Global Business 4th Edition by Mike Peng

Exercise 8

Subsidiary Initiative at LEGO North America
In 1997, Peter Eio, head of LEGO North America, proposed to LEGO Group senior management at its headquarters in Denmark, the idea of licensing Star Wars characters for LEGO toys. This would enable LEGO to capitalize on the anticipated release of the new Star Wars trilogy starting with The Phantom Menace in 1999. From his North America headquarters in Enfield, Connecticut, Eio was convinced that the US toy market had become a license-driven market. Licensed toys such as Disney characters from Disney movies and Buzz Lightyear from Toy Story accounted for half of all toys sold in the United States. Despite its success, LEGO's go-it-alone culture had prevented it from leveraging any licensed products up to this point.
Encouraged by Lucasfilrn executives who were LEGO fans and who wanted to partner with LEGO, Eio thought he had proposed a winning product that would enable LEGO to gei into the world of licensing. Unfortunately, LEGO senior executives' initial reaction, according to Eio himself, "was one of shock and horror. It wasn't the LEGO way." Specifically, LEGO executives felt LEGO did not need to license intellectual property from another player. Further, the specific characters centered on war and violence would violate one of LEGO founder Ole Kirk Christiansen's core values: never let war seem like child's play. According to critics, the very name, Star Wars, would violate the essence of the LEGO identity. Heated debate took place. One executive even claimed, "Over my dead body will LEGO ever introduce Star Wars."
During the next round, Eio and his team surveyed parents in the United States to gauge their opinion on the marriage between LEGO and Star Wars. He also convinced his colleague in charge of Germany, which was LEGO's largest and by far its most conservative market, to conduct a similar survey. While US parents strongly supported the idea, German parents were also enthusiastic. Armed with such supportive consumer data, Eio pushed this subsidiary-driven initiative further and continued to meet resistance and push-back from senior executives at headquarters. Eventually, the founder's grandson and the president and CEO of LEGO Group at that time, Kjeld Kirk Kristiansen, who was a Star Wars fan himself, overruled his conservative executives and gave the licensing deal his blessing. In 1999, LEGO Star Wars products were released on the wings of the blockbuster The Phantom Menace, becoming one of the most successful product launches not only for LEGO, but also for the global toy industry. In the end, more than one-sixth of LEGO Groups' earnings in the early 2000s came from the Star Wars line.
Sources: Based on (1) the author's interviews; (2) Economist, 2014, Unpacking Lego, March 8: 71; (3) D. Robertson, 2013, Brick by Brick: How LEGO
Rewrote the Rules of Innovation and Conquered the Global Toy Industry, New York: Crown.

What are the lessons we can draw from the successful pushing of one subsidiary initiative in this rate headquarters rejected its initial ideas case What are the do's and don'ts