Great firms don't simply diversify into new businesses when their core business appears to be maturing. Diversification attempts sometimes have two deleterious effects. First, companies find themselves extending into areas in which they do not have distinctive capabilities that can lead to competitive advantage. Second, the attention focused on the new businesses can accelerate deterioration of the core, as management becomes distracted and resources stretched thin. Top performing firms search for ways to deepen their competitive position, to reinvigorate their core business. Great firms don't simply accept the apparent decline of their core business.
LEGO went through some substantial challenges in the early 2000s. Jargon Vig Knudstorp became CEO in 2004, and he engineered a remarkable turnaround. He focused on what made the firm successful for decades - the LEGO bricks and the play associated with those iconic bricks. Over time, LEGO has reinvigorated the brand and the famous LEGO bricks. Moreover, the firm has deepened its competitive position with new product offerings and brand building efforts such as the LEGO movie.
Now the Wall Street Journal reports on the introduction of a new line of products called LEGO Boost. The products seek to capitalize on the movement to teach kids how to code. Geoffrey Fowler reports:
Learning programming is awesome when you’re making Lego robots fart. “Usually Legos cannot fart, so we made these Legos fart a lot,” says Eleanor, 9 years old, who helped me code dance moves, jokes and simulated bodily functions into Lego Boost, a new take on the iconic bricks. “Also burp. Don’t forget the burping,” she adds. Making Lego bricks come to life is a big deal for children aged 7 to 12—as well as for parents who want to teach them the basics of programming.
This new product line appears to build nicely off of the success of the company's Mindstorms products. Mindstorms is used to teach older kids about robotics. The Boost product line aims to introduce coding to younger children (ages 7-12). The product line is consistent with the brand positioning, and it leverages what the company is already good at doing. LEGO Boost appears to be another way in which LEGO continues to reinvigorate the core business and deepen its competitive position, rather than trying to do new things for which LEGO does not have a distinctive capability.