cultural teamwork) could be more visual if you use a table.

*Writing style: The text is easy to understand but maybe some sentences are a bit long.

*References: If you try to use more high quality references such as books and articles, your article will be more accurate. You should also reference all the passages of the text to reflect the sources where the information comes from. Remember also to reference all the figures. You should also write a brief summary of each source.

=Reviewer 2 (s141943)=

*Regarding to your questions:
1.: It is! Great topic, nice choice. However, it is a wide topic and I would suggest to specify more.
2.: It makes sense, but it is too long I guess, also some parts are well structured, but on a level of a book, or longer study.
3.: I will write about this at the table of contents.
4.: To narrow it more and find a specific focus regarding the cross-cultural challenges. The topic is exciting, but it is to wide. The reader can easily loose the point. In the meantime, be aware to repeat cross-cultural issues and solutions for them to many time at different part of the article. Of course problems and solutions, which are relating to communication appear everywhere, but try to keep the whole text simple.
5.: I would use Cross-cultural business management, or if you narrow it, Cross-cultural human resources management, etc.

*In general:
Really good and extremely relevant (in practice and in academic level as well) topic. The language and the grammar is good, however as you mentioned a read through will be good.
Take references and use some tables or maybe figures where they can save some space or explanations. Also because this topic is huge, the references can help for those who would like to go further after your article.
I guess it will be a really good article and I am curious about it.

*Contents:
It is really structured I see and the points make sense definitely. However, I would suggest a more compact structure.

For example you have a nice abstract. And after the introduction as the first. Within the introduction the 5th and after as a subsection the 4th.
3+5 as intro: in here I would not use subsections that much, just explain roughly, why this problem come up as you did (GPM, outsourcing, etc) and which kind of issues come with it (section 5 here is integrated) and the 4th one can be a subsection.

Section 6 is a bit alone.. and it seems to me like general suggestions. So I would integrate this one under the following sections.

Section 7. It seems as a huge section. And so far your article is quite large. I would rather make it simple and mention the 7 areas and after narrow it to 2 or 1. For me the human resources management and the communication is the most exciting. Especially the HR. But this is the matter of taste.

Conclusion

References.

*Abstract
Really good and nice appetiser for the article. If you make the article more compact and you narrow the topic, rewrite a bit.

*Introduction:
As I mentioned above, I would suggest to change the structure and make this part rough, without that much details, maybe more tables and references to avoid to write down everything.
Also the very beginning of this part is realy good, but with more references it will be more professional.

As I said I would integrate section 5 into this introduction part. And here I would try to focus on how the various cultures meet with the organisational culture. Here there is a good point to mention some examples from 5.2. Later with one of the “solution”, which are try to get rid of these issues (sec. 7.1, 7.2 or 7.3) can refer back.

*Sec. 6.: I would make a table from the point or make it a bit rough, because it is more like a general guidance. Also it could be great to mention why GPM uses these virtual teams, and what they are. Just with some words.

*From section 7, If I were you I would rather chose the first, or the second, or this two together to detail.

*I would suggest a conclusion at the end, to highlight the main points.