(Photo: mureut/Flickr)
In the early 2000s, the Lego Group had a problem.
Since 1993, the company had been diverting funds it raised from toy sales into ancillary businesses like theme parks, retail stores, and watches. And nearly every one of those prospects failed. Theses business moves were so bad that, according to an examination by Bain and Company, they were losing nearly $300,000 per day. In 2004, the company hired Jorgen Vig Knudstorp as its new chief executive officer, and his first major move was taking a hard look at the floundering company’s early history.*
“They found a note from [Ole Kirk Christiansen] the founder of Lego that said, ‘Only the best is good enough,'” says Diego Coraiola, assistant professor of management at the University of Alberta. “It made them remember that they were only a building block company.”
Lego shifted its tactics. It sold off its theme parks and video games, sold or scaled back its foreign outposts, and even cut down on the number of Lego styles that were being made. This strategy paid off. In 2017, Lego reported the highest earnings in its 85-year history. Perhaps not coincidentally, you can now read all about Lego’s long and storied past at its official website.
Coraiola is one of a number of experts who have studied how corporations dig up, then use, their histories. His interest in the topic began when he couldn’t quite figure out how the preservation of corporate archives fit into a company’s bottom line. “Why invest in preserving documents and records, why hire archivists and historians?” Coraiola says. “But if you’re a large corporation that’s been around for 100 years, and you have developed so many prototypes and made so many decisions, if you don’t know what’s in [your history], you don’t know what’s valuable.”
For corporations, history is used as another step in the path to competitive advantage. As a 2010 paper on the topic of corporate history put it: “History is a social and rhetorical construction that can be shaped and manipulated to motivate, persuade, and frame action, both within and outside an organization. Viewed as a malleable construct, the capacity to manage history can, itself, be a rare and inimitable resource.”
To Coraiola, corporations have four main goals when utilizing their history: to motivate their employees through the development of a culture, to enhance its reputation to those outside the corporation, to demonstrate where and how they fit into a particular industry (a version of what Lego did), or to claim authenticity that their competitors can’t.
Why is the last one so vitally important? As Coraiola and co-authors wrote in a 2016 paper:
Because it is difficult for customers to distinguish between the offerings of many organizations such as banks, coffee companies, or distilleries, presenting a compelling account of history that enhances an organization’s authenticity is one way to build in difference from other companies in the same industry.
However, corporate history can also hurt a company. In the 1990s, public and journalistic pressure led certain companies to reveal the relationships they shared with Nazi Germany. One particularly prominent example: IBM created punch cards that were used to process and track prisoners in Nazi concentration camps. (This was revealed in Edwin Black’s exhaustively researched 2001 book IBM and the Holocaust.) The revelation likely had an effect on revenue, as profits dipped from $7.72 billion to 3.58 billion between 2001 and 2002, before returning to previous levels.
Of course, that piece of IBM’s history doesn’t show up in its vast online archives. In corporate hands, history isn’t impartial; it’s manipulated for money.
“When you’re telling a story and you say it’s ‘history,’ it has a truthful appeal for audiences,” Coraiola says. “It’s important for consumers to see history, and the past, as a social construction.”
*Update — January 2, 2018: This article has been updated to reflect the correct name of the company that released an examination of Lego Group’s finances.
