1. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 1/25 Based on the decade-long digitalization journey and experiences of the LEGO Group, this article provides insights on building the foundations for enhancing enterprise capabilities for digital leadership. Leveraging digitalization is one of the LEGO Group’s four strategic priorities and is fundamental to it being a world leader in its industry.

2. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 2/25 Agenda  Defining Digital Leadership  LEGO Group Background  Digitalization at the LEGO Group  LEGO’s Journey Toward Digital Leadership  Lessons for Digital Leadership

3. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 3/25 Defining Digital Leadership  Executives have very diverse perspectives as what “going digital” really means.  These perspectives range from a focus on technology, to digital customer engagement, to new digital business models and more.  The lack of clarity often results in piecemeal initiatives, missed opportunities and false starts in the digitalization of the enterprise.

4. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 4/25 Defining Digital Leadership  The term digitalization goes beyond an organization taking advantage of digital platforms, but rather reflects the way that digital media and platforms influence the restructuring of the economy, society and culture.  We define digital leadership as “Doing the right things for the strategic success of digitalization for the enterprise and its business ecosystem.”

5. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 5/25 Building blocks of strategy and organization will have to change 1.A different kind of business strategy 2.Different kinds of business models 3.A different kind of enterprise platform integration 4.A different kind of people mindset and skill set 5.A different kind of corporate IT function 6.A different kind of workplace

6. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 6/25 Agenda  Defining Digital Leadership  LEGO Group Background  Digitalization at the LEGO Group  LEGO’s Journey Toward Digital Leadership  Lessons for Digital Leadership

7. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 7/25 LEGO Group Background  Founded in 1932 by Ole Kirk Kristiansen the LEGO Group is a private company (still owned by the Kristiansen family) with headquarters in Billund, Denmark.  Renowned for the iconic LEGO brick, LEGO products are sold in more than 140 countries. It has more than 17,000 employees worldwide.  To date, more than 760 billion LEGO elements have been manufactured.

8. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 8/25 The LEGO Group Organizational Wheel

9. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 9/25 Near-Death Experience and the Start of the Transformation Journey  Although LEGO is now a thriving business, in the early 2000s it verged on defaulting on its debt.  The toy market had become more fickle with the advent of new electronic games.  The starting point for the transformation was the replacement of the CEO in October 2004.  The emphasis in 2005-2007 was on creating a defensible core of products.  In 2008, the strategy shifted from stability to growth and the focus was on building sustainable platforms for growth while continuing to improve the core business.  There was a realization of the growing importance of digital platforms for the LEGO Group.

10. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 10/25 The LEGO Strategy Sustain core commercial and operational momentum Create the organization of the future Expand global presenceLeverage digitalization

11. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 11/25 Agenda  Defining Digital Leadership  LEGO Group Background  Digitalization at the LEGO Group  LEGO’s Journey Toward Digital Leadership  Lessons for Digital Leadership

12. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 12/25 Digitalization at the LEGO Group  LEGO used three lenses for leveraging digitalization:  a “Products” lens, which centered around product innovation and the product ecosystem;  a “Marketing” lens for digital marketing; and  an “Enterprise” lens, which centered around enterprise platforms and integration of the outside and the inside of the enterprise.

13. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 13/25 Product Digitalization Moves  The first hybrid digital/physical LEGO experience was LEGO MINDSTORMS®  A month after its launch, LEGO discovered that the proprietary operating system had been hacked.  Instead of prosecuting the hackers, it talked to them and found they were LEGO fans who wanted to build their own creations.  Since then, LEGO has launched numerous digital platforms to strengthen its connections to the large communities of LEGO fans

14. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 14/25 Marketing Digitalization Moves  There is a lot of overlap between marketing and managing the product experience in a digital environment, because the digital experience is part of the product.  LEGO divides its market constituencies into customers (retailers such as Target, Walmart and Amazon), shoppers (adults such as parents and grandparents who buy LEGO products for children), consumers (those who play and learn with LEGO products, mostly children), and fans (adult and teenage fans who are both shoppers and consumers).

15. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 15/25 The Affinity Pyramid Engagement Map

16. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 16/25 The Rise of Multiple Digital Officers across the LEGO Group Extraordinary user adoption User excitement of what IT can do for you Low support needsFewer change requests Higher user and process efficiency No training and change management

17. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 17/25 Enterprise and Engagement Platforms Engagement Platform (Interaction / Dialog) Enterprise Platform (Record / Transaction) OUTSIDE FOCUS Digital Consumer / Shopper / Customers INSIDE FOCUS Digital Workforce SPEED OF CHANGE LEVEL OF GOVERNANCE +- -+

18. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 18/25 Benefits of Involving Users in Augmenting the Enterprise Platform through App Development

19. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 19/25 Multiple Digital Officers Enable the Digital Innovation Process to be Distributed between Corporate IT and Business Units

20. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 20/25 Agenda  Defining Digital Leadership  LEGO Group Background  Digitalization at the LEGO Group  LEGO’s Journey Toward Digital Leadership  Lessons for Digital Leadership

21. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 21/25 The Path to Enterprise Digital Leadership

22. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 22/25 Agenda  Defining Digital Leadership  LEGO Group Background  Digitalization at the LEGO Group  LEGO’s Journey Toward Digital Leadership  Lessons for Digital Leadership

23. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 23/25 Lessons for Digital Leadership 1/3  New Ways of Thinking about Enterprise Digitalization  Lesson 1. Execute Business Strategy Digitally  Lesson 2. Use Digitalization to Bolster Business Strategy around Your Core Distinctive Competence.  Lesson 3. Position the Corporate IT Function Close to the Business to Enable Responsive Digitalization.  Lesson 4. Create Multiple Digital Officers to Distribute Digital Innovation across the Enterprise.  Lesson 5. Leverage the Ecosystem of Partners for Complementary Digitalization Competences.  Lesson 6. Iterate to Success in Digitalization.

24. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 24/25 Lessons for Digital Leadership 2/3  New Ways of Thinking about Digital Platforms  Lesson 7. Recognize that User Experience Drives IT Architecture, Not Vice Versa.  Lesson 8. Recognize that Dynamic Engagement Platforms for Digitalization Invert Business Priorities and Generate a New Level of Complexity.  Lesson 9. Collaborate with Technology Vendor Partners to Create Dynamic Digital Platforms.  Lesson 10. View SMAC Technologies Through a Digitalization Value Lens.

25. How LEGO Built the Foundations and Enterprise Capabilities for Digital Leadership El Sawy, Kræmmergaard, Amsinck & Lerbech Vinther – June 2016 Page 25/25 Lessons for Digital Leadership 3/3  New Ways of Thinking about the Digital Workforce  Lesson 11. Hire Digital Generalists Rather than Just Technical Specialists.  Lesson 12. Create an Attractive Workplace for Digitally Savvy People.  Lesson 13. Improve and Monitor the Digital Quotient of the Workforce.