Product development and portfolio management processes at LEGO

Overview

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 . 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.

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 , .

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 . 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 (Figure 2.) LEGO`s heavyweight matrix organisation is appropriate regarding their platform projects.

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 . 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.