Owning Versus Operating: Lessons from LEGO’s Near Collapse
By the early 2000s, LEGO had grown far beyond the iconic plastic bricks that first made the company a household name. The toy giant ventured into running its own Legoland theme parks, operating an in-house video game development studio, and producing a clothing line alongside television content. At first glance, this appeared to be a savvy diversification strategy, transitioning LEGO from a toy manufacturer into a full-fledged entertainment brand.
However, the reality was more complex. LEGO was attempting to simultaneously excel as an amusement park operator, a game developer, and a clothing brand—all areas outside its core expertise. Meanwhile, the foundational product—the brick sets that defined LEGO’s identity—began to lose market share as corporate focus became fragmented. The financial consequences were severe. By 2003, LEGO had lost nearly a third of its revenue in just one year and was reportedly less than 18 months from exhausting its cash reserves.
When Jørgen Vig Knudstorp took over as CEO in 2004, he made a critical, though somewhat unexpected, decision. Rather than completely abandoning the theme parks, games, or films, LEGO opted to sell majority ownership of its theme parks to Merlin Entertainments, while retaining licensing rights. This arrangement allowed the LEGO brand to remain visible in the parks without the company managing day-to-day operations. The in-house game studio was shuttered, and LEGO began licensing its brand to specialized developers—giving rise to popular franchises like Lego Star Wars and Lego Batman.
Similarly, The Lego Movie emerged through a licensing partnership with a film studio rather than from an internal production division. LEGO maintained ownership of these business segments but stopped running them directly. This strategic shift was instrumental in one of the most remarkable corporate turnarounds in recent history.
The Difference Between Owning and Running a Business
LEGO’s challenges were not rooted in poor ideas. The company correctly identified promising opportunities in entertainment and related sectors. The key error was assuming that to capitalize on these opportunities, LEGO had to operate every aspect personally.
Running a theme park demands a completely different skill set than designing toys. Developing video games requires expertise distinct from manufacturing plastic bricks. The leadership’s misstep was conflating ownership with operational control—believing that success meant managing every facet internally.
The solution lay in discerning which parts of the business LEGO needed to operate itself and which it could license or delegate. By focusing intensely on the core brick system—the heart of its brand—while entrusting other ventures to experts, LEGO preserved its competitive advantage and brand integrity.
This distinction between ownership and operation is a common pitfall among business owners, many of whom instinctively try to manage every part of their enterprise, often to their detriment.
A Personal Reflection: Choosing What to Run Personally
Reflecting on my own experience, a few years ago I faced a significant decision after my father passed away. I suddenly became responsible for running the family businesses alone—roles we had previously shared. Concurrently, I was developing a separate coaching venture, which was smaller in revenue but deeply fulfilling.
From a purely financial and efficiency standpoint, discontinuing the coaching business to focus on the established, profitable companies made sense. Yet, personally, I couldn’t bring myself to do it. The coaching work was meaningful, and surrendering it felt like addressing the wrong problem.
Instead, I audited the established businesses to evaluate each component’s revenue contribution and how much of my direct involvement was truly necessary. I discovered that some parts could be run effectively by others without my constant oversight. By delegating or handing off those responsibilities, I created the space to nurture the business areas that mattered most to me.
The Audit That Reveals What You Should Let Go
Typical business audits often focus on revenue, expenses, and other financial metrics—but they rarely capture how much of your personal attention each business area consumes. LEGO’s theme parks and game studio didn’t seem like failures at first. They were slow drains on leadership focus, which eventually translated into severe financial strain.
Importantly, the decisions to expand into these areas were not inherently flawed. Opportunities that align with your brand and excite your customers are worth pursuing. The mistake lies in assuming that every opportunity requires your personal management.
Recognizing this early—before financial indicators force your hand—can save your business from needless distraction and decline.
An Exercise to Clarify Your Role This Month
Take an inventory of your business’s distinct parts—be they product lines, services, client segments, or side ventures. For each, ask two questions: “What does this generate?” and “Does it require my direct, personal involvement to operate, or could someone else manage it effectively?”
You are looking for the mismatch—business elements that add value but don’t need you running them daily.
When you identify these, consider following LEGO’s example: maintain ownership and oversight where it counts, but delegate operations to those with the right expertise. This strategy not only preserves your core value but also fosters sustainable growth.
Ultimately, building a business that lasts often starts with honest self-assessment about where your time and skills are best applied.
Here’s to building a business—and a life—with zero regrets.
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