Lego's Survival

By 2003, Lego was bleeding roughly $300 million a year and sat weeks from running out of cash. The company that had defined the interlocking plastic brick nearly destroyed itself, not by neglecting its product, but by chasing everything around it: theme parks, clothing, a TV channel, video games, jewelry, and a flood of custom pieces that couldn't be reused across sets. The theory was diversification and relevance. The practice was a company spread thin across businesses it didn't understand.

When a new CEO took over in 2004, he made a series of hard, unglamorous cuts that ran against every instinct to grow your way out of trouble. For founders and operators, this case sharpens the question every struggling company faces and usually answers wrong: not what new thing should we try, but what made us worth caring about in the first place, and what would it cost to return to it.