Harvard Case - The LEGO Group: Publish or Protect?
"The LEGO Group: Publish or Protect?" Harvard business case study is written by Willy Shih, Sen Chai. It deals with the challenges in the field of Operations Management. The case study is 16 minute(s) long and it was first published on : Feb 15, 2013
At Fern Fort University, we recommend that the LEGO Group adopt a balanced strategy that leverages the power of open innovation while safeguarding its core intellectual property. This approach involves strategically publishing select LEGO building instructions and digital models, fostering a vibrant community of LEGO enthusiasts, and simultaneously implementing robust measures to protect its core IP.
2. Background
The LEGO Group, a global leader in the toy industry, faces a critical decision regarding its intellectual property (IP) strategy. The company's success hinges on its iconic building bricks and the creative potential they offer. However, the rise of digital platforms and open-source movements presents both opportunities and challenges. The case study focuses on Jorgen Vig Knudstorp, CEO of LEGO, who must decide whether to embrace a more open approach to its IP, potentially fostering innovation and growth, or maintain a more protective stance, safeguarding its core assets.
The main protagonists are Jorgen Vig Knudstorp, the CEO, who must navigate the complex decision, and the LEGO Group's leadership team, who must advise and implement the chosen strategy.
3. Analysis of the Case Study
The case can be analyzed through a framework that considers both the internal and external factors influencing the LEGO Group's decision:
Internal Factors:
- Core Competencies: LEGO's core competency lies in its innovative product design, manufacturing processes, and brand building.
- Organizational Culture: The company's culture emphasizes creativity, play, and learning, which aligns with the potential benefits of open innovation.
- Financial Resources: The LEGO Group possesses the resources to invest in both IP protection and open innovation initiatives.
External Factors:
- Competitive Landscape: The toy industry is highly competitive, with both established players and emerging disruptors. Open innovation could help LEGO stay ahead of the curve.
- Technological Advancements: The rise of 3D printing, digital design platforms, and online communities creates opportunities for both collaboration and IP infringement.
- Consumer Trends: Consumers increasingly value experiences and customization, which aligns with the potential of open innovation.
Strategic Framework:
The case study can be analyzed through the lens of Porter's Five Forces framework:
- Threat of New Entrants: The toy industry has low barriers to entry, making it vulnerable to new competitors. Open innovation could help LEGO build a stronger ecosystem and deter new entrants.
- Bargaining Power of Buyers: Consumers have a wide range of choices in the toy market. Open innovation could enhance customer engagement and loyalty.
- Bargaining Power of Suppliers: LEGO's dependence on plastic suppliers could be mitigated by fostering innovation within its supply chain.
- Threat of Substitute Products: The rise of digital entertainment and other forms of play presents a threat to traditional toys. Open innovation could help LEGO adapt to these changes.
- Competitive Rivalry: The toy industry is highly competitive, with established players like Mattel and Hasbro. Open innovation could help LEGO differentiate itself and gain a competitive advantage.
4. Recommendations
The LEGO Group should adopt a balanced strategy that combines open innovation with robust IP protection:
1. Strategic Publishing:
- Select Building Instructions and Digital Models: Publish a curated selection of LEGO building instructions and digital models, focusing on designs that encourage creativity and community engagement.
- Develop Clear Guidelines: Establish clear guidelines for the use and sharing of published content, ensuring that LEGO's IP is not compromised.
- Foster Collaboration: Encourage collaboration among LEGO enthusiasts, fostering a vibrant community of builders, designers, and innovators.
2. Robust IP Protection:
- Strengthen Patent Portfolio: Invest in a robust patent portfolio, covering both existing and emerging LEGO technologies.
- Implement Digital Rights Management: Employ digital rights management (DRM) technologies to protect digital models and designs.
- Monitor for Infringement: Actively monitor online platforms and marketplaces for instances of IP infringement.
3. Technology and Analytics:
- Leverage Data Analytics: Utilize data analytics to understand user behavior, identify trends, and optimize the open innovation strategy.
- Develop AI-powered Tools: Explore the use of AI-powered tools to automate IP protection and content moderation.
- Invest in Cybersecurity: Invest in robust cybersecurity measures to protect LEGO's digital assets and data.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The strategy aligns with LEGO's core competencies in product design and innovation, while also fostering a vibrant community that aligns with the company's mission of inspiring and developing children through creative play.
- External Customers and Internal Clients: The strategy caters to the needs of both external customers (LEGO enthusiasts) and internal clients (LEGO designers and engineers), creating a collaborative ecosystem.
- Competitors: The strategy helps LEGO stay ahead of the curve by embracing open innovation and fostering a vibrant community, while also safeguarding its core IP from competitors.
- Attractiveness: The strategy is attractive from a financial perspective, as it has the potential to drive growth, enhance brand loyalty, and generate new revenue streams.
Assumptions:
- The LEGO Group has the financial resources and technological capabilities to implement the strategy effectively.
- The LEGO Group can effectively manage the risks associated with open innovation, such as IP infringement and potential loss of control.
6. Conclusion
By adopting a balanced strategy that combines open innovation with robust IP protection, the LEGO Group can leverage the power of community engagement and collaboration while safeguarding its core intellectual property. This approach positions the company for sustained growth and innovation in the rapidly evolving toy industry.
7. Discussion
Alternatives:
- Complete Open Source: This option would involve releasing all LEGO building instructions and digital models into the public domain, potentially fostering rapid innovation but also risking loss of control over IP.
- Complete Protection: This option would involve maintaining a highly restrictive approach to IP, potentially hindering innovation and limiting community engagement.
Risks:
- IP Infringement: The open innovation strategy could lead to increased IP infringement, requiring robust monitoring and enforcement mechanisms.
- Loss of Control: The LEGO Group may lose some control over the direction of innovation if it embraces open innovation too broadly.
- Technological Challenges: Implementing the strategy effectively requires significant investment in technology and analytics.
Key Assumptions:
- The LEGO Group has the financial resources and technological capabilities to implement the strategy effectively.
- The LEGO Group can effectively manage the risks associated with open innovation, such as IP infringement and potential loss of control.
8. Next Steps
- Form a Task Force: Establish a cross-functional task force to develop and implement the strategy.
- Develop Pilot Programs: Launch pilot programs to test different aspects of the open innovation strategy.
- Invest in Technology and Analytics: Invest in the necessary technology and analytics capabilities to support the strategy.
- Monitor and Evaluate: Continuously monitor the effectiveness of the strategy and make adjustments as needed.
Timeline:
- Phase 1 (Year 1): Develop the strategy, establish a task force, and launch pilot programs.
- Phase 2 (Years 2-3): Expand the open innovation initiative, invest in technology and analytics, and monitor results.
- Phase 3 (Year 4+): Refine the strategy based on learnings, optimize processes, and scale the initiative.
This balanced approach allows the LEGO Group to leverage the power of open innovation while safeguarding its core intellectual property, ensuring continued success in the dynamic toy industry.
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Case Description
Senior managers at the LEGO Group are faced with a quandary: Should they patent inventions coming out of their manufacturing process development work, should they keep them as trade secrets, or should they publish them so that they would go into the public domain and nobody else could patent them? They wish to preserve their freedom to practice, but they are very concerned about competitors' ability to benefit from LEGO Group's R&D investments or alternately interfere with its freedom to operate.
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