Riblet#40: Adaptation, one brick at a time

Mega-risks that are crystallising such as the current pandemic and global economic slow-down are not ones that an organisation can eliminate on its own; adaptation is the best strategy.  Adaptation is both a defence against the impacts of the risk and an exploitation of the risk itself, especially where competitors may be failing to adapt.  

Kodak is a company that dominated the photography market for decades and despite producing the first digital camera, it failed to adapt to changing market conditions and eventually filed for bankruptcy.  It may be that it was just too attached to its long-term cash-cow to abandon it when change overtook it.  One approach to evaluating adaptation and executing it successfully is “test & learn”; it involves testing assumptions and trying out solutions cheaply and on a small scale before investing heavily in a product or service or development of any sort.  It is the almost playful approach promoted by the Lean Startup movement that gives new ideas the best chance of success, and ditches bad ones.  Like risk management, test and learn is a continuous process of assessment, understanding and adaptation.

Amidst the gloom for toymakers, Lego stands out with sales up 7% in the first half of this year and profits up 11% despite the pandemic and consequent factory shutdowns.  With the demise of so many retailers, most notably Toys “Я” Us, Lego has invested in its e-commerce capability and it has also opened its own branded stores.  The company believes a continuing physical presence is necessary and so they have addressed their dependency on others by doing it themselves.  This year, they are opening 80 physical stores in China.

Lego has moved increasingly into playsets for both children and adults, and is also combining with digital activity (another threat to its business model) such as teaming up with Nintendo to produce Super Mario sets.  Also, Chinese-inspired sets – the Monkie Kid line – have been developed for that growing market, although USA remains its biggest source of customers.

Lego’s principal goal is diversity for boys and girls as well as different age groups and as their CEO confirms, they are great believers in the philosophy of “learning through play”.  Test and learn is a kind of corporate version of that philosophy and is at the heart of this continuous adaptation; it is what differentiates it from struggling toymakers such as Hasbro and Mattel.

But of course, the trick is to continue testing and learning, assessing and adapting, such that it becomes embedded as part of the culture of the organisation. Whether or not that is achieved requires the evidence of further years and the navigation of future crises, but it would be instructive to keep an eye on this brand.

Data Source: ft.com; The Lean Startup – Eric Ries


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