THE THIRD WAY: LEGO’S INNOVATION PLAYBOOK

THE INNOVATION DILEMMA

Most organizations face a strategic choice: pursue incremental improvements or bet on disruptive transformation. Incremental innovation feels safe but delivers diminishing returns – each upgrade yields smaller competitive advantages. Disruptive innovation promises breakthrough growth but carries enormous risk and uncertain market acceptance.

There’s a third path – one that builds sustainable competitive advantage by creating ecosystems of complementary innovations around what you already do well. This approach, pioneered by companies like LEGO, Apple, and Amazon, doesn’t require abandoning your core strengths or gambling on unproven markets. Instead, it strategically amplifies your existing excellence through coordinated innovation portfolios.

INTRODUCING THE THIRD WAY

The Third Way comes from David Robertson, Professor of Practice at the Wharton School and author of The Power of Little Ideas: A Low-Risk, High-Reward Approach to Innovation. Through extensive research into LEGO’s remarkable turnaround, he discovered that the company’s recovery didn’t come from a single breakthrough innovation, but from building a coordinated ecosystem of complementary innovations around their core product – the brick. His research revealed a systematic approach that any organization can apply.

Robert Rasmussen, Main Architect of the LEGO® SERIOUS PLAY® Method, collaborated with Robertson to develop a specialized Learning Lab that integrates LSP with the Third Way approach, enabling organizations to discover and build their own innovation ecosystems through hands-on facilitated workshops.

The Third Way of Innovation is defined as: “The design, development, and delivery of a set of diverse, complementary innovations around a key product or service, that operate together to carry out a single business promise, and are closely and centrally managed.“

The Third Way offers distinct advantages: lower risk than disruption, higher growth than incrementalism, and sustainable competitive advantage through integrated ecosystems that competitors struggle to replicate. This approach sits between two familiar strategies:

• Incremental Innovation: Making existing products better, faster, cheaper
• Disruptive Innovation: Creating entirely new markets or applying breakthrough technology

The Third Way leverages what you’re already excellent at while strategically building complementary innovations that enhance the overall customer experience and create network effects across your offerings.

THE LEGO STORY: FROM CRISIS TO BREAKTHROUGH

LEGO’s journey perfectly illustrates both the risks of losing strategic focus and the power of the Third Way approach.

THE NEAR-BANKRUPTCY

Since it’s establishment in 1932, LEGO grew steadily throughout the decades. However, by the early 2000s, LEGO faced a severe business crisis despite aggressive innovation efforts:

• Theme parks operated independently from the core brick
• Clothing and lifestyle products didn’t enhance the brand experience
• Video games developed separately from physical products
• Retail stores functioned merely as distribution channels
• More and more product sets but less and less profits (and even losses)

These innovations operated in silos. No unified business promise. Low connection to the crown jewel. The company that invented the interlocking building system had forgotten their key principles – and was on the verge of bankruptcy.

THE TURNAROUND

BUILDING THE ECOSYSTEM

With the crown jewel and business promise defined, LEGO rebuilt around complementary innovations:

• LEGO Movies brought brick-built stories to life. Children who watch want to build their own adventures. Builders look forward to seeing their characters in larger narratives.
• LEGO Education transformed creative construction into structured learning – teaching mathematics through gear ratios, physics through bridge building, programming through robotics.
• LEGOLAND Theme Parks became immersive experiences of brick-built worlds at massive scale. Parks inspire home building; home building creates desire to see more at parks.
• LEGO Digital Experiences extended rather than replaced physical play. Building apps, social sharing platforms, and video games that continue stories begun with brick sets.
• LEGO SERIOUS PLAY transformed the brick into a thinking tool for business strategy, where building with hands unlocks insights that traditional discussions cannot reach.

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THE THIRD WAY OF INNOVATION: POWERED BY LEGO SERIOUS PLAY

Rasmussen Consulting helps guide organizations through the four essential steps of The Third Way, powered by the LEGO® SERIOUS PLAY® Method:

• D1 – DEFINE: What is your crown jewel?
  Identify your stable core offering that customers already trust. This isn’t your newest product or aspirational identity, but what you genuinely excel at delivering consistently. LEGO’s crown jewel wasn’t the brand – it was the brick itself.
• D2 – DECIDE: What is your business promise?
  Articulate the job customers hire you to accomplish. Not your mission statement or marketing message, but the actual goal customers pursue when choosing you. For LEGO, this became “story-driven creative construction” – the deeper purpose behind the purchase.
• D3 – DESIGN: What complementary innovations are needed?
  Map the customer journey and identify innovations that address friction at each stage while reinforcing your business promise. LEGO didn’t just add products – they built an ecosystem where each element enhanced the overall experience.
• D4 – DELIVER: How will you coordinate implementation?
  Establish central management that prevents innovations from becoming disconnected departmental initiatives. LEGO’s recovery required ruthless focus – cutting innovations that didn’t serve the core promise, regardless of their individual potential.

HOW LEGO® SERIOUS PLAY® POWERS THE THIRD WAY

Understanding strategic frameworks is one thing. Creating shared commitment across organizations is entirely different. Traditional strategic planning often fails because abstract discussions mean different things to different people. Departments protect territories. The loudest or most senior voices dominate, while crucial perspectives remain unheard. The LEGO® SERIOUS PLAY® Method addresses these barriers: everyone builds, everyone shares.

When teams physically construct their crown jewel, they discover dimensions they couldn’t articulate in words. When they build business promise models together, shared understanding emerges. When they map ecosystems three-dimensionally, everything becomes visible. LEGO models serve as the connecting language.

• Central Coordination: Every innovation serves the same business promise: story-driven creative construction. Marketing campaigns, product launches, park experiences, and digital initiatives align to reinforce this single message.
• Network Effects: Each innovation makes others more valuable. Movies drive set sales. Sets inspire education applications. Education builds lifetime builders. Parks create brand affinity. Digital extends physical play.
• Customer Lock-in: The ecosystem creates switching costs beyond any single product. Once invested in LEGO’s world – physically, digitally, emotionally – alternatives feel incomplete.
• Sustainable Advantage: Competitors can copy individual innovations, but replicating an entire coordinated ecosystem proves far more difficult.

The Third Way works best for established organizations with proven strengths seeking sustainable competitive advantage through coordinated innovation ecosystems.

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MOVING FORWARD TOGETHER

Strategic success requires both clarity and collaboration. Collaborative strategy emerges when teams think and build together, creating genuine shared understanding across the organization. When organizations combine the Third Way with the LEGO® SERIOUS PLAY® Method, strategy moves from plans to competitive advantage.

“Innovation is not about saying yes to everything. 
It’s about saying no to all but the most crucial features.”

Steve Jobs

Unlock Creativity • Uncover Insights • Unleash Potential

Curious about how The Third Way could work for your organization? 

Contact us to discuss how to clarify your crown jewel, align your business promise, and design your innovation ecosystem.

Rasmussen Consulting Thailand