University of the People

BUS 5910-01 Management Capstone – AY2024-T4

Assignment Activity Unit 3

Instructor: Dr.Harsha Lalwani

Sustaining Organizational Adaptability: A Case Study of the Lego Group

The Lego Group, an iconic toy company established in 1923, has undergone significant

challenges and transformations throughout its history. Despite experiencing periods of

prosperity, the company faced near-bankruptcy in 2003 due to declining sales and misaligned

strategies. However, under new leadership, Lego successfully navigated this crisis and

revitalized its business model, emphasizing adaptability and innovation. This paper examines the

ongoing challenge faced by the Lego Group in sustaining organizational adaptability amidst a

dynamic market landscape. Through a comprehensive analysis, this study aims to identify the

root causes of this challenge and propose actionable recommendations to enhance organizational

agility and resilience.

Problem Statement:

The primary issue confronting the Lego Group is the imperative to sustain and enhance

organizational adaptability to thrive in an ever-evolving market environment. Despite significant

progress in recent years, the company continues to grapple with improving productivity, quality,

and customer satisfaction while remaining responsive to shifting market dynamics and consumer

preferences. For instance, in 2017, the Lego Group faced challenges in meeting customer

demand for its popular building sets due to supply chain disruptions caused by unforeseen

manufacturing delays. This highlighted the need for the company to enhance its operational

agility and flexibility to swiftly address such disruptions and maintain customer satisfaction

(Lowe, 2018). This challenge intersects with various disciplines, including Organizational

Theory, Change Management, and Operations Management, and requires a multifaceted

approach to address effectively (Johnson & Smith, 2022; Kotter, 2012; Robinson et al., 2004).
Moreover, external factors such as industry trends, economic conditions, and technological

advancements exert significant influence on the organization’s adaptability. The toy industry is

experiencing rapid technological advancements and shifts in consumer behavior, necessitating

continuous innovation and adaptation of strategies to maintain a competitive edge. Economic

conditions, including fluctuations in consumer spending and market volatility, further compound

the challenge by creating uncertainties that require agile responses. Additionally, emerging

industry trends, such as the growing emphasis on sustainability and digitalization, present both

opportunities and challenges that the Lego Group must navigate to sustain its long-term viability.

Despite the Lego Group’s remarkable turnaround from near-bankruptcy to success, sustaining

and enhancing organizational adaptability remains paramount for its long-term viability. As the

toy industry undergoes rapid technological advancements and shifts in consumer behavior, Lego

must continually innovate and adapt its strategies to maintain its competitive edge. This entails

not only addressing internal operational challenges but also proactively anticipating and

responding to external market forces. By integrating insights from Organizational Theory,

Change Management, and Operations Management, Lego can develop a comprehensive

approach to foster a culture of agility and innovation, ensuring its continued relevance and

success in an increasingly competitive landscape.

Root Cause Analysis:

A root cause analysis reveals several underlying factors contributing to the challenge of

sustaining organizational adaptability at the Lego Group. These include a lack of cross-

functional collaboration, inadequate change management practices, and insufficient employee

engagement (Robbins & Judge, 2018; Cummings & Worley, 2014). Siloed departments and

fragmented communication hinder the organization’s ability to respond swiftly to market

changes, while resistance to organizational shifts impedes the adoption of innovative strategies

and technologies essential for adaptability. Moreover, low levels of employee engagement

undermine internal talent utilization and inhibit a culture of innovation and agility (Johnson &

Smith, 2022; Kotter, 2012; Robinson et al., 2004).

Furthermore, the lack of cross-functional collaboration not only hampers the flow of information

and resources but also limits the diversity of perspectives brought to problem-solving efforts.

This narrow focus inhibits creativity and innovation, as solutions may be constrained by

departmental silos. In addition, inadequate change management practices contribute to a culture

resistant to organizational shifts, leading to employee uncertainty and decreased morale. Without

effective change management processes, employees may feel disconnected from the

organization’s vision and goals, further undermining their engagement and willingness to adapt.

Addressing these root causes requires a holistic approach that emphasizes communication,

collaboration, and employee empowerment, fostering a culture of continuous improvement and

adaptability throughout the organization (Robbins & Judge, 2018; Cummings & Worley, 2014).

During periods of organizational change, such as leadership transitions or strategic realignments,

Lego faced internal challenges related to cultural resistance and operational inertia. For example,

when Jørgen Vig Knudstorp assumed the role of CEO in 2004, he implemented a series of

restructuring initiatives to streamline operations, reduce costs, and foster a culture of innovation.

By empowering employees to embrace change, fostering cross-functional collaboration, and

promoting a shared vision of organizational adaptability, Lego successfully navigated internal

challenges and emerged stronger and more resilient.

Leadership Analysis:

Effective leadership plays a pivotal role in addressing the challenge of sustaining organizational

adaptability. The leadership at the Lego Group, particularly under the guidance of the new CEO

in 2014, demonstrated proactive decision-making and strategic vision in navigating the company

through crisis and transformation. However, there remain opportunities for improvement,

particularly in fostering a culture of innovation and empowering employees to drive

organizational change. By leveraging leadership theories and practices, such as transformational

leadership and servant leadership, the Lego Group can further enhance its adaptive capacity and

drive sustainable growth (Northouse, 2018; Spears, 2010).

Furthermore, effective leadership involves not only setting a strategic direction but also actively

engaging employees and fostering a collaborative and innovative culture. While the new CEO’s

strategic vision and decisive actions were instrumental in guiding Lego through crisis, ongoing
efforts are needed to empower employees at all levels to contribute to organizational

adaptability. Transformational leadership, which inspires and motivates followers to achieve

common goals, can be leveraged to instill a sense of purpose and commitment among employees

towards embracing change (Northouse, 2018). Additionally, servant leadership principles

emphasize the leader’s role in serving the needs of others and promoting a supportive and

inclusive work environment, which are essential for nurturing creativity and agility within the

organization (Spears, 2010). By embracing these leadership approaches, the Lego Group can

cultivate a culture where innovation flourishes, and employees feel empowered to adapt to

evolving market dynamics, driving sustainable growth and success.

In conclusion, the Lego Group’s journey from near-collapse to success underscores the critical

importance of organizational adaptability in today’s dynamic business landscape. Through a

comprehensive analysis of the root causes and leadership dynamics, this paper has elucidated key

challenges and opportunities facing the company. By addressing issues such as cross-functional

collaboration, change management practices, and employee engagement, the Lego Group can

fortify its adaptability and resilience, ensuring continued relevance and competitiveness in the

toy industry and beyond.

Word Count: 1059 words

References

 Cummings, T. G., & Worley, C. G. (2014). Organization development and change.

Cengage Learning.

 Johnson, P., & Smith, H. (2022). Organizational Theory and Behavior. Routledge.

 Kotter, J. P. (2012). Leading change. Harvard Business Review Press.

 Lowe, S. (2018). The Lego Group: Navigating supply chain disruption. Supply Chain

Management Review, 22(1), 45-48.

 Northouse, P. G. (2018). Leadership: Theory and practice. SAGE Publications.

 Robbins, S. P., & Judge, T. A. (2018). Essentials of organizational behavior. Pearson.

 Robinson, D., Perryman, S., & Hayday, S. (2004). The drivers of employee engagement.

Institute for Employment Studies.

 Spears, L. C. (2010). Character and servant leadership: Ten characteristics of effective,

caring leaders. The Journal of Virtues & Leadership.