LEGO Had 13,000 Products. Then Nearly Went Bankrupt.

In 2003, LEGO was technically insolvent. Net margin had collapsed to 2.4%. The company had expanded into theme parks, clothing, video games, and jewelry. It had 13,000 product SKUs. It had diversified its way to the edge of bankruptcy.

The turnaround was brutal and specific: fire half the workforce. Exit every business that wasn't bricks. Cut SKUs from 13,000 to a number manageable by a company that knew what it was.

By 2024, LEGO posted $10.8 billion in revenue with a 15.6% net margin. The core product — a plastic brick with a 0.002mm manufacturing tolerance, unchanged in its fundamental design since 1958 — accounted for most of it.

The lesson LEGO learned in 2003 applies to almost every brand that's ever scaled: complexity is not the same as value. Thirteen thousand products is not thirteen thousand opportunities. It's thirteen thousand ways to dilute what you're actually good at.

When patents expired and cheaper competitors entered, LEGO's moat turned out to be speed (300+ new sets per year) and community (adult fans, licensed IP). Both emerged from the same discipline: knowing what LEGO was, and refusing to be anything else.