The Third Way of Innovation: How LEGO Saved Itself Without Radically Changing Its Product

In this episode of Rozmowy Logistyków, Piotr Skobało talks with Robert Lis about what systemic innovation is and how not to implement it. Using LEGO's five-year crisis as an example, they discuss the mistakes companies most often make when rolling out change, and which approaches actually work.

THE LEGO CRISIS AND THE BIRTH OF THE THIRD WAY

From the late 1970s to the mid-1990s, LEGO grew without interruption — until growth stopped. The company then tried the fashionable "radical innovation" of the time ("disrupt yourself or someone else will"): sets moved away from the basic brick, becoming modular and large, as children drifted toward the first game consoles. Costs rose, sales didn't. Researcher David Robertson, author of The Power of Little Ideas, found that what pulled LEGO out of the crisis was a return to the brick as the company's DNA, and building small innovations around it — a third way, neither incremental nor radical.

THREE INNOVATION MODELS IN BRIEF

Incremental innovation is a familiar rhythm: a new model every few years, an annual software update — easy to copy, with competitors as the reference point. Radical innovation rebuilds the entire business model, like Netflix, which went from a logistics-driven DVD rental service to a streaming platform. The third way (also called systemic innovation) leaves the product unchanged — it only aims to make it "objectively good" — and builds an ecosystem of small services around it that make it easier to use.

WHEN TO REACH FOR THE THIRD WAY

It's a good choice when a product is approaching commoditization: margins are falling, competitive advantage is blurring, and the market is full of very similar players using the same suppliers. In logistics, the classic example is transport from point A to B — a commodity service for a long time now. Instead of competing on rate alone, you can build small innovations around the ordering process, payment, just-in-time delivery, or flexible checkout options in e-commerce (lockers, same-day delivery) — what makes using the service easier, not the service itself.

FOUR STEPS TO IMPLEMENTATION

First: choose the "crown jewel" — the core product to build the innovation system around (sometimes obvious, sometimes requiring a choice among several lines). Second: understand which customer need you want to address — David Robertson advises "going on a date with the customer instead of fighting the competition," remembering that the buyer and the user of a service are often different people in B2B. Third: design specific small innovations that address that need (the GoPro example — a worse camera than competitors, but with a mounting ecosystem and app that made it irreplaceable). Fourth: implementation, evaluated not item by item, but as a whole ecosystem — a single element can generate a cost, but what matters is whether the whole is profitable.

WHY DEPLOYMENTS FALL APART

The most common trap is company-centrism — looking through the lens of what the company already knows how to produce, instead of through the lens of changing customer needs. The second is attachment to the status quo ("it always worked") and relying on one decision-maker's idea instead of real customer input. The third is scaling too early — success with one specific client doesn't mean the solution will work across the rest of the portfolio. What matters most is a culture that tolerates "smart failure": testing at small scale, different KPIs at the start than revenue, and treating a mistake as material to learn from, not something to be held accountable for.