Lego’s problems began in late 1990s when management stopped focusing on design. Instead, it focused on brand growth and company expansion. The Galidor line was launched in 2002 but it lacked the tradition of Lego construction as action figures could barely be taken apart and reassembled. Due to this line, consumers’ perception of the brand was changing as Lego no longer focused on the freedom and creativity of construction.

To re-establish creativity, management allowed designers to do as they wished with no limits, and accepted every component that was designed, increasing supply costs. However, designers had the wrong target market in mind. The designs were appealing to adults but kids hated them. To solve this problem, designers worked with the marketing department. Marketers researched the types of products that kids wanted, and guided the product developments. Also, instead of manufacturing every piece that designers came up with, a voting system was created where only the pieces with the most votes would be produced. Interestingly enough, instead of allowing absolute freedom, having component limits steered designers in the right direction to come up with successful products. Empowerment may be essential to employee satisfaction, but management needs to show them the ropes to success first.

source: http://www.businessweek.com/innovate/content/jul2010/id20100722_781838.htm