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What Can Web3 Folks Learn from LEGO?
Everyone exploring the Web3 world is familiar with LEGO. DeFi is often likened to financial LEGO, DAOs to organizational LEGO, and in the future, various vertical-specific LEGO metaphors will emerge. People enjoy using LEGO as an analogy because the LEGO bricks vividly illustrate how different protocols in the Web3 world combine to create various application scenarios.
But there's more to learn from LEGO than just composability. People in the Web3 space might miss the fact that composability alone isn't enough; fostering an open and inclusive community is essential for sparking innovation. LEGO's remarkable comeback story over the past 20 years, driven by mutual support between the company and its community, highlights the importance of active community engagement and offers guidance on how to make it happen. LEGO's approach isn't just a lesson for brands but also serves as valuable inspiration for everyone in the Web3 world.
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The First Resonance of LEGO and Community
Since its inception in 1932, LEGO has dominated the toy market, transitioning from simple wooden building toys to the iconic plastic interlocking bricks we know today. However, during the 1990s, as gaming consoles, music players, and other tech gadgets gained popularity, children's interest in LEGO toys began to decline. Sales suffered, and in 1998, LEGO experienced its first-ever financial loss.
LEGO didn't just stand by as its market share shrank. To reignite interest, the company's R&D department developed a range of new products, including a kit called LEGO Mindstorms. This kit featured a robot controller, three motors, three sensors, over 700 bricks, and software to program the controller. Initially intended for children, LEGO soon discovered that 70% of their sales were coming from adults who were buying the kits for their own enjoyment. However, things quickly spiraled out of control.
In no time, a Stanford University student reverse-engineered the software, and within weeks, hackers from around the world cracked the kit, creating more intricate programs than LEGO's original version and allowing enthusiasts to unleash their creativity. Traditionally, LEGO was a rather insular and prideful company, unwavering in its commitment to quality and convinced that "only LEGO's creations were the best on the market." The community-driven hacking shook LEGO's legal department and raised the possibility of legal action.
But LEGO hesitated for quite some time. On one hand, litigation would be extremely difficult and costly; on the other, the Mindstorms team held a different opinion, believing people cracked the product because they loved it. Considering that Mindstorms was just one of many new products, LEGO eventually decided to collaborate. To nurture this community, LEGO set up an official forum and added a "right to hack" clause in the LEGO Mindstorms end-user license agreement.
The outcome was quite dramatic. Both the official LEGO forum and community-built websites flourished. Fans from around the world created hundreds of web pages showcasing their inventions and teaching others how to replicate them step by step. Publishers began releasing books on programming LEGO robots, startups started manufacturing and selling Mindstorms-compatible sensors and hardware, and community members organized robot competitions. Practically overnight, an ecosystem formed around LEGO Mindstorms. Support from the community attracted a large number of new users, leading to Mindstorms selling out and running out of stock before Christmas. This was LEGO's first taste of the power of community engagement.
Embracing the Community
The majority of products developed in a hurry during the 90s failed and nearly dragged LEGO down. By 2003, LEGO was on the brink of bankruptcy, with many product lines closed. Despite garnering substantial community support, LEGO's older generation of management lacked enthusiasm for the Mindstorms product and the community. In 2001, the Mindstorms team was disbanded, and the Mindstorms product line will not been updated since then.
In 2004, Jørgen Vig Knudstorp was appointed CEO during a critical time, giving LEGO an opportunity to reevaluate its relationship with the community. The new CEO quickly concluded that embracing the community was essential. "We believe innovation will come from dialogue within the community," Knudstorp said at a community meetup in 2005.
Although the Mindstorms products were no longer updated, the community's passion for them hadn't faded. The number of participants in Mindstorms competitions had grown from a few thousand initially to 50,000 in 2004. The new CEO decided to revive the series and invited the most active community supporters to collaborate.
Years later, when interviewed about this period, it was revealed that most people in LEGO didn't have a deeper understanding of the community, and they didn't support inviting community members to co-create. The new CEO ultimately convinced everyone for several pragmatic reasons:
1. Community enthusiasts' knowledge and insights could increase the success rate of the products.
2. Inviting community members would encourage user participation and build better trust.
3. Engaging community members in product design had strong news value, potentially attracting media coverage and saving on promotional costs.
4. By doing this, the community would participate in promotion voluntarily.
In a word, it can increase sales and save money.
There are many challenges, of course, such as finding the right people to involve, ensuring direction isn't lost with community participation, guaranteeing the confidentiality, and dispelling internal biases against community collaboration. But in the end, LEGO overcame these difficulties. They identified four of the most passionate elite users from the community to co-create, and in 2006, the new version of Mindstorms, the classic Mindstorms NXT series, was launched, achieving great success.
The increase in sales was not the only benefit. Since then, LEGO has firmly believed in the power of the community, leading to a significant shift in the company's strategy. Starting with the initial four passionate community members participating in the design, LEGO began to build a pyramid system, dividing different community enthusiasts into various levels and establishing an honor system. Active community members receive incentives such as honors and limited-edition bricks. Community participation is no longer limited to Mindstorms sets but has expanded to multiple collections.
Community collaboration is not limited to the modification of existing products. In 2006, a building designer named Tucker used LEGO to build the famous Chicago landmark - the Sears Tower, and attracted attention within the community. LEGO quickly noticed this and eventually reached an experimental collaboration with Tucker, providing LEGO bricks and brand authorization for Tucker to create and sell 1,250 Sears Tower sets. Tucker and his wife completed the production of 1,250 LEGO sets in their garage and delivered them to local souvenir shops in Chicago, selling half of them in just ten days.
With the initial success of the experiment, LEGO expanded the scale and set up a temporary team within the company, assembling 4,000 sets in their spare time and sending them to more souvenir shops. The result was still a rapid sellout. In the end, this set became an official LEGO product and expanded into a series, The LEGO Architecture Series.
Starting with the Sears Tower, the LEGO Architecture Series not only achieved huge sales but also attracted many users who had never consumed LEGO bricks before. Because this series has a high enough tone and looks more like an art piece than a children's toy, it has successfully entered many high-end retail channels.
Over the years, LEGO has built a strong community support system that includes:
LEGO Ambassador Network: Each certified LEGO group has an ambassador who communicates directly with the company. They also connect with other ambassadors worldwide, fostering positive interactions between communities and LEGO.
LEGO Certified Professionals: Expert players who turn their LEGO passion into a job and collaborate with LEGO to promote the brand's ecosystem.
LEGO Ideas: A platform for enthusiasts to share and rate original designs. Popular designs can become official products, with creators earning 1% of the sales as royalties.
LEGO World Builder: An online space for fans to create and collaborate on new LEGO worlds, characters, and stories. The best creations may become official products or even inspire animations, movies, or TV shows.
BrickLink: A marketplace for buying and selling LEGO products, offering a community space for sharing tips and designs. They also provide free software called "Studio" for designing digital LEGO models. Acquired by LEGO in 2019, it now serves as an essential hub for innovation and collaboration.
Trust the Community and Share Power with the Community
The stories surrounding LEGO and its community are abundant; we will stop here, as it is already enough to inspire us.
We are all familiar with the term "community." Companies mention the community in many contexts. However, the truth is that most companies have never had a real community. The "community" they refer to is usually the consumers who purchase their products. But a community is a group of people with similar values and close connections and engagements. From this perspective, merely being users or consumers does not constitute a community.
The methods and goals of building a consumer base and communities are different. The former aims to expand the scale to increase sales. However, scale is not the primary goal of a community. The objective of a community is to create closer connections among its members and generate more meaningful interactions. Without these, even a large community will not create value.
Several key points have contributed to the success of the symbiosis between LEGO and the community:
LEGO's products and brand culture are loved by many people.
Creative combinations are better supported by the excellent interoperability of LEGO bricks.
LEGO has developed a culture of respect, support, and power-sharing with the community, which has been successfully executed through a range of projects.
When a community is effectively activated, community-driven innovation and adoption blur the lines between brand and consumer. Consumers are no longer just consumers; they become creators within brands, engaging in imaginative and unconventional production, creating a win-win situation.
Consumers also become "owners." Although LEGO does not provide consumers with actual ownership, it allows them to feel psychological ownership of the brand. Psychological ownership is as important as actual ownership.
Since 2004, LEGO's entire business ecosystem has been fundamentally transformed. The community has not let LEGO down. They have helped LEGO gradually emerge from its predicament and maintain rapid growth. Now, LEGO is the world's largest toy company, with sales of 64.5 billion Danish kroner in 2022, which is ten times that of 2004.
Of course, there are challenges, as the interests of the community and the company do not always align. For example, most community members are interested in participating in the creative process, but they may not be keen on helping the company with sales. In a highly active and interconnected community, corporate control gradually diminishes, and conflicts between the company's philosophy and the community's ideals may challenge the company's managerial authority. However, this is the essence of symbiosis: a truly active and autonomous community. If the community only follows the company's directives, it would be no different from a corporate department.
In today's business world, most brands are still unfamiliar with communities. They have millions of consumers but do not know how to build communities or share power with them, let alone involve them in the creative process. The good news is that, supported by Web3 technology, many brands are bravely taking their first steps.
Web3 Fosters Symbiotic Relationships Between Businesses and Communities
The story surrounding the LEGO community may be unfamiliar to many friends in the Web3 space. However, in some ways, we are also quite familiar with such stories.
LEGO has built a community through its open culture and people's love for the brand. LEGO encourages and nurtures the community, creating better connections and interactions. LEGO has developed various mechanisms to encourage creativity and reward creators. The high standardization and interoperability of LEGO toys provide a foundation for convenient community creation. Delving deeper into the LEGO community, we can find traces of DAOs, with discussions, collaborations, co-creation, proposals, and voting. There are even creator royalties.
However, in the LEGO community, people do not genuinely own the LEGO brand. They do not own the data rights of their creation. To some extent, the support and power-sharing that the brand offers to the community can be seen as a bestowal from the lord that can be withdrawn at any time. The vast majority of community members have not received any tangible rewards, even though they have contributed value.
This is not a criticism of LEGO. The exploration LEGO has done is remarkable, and it has gone much further than most brands. However, it is clear that many scenarios still have room for further evolution.
Is it possible to grant true ownership of creations to community members? How can we better recognize the value generated by their work? Can we provide more reliable guarantees for community support and authorization? Are there more effective community governance mechanisms for projects? Can the community co-own a portion of the brand or at least share in the value it create? How can we explore more open and collaborative possibilities?
Web3 may be the key to all of this.
However, we must keep in mind that each technology functions as a tool, and every strategy serves as a means to achieving our goals. As businesses brace communities the ultimate goal is to cultivate a culture that nurtures connections, fosters participation, respects individual community members, and has faith in the community, while being willing to share the power with the community. The brand not only belongs to the company, but also to every user who has played a part in its success.
Hey, I've got bricks, let's have some fun?
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