Crowdsourcing in the toy industry: LEGO Ideas

Crowdsourcing in the toy industry - LEGO IdeasCrowdsourcing has long held quite a bit of promise: who would not want to have customers participate in funding, marketing, or developing products for themselves and thus relieving the company from some of these tasks.

In the toy industry, crowdsourcing has recently made an appearance, so it is interesting to take a look at what has happened there and to consider what could happen in the future. The main focus of this post is LEGO Ideas, as it is by far the most visible example of crowdsourcing in the toy industry.

Crowdsourcing in the toy industry

The toy industry is driven by creating demand through major marketing machines and not so much about creating the products together with users. There may even be good reasons for this, as the end users of toys are of such a young age that it may not seem that they are the best possible designers, although this is a view I’m not ready to accept at face value, not to mention that there are also adult fans of various toys and parents also have an interest in the toys of their children so there are plenty of grown-ups who also have an interest in toys.

Hasbro, for example, has used crowdsourcing in a very limited way to tweak Monopoly, one of their main brands: from discussing common house rules in 2014 to selecting most popular major cities in 2015. For Hasbro, crowdsourcing has played the part of engaging the community of one of its most mature brands by enabling them to make small decisions.

Mattel has taken a couple of fledgling steps into crowdsourcing as well, mostly with its Fisher-Price brand that ran a successful contest to create two new Little People characters in 2014 followed by a more permanent My FP Ideas crowdsourcing website (that, unlike most crowdsourcing efforts, offers nothing for the inventors). More recently, in April 2015, Mattel announced a partnership with the crowdsourcing portal Quirky (with an advanced royalty program) “to accelerate the speed and scope of invention.” The initial reception among analysts has been fairly skeptical, expecting some good ideas in the margins, but no major effect on the core business.

So, with competition taking fledgling steps, what about LEGO Ideas? It is by far the oldest initiative in this space, having launched as LEGO Cuusoo, collaboration between LEGO and Cuusoo, in Japan in 2008, followed by an international launch in 2011, and eventually becoming wholly run by LEGO in 2014. The platform has seen 12 LEGO sets announced for international release so far (out of more than 10,000 proposed), so there are some tangible results from this initiative as well. This history enables us to dig into some data and see how LEGO Ideas really works.

The basics of LEGO Ideas

LEGO Ideas is meant for LEGO fans aged 13 and up to share and vote for ideas for new LEGO sets based on anything – the sets can be completely original or they can be based on an existing IP (LEGO can attempt to acquire a license for most IPs, although not for ones of its main competitors, such as Hasbro’s My Little Pony).

Submitted projects (ideas) need to reach 10,000 supporters in order to be reviewed by LEGO for possible inclusion into the product line. LEGO retains the right to decline any project, regardless of its support. The review sessions are held three times per year: in May (results announced in September) for ideas that have reached 10,000 supporters by January; in September (results announced in January) for ideas that have reached 10,000 supporters by May; and in January (results announced in May) for ideas that have reached 10,000 supporters by September. Therefore, the minimum time from reaching 10,000 supporters to the announced decision on whether the set will be produced is eight months.

Once LEGO has selected a project for production, the final production version will be created by LEGO’s own designers (with some level of co-operation between them and the originator of the idea) and the originator of the idea will receive a 1% royalty of the product’s net sales.

Approved LEGO Ideas sets, lead times, and batch sizes

The twelve sets that have been approved for international release so far are (set #001 was only released in Japan):

  • #002 Hayabusa (created 25 January 2011, supported 7 April 2011, released 1 March 2012)
  • #003 Minecraft Micro World (created 5 December 2011, supported 6 December 2011, released 1 June 2012)
  • #004 Back to the Future DeLorean Time Machine (created 1 August 2011, supported 29 April 2012, released 1 August 2013)
  • #005 Mars Science Laboratory Curiosity Rover (created 14 November 2011, supported 18 August 2012, released 1 January 2014)
  • #006 Ghostbusters 30th Anniversary (created 1 March 2013,. supported 14 August 2013, released 1 June 2014)
  • #007 Exo Suit (created 28 March 2012, supported 9 January 2013, released 1 August 2014)
  • #008 Research Institute (created 29 April 2012, supported 10 June 2013, released 1 August 2014)
  • #009 LEGO Bird Project (created 13 May 2012, supported 16 January 2014, released 1 January 2015)
  • #010 The Big Bang Theory (created 18 February 2014, supported 17 March 2014, to be released on 1 August 2015)
  • #011 WALL-E (created 29 October 2013, supported 30 July 2014, not yet released)
  • #012 Doctor Who and Companions (created 26 February 2014, supported 7 April 2014, not yet released)
  • #013 Labyrinth Marble Maze (created 17 April 2012, supported 12 September 2014, not yet released)

As can be seen from the dates, getting a set released through LEGO Ideas is a long process: from the date when the project has gathered the needed 10,000 supporters, it takes between a year and a year and a half for the set to become available for purchase. However, according to LEGO Business Manager Daiva S. Naldal, the Ideas sets are faster to reach market than regular LEGO sets – between 6-12 months from the go decision (remember, reviews are conducted on set dates so the supported ideas wait in queue for the review).

According to LEGO, each set is reviewed independently. If this is the case, then grouping them up for reviews makes no sense. This was realized in manufacturing in the 1950s with the creation of Lean manufacturing and its emphasis on creating flow rather than batches. The lead time for new sets could be shortened considerably if the ideas were reviewed as soon as they reach the necessary support.

It also seems to be quite difficult to estimate the demand for the Ideas sets. The sets are made as limited production runs, and while most sets stay available for a fair while, two sets actually sold out their initial stock quite quickly: Exo Suit and Research Institute. LEGO produced another batch of each for December 2014, with the result that Exo Suit sets from the second batch are still available as of July 2015, whereas the Research Institute sold out immediately for the second time – and no more were produced despite this huge demand. This is a puzzling business decision: why not manufacture something people want to buy? If LEGO is concerned that the sets will not sell, they could just take preorders and adjust their production run to match.

Problems in the paradise: rejected LEGO Ideas projects

What might not be immediately apparent about LEGO Ideas is that the majority of fan projects that reach 10,000 supporters do not get made into LEGO sets. Looking at the recent reviews, the situation looks like this:

  • 2015, first review: no results yet, 13 projects under review
  • 2014, third review: 1 approved, 7 rejected, 1 pending
  • 2014, second review: 1 approved, 7 rejected
  • 2014, first review: 3 approved, 3 rejected (one approved and one rejected set shared the same theme, Dr. Who)
  • 2013, fall review: 2 approved, 5 rejected (one approved and one rejected set shared the same theme, Ghostbusters)
  • 2013, summer review: 0 approved, 3 rejected
  • 2013, spring review: 1 approved, 3 rejected

Another interesting observation from the above figures is that the popularity of LEGO Ideas is growing: more and more projects are reaching the required 10,000 supporters.

The large number of rejections, coupled with the fact that LEGO does not give any reasons for the rejections, is a worrisome sign. There are already many comments from hardcore fans on the LEGO Ideas blog on how they are getting tired as they are left confused by the apparent arbitrariness of the production decisions, and question why should they spend so much time engaging with the company when 10,000 supporters does not seem to mean anything.

It is interesting to note that LEGO used to give more detailed explanations. For example, a Legend of Zelda model was rejected based on the complexity of the molds needed for the minifigures, and a model based on the Firefly TV series was rejected based on it not being a fit to the LEGO brand, one of the core premises of which is to be appropriate for 6-11-year-olds. Of course, giving reasons for rejections potentially invites arguments against these reasons, whereas not giving reasons avoids such uncomfortable discussions, but such discussions are a crucial part of what social collaboration is about, so I do not see how a successful venture depending on contributions from the crowd can be run without engaging in those discussions, no matter how difficult. (Actually, the discussion on the Firefly decision is a perfect example of this: fans cited numerous licenses LEGO works with that are just as mature as Firefly – I just hope that the conclusions LEGO drew from that discussion were not that it’s better to not discuss at all, when the conclusion should have been to give better reasons)

With the popularity of the site growing, this places pressure on LEGO to get things right, and to get them right now, in order to retain growth and benefit from it and to not alienate some of their biggest fans.

Who is LEGO Ideas for, anyway?

LEGO Ideas is torn by a dualism of purpose. On one hand, LEGO Ideas is seen by LEGO as part of their engagement with the adult fans of LEGO (AFOLs). On the other hand, everything LEGO does also aims to be suitable for their core audience of children between 6 and 11 years of age.

With the exception of Minecraft, the sets approved from LEGO Ideas are targeted at AFOLs, and Minecraft is a clear outlier: proposed by Mojang themselves (the creators of Minecraft; although there were other submissions under the same theme before) and gathering 10,000 supporters in less than 48 hours, Minecraft in LEGO Ideas was more of a marketing campaign than an actual fan project. However, this marketing campaign gave the pretense that LEGO Ideas could also be a venue for mainstream LEGO sets – something that is not supported by other actions around LEGO Ideas sets (for example, the limited production runs of the Research Institute).

Yet, when it comes to AFOLs, who are the customers that buy the really large and complex LEGO sets, LEGO Ideas is not doing that great of a job: the large sets are routinely rejected in the reviews after reaching 10,000 supporters. Finding the balance between AFOL-orientation and mass market appeal results in medium-sized sets based on popular IPs such as The Big Bang Theory, Ghostbusters, and Back to the Future.

Is this all there is to it? Is it like analysts commented on Mattel’s recent endeavors into crowdsourcing, that there can be good ideas around the edges, but it will not affect the core?

LEGO Ideas could be more than it is now

I am a firm believer in that children are usually given less credit than they deserve. Yes, even by LEGO, as shown in some of their marketing to girls, for example.

Crowdsourcing on LEGO Ideas could serve both the adult fans and the core market of LEGO. While it is reasonable to express some skepticism as to whether the two can be served by a single platform, I believe they can. Separating the two would result in an endless debate on which projects belong to which platform, and it is easier to gather all projects on a single platform and sort out the final approach to each as they reach sufficient levels of support.

The key aspect that would need to be developed is to not treat all supported Lego Ideas sets the same. Some of the sets can be suitable for inclusion in the core offering, some manufactured in limited quantities and shipped to select stores, whereas some sets could be offered online only and in some cases with Kickstarter-style preorders (think IKEA – price tag comes first; set the price tag based on the project and finalize the design if enough people are willing to buy for that price).

When it comes to AFOL offerings, do all sets need to fulfill the same quality standards? I can see how all sets you can buy from a store need to conform to clear standards, but what about really large AFOL creations? Could some of these be offered in Kickstarter style and with less design work from LEGO (as the originators of the ideas have done a considerable amount of design work already)?

This kind of arrangement would greatly increase the number of LEGO Ideas sets, so it does bring with it some challenges: Are there enough designers to work on these? How flexibly can LEGO produce such a number of sets?

However, I don’t see these challenges as unsurmountable. Rather, they are challenges LEGO needs to solve anyway in order to prosper in a faster and more agile world. The toy industry is well-known for its Christmas peak and huge production runs that target seasonal demand. LEGO already pioneered off-season product launches with its January and August launch dates for new sets, but this has been innovation on marketing, not on production capabilities. In order to grasp future opportunities, the production agility needs to be developed to match demand.

With sufficient production agility, one that LEGO is uniquely positioned to achieve because of its already modular brick-based construction, it would be possible to profitably create smaller runs and more flexibly resupply sets that are in high demand – and thus really offer people the products they want. What if an online-only Ideas set becomes a huge success? It can be upgraded to shipped-to-stores level! More experimentation creates more success. (And, you know, more profits)

Another step towards the core market of LEGO would be to lower the age limit on the site. The current age limit of 13 years is based on the US COPPA rules for child protection, but while there is additional work on running a site that allows members who are under 13 years old, if the site is not directed mainly at under-13-year-olds, this should not be an unsurmountable obstacle either – and the project requirements on LEGO Ideas make for a good case that under-13-year-olds are not the main audience.

With a wider audience and more options on how to treat the supported projects, Ideas could become an important part of the LEGO portfolio instead of the very niche part it is playing right now. Building the capabilities needed to get there is not simple, but LEGO is in a good position to do that – in a better position than any of its competitors, in fact. And whenever you find yourself in such a position, it should be very interesting from a strategic point of view. It all boils down to whether crowdsourcing is something LEGO really believes in. In the increasingly connected world, a sharing economy some call it, it does not seem likely that social collaboration is going to diminish in value, so from a megatrend point of view the answer should be obvious.

Photo: 21108 LEGO Ideas Ghostbusters set photo by Brickset @ Flickr (CC)

 

Author: Ville Kilkku

I run my own consultancy business, so if you find the ideas on this blog intriguing, contact me at consulting@kilkku.com or call me at +358 50 588 5043 and we can discuss how I can help you solve your business problems. I am currently based in Tornio, Finland, but work globally. Google+