HBR: Do you think people’s loyalty to LEGO is a function of habit? Knudstorp: I think it’s more than habit. When I became CEO, 13 years ago, and the LEGO Group was in crisis, people wrote letters to me and said, “Please don’t die. The world would be a poorer place without LEGO.” When customers have an emotional connection with your brand, they’ll make an effort to get it, which I think means that they’re making a conscious choice. People don’t line up for days to get the iPhone 7 because it’s the automatic choice. Of course, not all products can hope to create an emotional connection with the consumer. Airlines and hotels have loyalty programs to force us to be loyal because we don’t feel an emotional connection that would make us choose them. It’s hard to see many people thinking of themselves as “Holiday Inn people.” And if you’re marketing a practical product like Tide, you absolutely need to appeal to the unconscious mind, because the choice of what detergent to buy is usually made unconsciously. But a product like ours, which is about play and children and learning, can be more than just a safe or easy option. It can be a conscious statement of values or identity. Of course, children don’t go around thinking they’re LEGO people—they just want to play—but they can grow up to become LEGO people and have their own children. It’s a lot easier to persuade parents who got the LEGO habit themselves as kids, which is one reason we have to work harder in emerging markets, where we’re mostly talking to first-generation users. Does habit have a role in this emotional connection? Absolutely. Habit is how we build the connection. People develop habits by doing the same things repeatedly. But the habits eventually turn into values. If we teach our children to brush their teeth every night before they go to bed, in the beginning it’s just an action we force upon them. Then over time they feel uncomfortable going to bed without having brushed their teeth. Eventually they start to feel that brushing your teeth is the right thing to do. If you can make your brand a value—a part of someone’s identity—you have a really powerful competitive advantage. But it all begins with making your brand a habit. How does that work at the LEGO Group? You need to give people some simple routines they can practice to get habituated to building with the bricks. As the things they build become more complicated, they start developing their own habits and techniques. But they’ll be open to changing those routines if someone shows them a neater, simpler way. There are hundreds of LEGO conventions every year, all around the world, showcasing new ways of using existing elements that we as a company have never thought about. Go on YouTube, and you’ll see the amazing things people build. I’m sitting here with a structure of about 20 bricks, and I or anyone else could use the same 20 bricks to create millions of different structures. Building is a really fundamental need—we all want to make things that are our own—and we offer a platform for that. What do you have to do to get the process started? It’s all about keeping the basics simple and easy to get used to. A neuroscientist recently told me that our brains have the equivalent of 20 megabytes of RAM—enough to process just four photos on a smartphone. And it gets worse the older you get: Recent research out of NASA suggests that when people reach the age of 25, they’ve retained only about 5% of the capacity for creative thinking that they had when they were five. This means they’re easily overloaded. Let me illustrate how we manage that. We have a product line called LEGO Creator 3 in 1—kits that each offer instructions for building three models with the one kit. In fact you can make many more models with a single kit. Twelve years ago we would have offered 12 suggestions. But so much variety actually put people off. So we simplified it to just three. You also have to make the routines fun, because play is how kids learn and get habituated to new routines. Novelty—having the next cool thing—is important in the toy business. But habit is about predictability. How do you balance the two? You’re absolutely right that novelty is important for children, which is why 60% of the LEGO sets that we put on the market in any given year are new. But that’s not a trade-off with familiarity, because LEGO System of Play is a platform—perhaps the only toy in the world that offers a platform for play. Each new set not only brings 12 or so new possible models but also can be combined with what you already have to lift your total number of potential structures by orders of magnitude. This has a terrific network effect. If a child already has a LEGO set, getting another LEGO product is more valuable than just the incremental purchase—it extends his or her platform for play in an exponential way. And it’s infectious: The more kids who get the LEGO habit, the more others want to as well, and they can mix and match their LEGO collections.
