Business
Apple and LEGO Show How Focus Beats Diversification
<p><strong>Both Apple and LEGO escaped the brink of collapse by cutting noisy product lines and doubling down on what made them special, proving that ruthless focus often outperforms frantic expansion.</strong></p>
<h2>Losing Their Way: When Success Turns into Bloat</h2>
<p>People forget how shaky Apple and LEGO once looked. In the mid-1990s Apple was offering fifteen Macintosh variants and none of them thrilled buyers. According to Apple’s 1996 annual report the company lost sixty nine million dollars, a painful slide from the two hundred million dollars of profit it had booked only two years earlier.</p>
<p>LEGO faced an even scarier cliff. By 2003 the Danish brick maker carried roughly eight hundred million dollars of debt and was burning through a million dollars each day. Its catalog ballooned from six thousand unique bricks to more than twelve thousand. The logic was simple in theory: <strong>if kids were drifting toward video games, LEGO should meet them there and maybe even open a few theme parks for good measure. The logic failed.</strong></p>
<p>Consultants who later studied both companies pointed to the same root cause: chasing every shiny opportunity diluted talent, confused customers, and buried core strengths. Harvard Business School professor Clayton Christensen summed it up perfectly in an interview with Bloomberg: “Most companies do not starve, they choke.”</p>
<h2>The Steve Jobs Reset: Four Products, One Vision</h2>
<p>When Steve Jobs returned to Apple in 1997 he famously drew a two-by-two grid on a whiteboard. Consumer versus professional along one axis, desktop versus portable along the other. Four squares, four potential products. Everything else was cancelled.</p>
<p>That brutal edit looked reckless to outsiders, yet the numbers vindicated it quickly.</p>
<table>
<thead>
<tr>
<th>Year</th>
<th>Product count</th>
<th>Net income (USD)</th>
</tr>
</thead>
<tbody>
<tr>
<td>1996</td>
<td>15 Mac models</td>
<td>-69 million</td>
</tr>
<tr>
<td>1999</td>
<td>4 core Macs</td>
<td>+601 million</td>
</tr>
</tbody>
</table>
<p><strong>Source</strong>: Apple SEC Form 10-K filings 1996 and 1999</p>
<p>Jobs also axed licensing deals for Macintosh clones, cut marketing budgets, and persuaded Microsoft to invest 150 million dollars to ensure Office stayed on the Mac. Most important, he rallied engineers around a clear mantra: build the best computer experience on the planet, not the broadest lineup.</p>
<p>Former Apple designer Jony Ive described the atmosphere to Vanity Fair: “<strong>Instead of talking about how to beat Dell, we talked about how to delight the person who opens the box.</strong>” That user-first approach set the stage for the iMac, iPod, and eventually the iPhone.</p>
<p><img class="aligncenter size-large wp-image-57447" src="https://www.theibulletin.com/wp-content/uploads/2025/05/how-lego-and-apple-company-avoided-bankruptcy-1024x674.jpeg" alt="how lego and apple company avoided bankruptcy" width="740" height="487" /></p>
<h2>LEGO&#8217;s Back to Basics Playbook</h2>
<p>Jørgen Vig Knudstorp, a former McKinsey consultant turned LEGO executive, stepped into the chief executive role in 2004. His first act was not to invent the next big thing. It was to stop bleeding cash on ideas that were not obviously LEGO.</p>
<p>Actions he took within two years:</p>
<ul>
<li>Sold off majority ownership in the four theme parks for 460 million dollars</li>
<li>Shut down most internal video game projects and licensed character rights instead</li>
<li>Cut the number of active bricks by roughly fifty percent, trimming weird specialty pieces</li>
<li>Reduced product line complexity by thirty percent, letting factories run closer to full capacity</li>
</ul>
<p>Knudstorp also sent designers into living rooms around Europe and North America to watch children play. Researchers noticed that parents trusted LEGO as a creative activity but got annoyed by sets that could only build one highly specific model. Soon the iconic box of classic bricks returned to prominence, and evergreen lines like LEGO City roared back.</p>
<p>By 2008 LEGO posted a net profit of 235 million dollars, reversing five years of red ink. The turnaround earned Knudstorp a spot on TIME’s list of 100 most influential people, though he joked on stage at Copenhagen Business School that he simply “<strong>cleaned the attic before inviting guests.</strong>”</p>
<h2>Why Less Really Is More: The Opportunity Cost Equation</h2>
<p>Cutting products can feel counterintuitive. More options may attract more buyers, right? Research often proves the opposite. Columbia University professor Sheena Iyengar’s famous jam study showed that shoppers confronted with twenty four jam flavors were one tenth as likely to purchase as those who saw only six. Choice fatigue is real.</p>
<p>For companies the cost is even higher:</p>
<ul>
<li>Engineering time spreads thin, lowering quality.</li>
<li>Marketing dollars fragment, reducing impact.</li>
<li>Supply chains grow tangled, raising unit costs.</li>
<li>Customers struggle to identify the flagship offer, dulling brand voice.</li>
</ul>
<p>Apple and LEGO illustrate the principle with hard data. Apple’s gross margin climbed from 19.8 percent in 1997 to 29.8 percent in 2000 once the catalog shrank. LEGO’s return on sales improved from negative 30 percent in 2003 to positive 12.3 percent in 2008, according to its annual report.</p>
<p>A smaller portfolio forced each team to ask a brutal but healthy question: “<strong>Would I bet my job on this product?</strong>” If the answer was no, the concept died early, saving money and focus for better bets.</p>
<h2>What Modern Companies Can Learn from Bricks and Bytes</h2>
<p>Not every firm can drop from fifteen products to four overnight, yet the guiding lessons scale to any size.</p>
<p><strong>Keep customer obsession front and center</strong><br />
Companies stay relevant when they understand real daily problems, not when they mimic competitors. Apple designers watched people fumble with cords and decided to build the iPod with a simple click wheel, then the iPhone with one home button. LEGO staff sat on carpets with kids and realized creativity mattered more than licensed movie tie-ins.</p>
<p><strong>Measure cost to serve, not just revenue</strong><br />
Both turnarounds revealed hidden money pits. Apple discovered that certain Mac configurations cost more to assemble than they sold for after rebates. LEGO unearthed specialty bricks that required new molds costing tens of thousands of dollars for marginal sales. Modern analytics tools let finance teams flag those gaps sooner.</p>
<p><strong>Say no early and often</strong><br />
Focus is a discipline. It requires declining partnerships that do not map to the core story, postponing pet projects until resources free up, and sometimes shelving a product that technically works but distracts the brand. Jeff Bezos called this the regret minimization framework. Jobs and Knudstorp lived it daily.</p>
<p><strong>Invest deep, not wide</strong><br />
Once distractions vanish, talent can push the ceiling on a handful of breakthrough ideas. Apple poured saved resources into refining the unibody MacBook chassis. LEGO used its slimmer catalog to fund research into plant based plastics, a step toward sustainability that resonates with parents.</p>
<h2>FAQ</h2>
<p><strong>How did Apple decide which products to cut when Steve Jobs returned?</strong><br />
Jobs asked each division to justify its lineup in one on one reviews. Anything that did not fit the four quadrant grid or lacked a clear profit path was cancelled.</p>
<p><strong>Why did LEGO theme parks hurt the company’s finances?</strong><br />
The parks demanded massive capital outlays yet offered low margins compared with toy sales. Debt servicing costs climbed, squeezing cash needed for core design work.</p>
<p><strong>Is product focus only for large brands or for startups too?</strong><br />
Startups benefit even more because resources are limited. A tight offer creates clarity for investors and early adopters.</p>
<p><strong>What is an example of opportunity cost in these turnarounds?</strong><br />
Every dollar Apple spent on underperforming printers was a dollar not spent on perfecting the first iMac. Cutting printers freed budget and engineering time for the flagship computer.</p>
<p><strong>Did LEGO completely abandon digital games after the reset?</strong><br />
No. LEGO switched to a licensing model. Traveller’s Tales produced the popular LEGO Star Wars game, giving LEGO royalties without carrying development risk.</p>
<p><strong>How many unique bricks does LEGO sell today?</strong><br />
LEGO reports roughly seven thousand active elements, down from the twelve thousand peak yet still far leaner than the early 2000s.</p>
<p><strong>What role did external investment play in Apple’s turnaround?</strong><br />
Microsoft’s 150 million dollar preferred stock purchase provided breathing room and signaled confidence, but internal product focus drove the long term recovery.</p>
<p><strong>Can trimming products hurt a brand by limiting choice?</strong><br />
Choice cuts only hurt if they remove real customer value. Careful research ensures the trimmed catalog still covers essential needs while removing redundancy.</p>
<h2>Conclusion</h2>
<p>Apple and LEGO remind us that cutting clutter often sparks innovation and growth. If this story helps you rethink your own product list, share it with friends and let me know what you would trim or keep. I would love to hear your thoughts.</p>

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