SMART Play, Smart Strategy? LEGO, Openness, and Network Effects
A platform strategy and platform economics take on LEGO's latest moves.
Peter C. Evans recently published an excellent post on LEGO’s SMART Play platform on Platform Professional. This post brilliantly captures how LEGO is evolving from a product company to a data-rich, digitally augmented play platform. Yet, it leaves open a crucial antitrust and strategy question: is LEGO competing in the market or for the market? To address this question, I go back to a post I published a long time ago (in 2011!) about LEGO’s ambivalent attitude towards enforcing IP rights. Revisiting this analysis through the lens of SMART Play suggests that LEGO’s attitude toward openness remains ambivalent, but ultimately aims to enclose the most valuable network effects within its own ecosystem.
LEGO’s SMART Play
Evans’ post portrays SMART Play as LEGO’s next-generation platform that fuses physical bricks with invisible digital capabilities—sensors, chips, and data—while preserving the simplicity and creativity of traditional building. SMART Play introduces the SMART Brick and related components that are backward compatible with the traditional LEGO System-in-Play, so that existing sets can be “upgraded” into interactive experiences rather than replaced.
He frames LEGO’s evolution as a platform journey: from selling discrete toy sets to orchestrating a modular system where hardware, software, content, and user data combine into a cohesive play infrastructure. In this narrative, LEGO is a sophisticated ecosystem orchestrator that blends open-ended creativity with tight integration across physical and digital layers.
Competition for or in the market?
A missing piece in Evans’ account is the classic question from platform economics: does SMART Play foster competition in the market or for the market? In Belleflamme and Peitz (2015, p. 604), we present this alternative as follows:
“When two (or more) goods exhibiting network effects compete with one another, the issue of compatibility becomes of paramount importance. Actually, the degree of compatibility between the two goods determines the nature of competition between the firms sponsoring these goods. At one extreme, when goods are incompatible, each makes up its own network. In this case, network effects induce a self-reinforcing process: success tends to feed success and failure to beget failure. As a result, large networks naturally become larger, and small networks smaller. Sooner or later, one good completely dominates the market and all other incompatible goods disappear. Hence, at the start of the competition process, firms really compete for the market: they compete for the prize of becoming the future monopolist.
The picture changes dramatically when goods are compatible. There is now a single network for these goods; that is, network effects are no longer limited to the adopters of a particular good (as users of compatible goods can make use of the other goods’ networks and vice versa). It follows that several compatible goods may coexist, meaning that firms now compete in the market. As compatibility is a matter of decision, the fundamental question for firms competing in a network market is whether competition ‘for the market’ (i.e., between incompatible goods) will be more or less profitable than competition ‘within the market’ (i.e., between compatible goods).”
Framed this way, SMART Play is not just an impressive innovation story but also a governance and power story: who gets to plug in, on what terms, and with what degree of independence from LEGO’s infrastructure? The key strategic issue is whether SMART Play becomes an open, interoperable layer in a broader landscape of connected toys, or a proprietary standard that shifts competition toward winner-take-most dynamics in “connected play.”
My 2011 “Jekyll-and-Hyde” diagnosis
In 2011, I described LEGO’s IP behaviour as oscillating between very open and very closed, almost as if the company had a split personality. On the open side, LEGO embraced crowdsourcing (Cuusoo, LEGO Factory/DESIGNbyME) and tolerated Mindstorms hackers who cracked and improved its robotics software, using user innovation to enhance product quality and brand appeal while saving on internal development costs.
On the closed side, LEGO fought hard to “build a wall around its bricks” after its patents expired, using trademarks and copyright to preserve incompatibility even after losing key legal battles in Canada (2005) and Europe (2010). My interpretation was that this was not confusion but a rational dual strategy: be open where external creativity increases demand for LEGO’s products, and be closed where compatibility would erode switching costs and weaken LEGO’s ability to charge a premium on its core bricks.
What changed between 2011 and 2025?
Between my post and the SMART Play era, LEGO deepened both sides of this ambivalence. On the “open” trajectory, it expanded community engagement and open innovation: fan communities, co-creation platforms, and digital channels such as LEGO Ideas (successor to Cuusoo), ReBrick, and other community tools became institutionalised and celebrated as part of LEGO’s transformation narrative.
At the same time, LEGO invested heavily in its own digital backbone and engagement platforms—My LEGO Network, LEGO ID, proprietary apps and online services—that centralise data and identity inside LEGO-built infrastructure rather than on genuinely neutral or open standards. Digital initiatives such as LEGO Fusion, LEGO Dimensions, and now SMART Play show a pattern: they create rich complementarities around LEGO’s IP and brick standard, but interoperability with non-LEGO toys, content, or competing digital infrastructures remains tightly constrained.
In this sense, LEGO’s “openness” has evolved toward what could be called controlled permeability: encouraging user-generated content, partnerships, and co-creation, while keeping the decisive levers—technical standards, data access, API governance, and legal control over brand and brick compatibility—firmly under LEGO’s authority. The Jekyll-and-Hyde pattern is still there, but more strategically choreographed in a platform-centric way.
Openness from LEGO’s viewpoint
From LEGO’s perspective, the core question is whether a two‑pronged openness strategy that leans toward competing for the market (by preserving incompatibility and a walled‑garden around bricks, IP, and data) is more profitable over time than competing in the market (by embracing broader compatibility and interoperability).
A “for the market” approach allows LEGO to concentrate network effects inside its own ecosystem: every additional user, set, or digital interaction reinforces the value of the LEGO standard and makes switching to rivals more costly.
A more open, “in the market” posture—where SMART Play becomes a truly interoperable layer in a wider connected‑toy environment—could expand the total pie by encouraging more third‑party innovation and lowering barriers for complementary products and services.
In a dynamic sense, LEGO must weigh the benefits of tight control (higher margins, stronger brand, and better defence against imitation) against the potential of a more open, federated ecosystem that might grow faster overall but dilute LEGO’s share of value capture.
This trade‑off is not purely abstract: it runs through concrete design decisions about APIs, data access, licensing of digital components, and the extent to which non‑LEGO hardware or software can plug into SMART Play on non‑discriminatory terms. A two‑pronged strategy—open where external creativity increases demand for LEGO’s core, closed where compatibility might erode its premium position—may be rational from LEGO’s standpoint, but it still leaves open the question whether the long‑run profit‑maximising configuration is a tightly enclosed platform or a more modular, shared infrastructure in which LEGO is “first among equals.”
Openness from a public viewpoint
From a public‑policy and antitrust perspective, the same openness question looks different because it hinges on how the relevant market is defined and how network effects are assessed. If the market is “all toys,” LEGO’s share is significant but far from monopolistic (about 11-12%): consumers face many alternatives, from video games to dolls and other non‑construction toys, which supports Peter’s intuition that LEGO is not an obvious antitrust case in that broad space.
However, if the relevant market is defined more narrowly—construction/building sets based on a combinable brick standard, or even “connected construction platforms” once SMART Play is included—LEGO’s position looks much stronger, and network effects become central. In such a market, incompatibility and a walled‑garden architecture can create self‑reinforcing dynamics in which success breeds more success, making it harder for rival building systems or open, cross‑brand standards to gain traction, even if consumers might benefit from greater interoperability.
This tension between dominance and network effects creates a genuine policy dilemma: strong network effects are crucial to platform value, but when combined with deliberate incompatibility, they can also entrench a single firm and limit competitive pressure over time.
From a public viewpoint, the key question is not whether LEGO’s current behaviour violates antitrust law in a broad toy market (it likely does not), but whether the trajectory of SMART Play and related digital extensions could, in a narrower platform market, tilt competition too far toward “for the market” outcomes—winner‑take‑most structures that are hard to reverse once ecosystem lock‑in has set in. If so, regulators may treat connected play as a domain where openness and cross-platform compatibility should be encouraged (as in telecoms or payments). This would challenge enclosure-oriented strategies like SMART Play, in the spirit of what the Canadian Supreme Court wrote in 2005:
“The monopoly on the bricks is over, and Mega Bloks and Lego bricks may be interchangeable in the bins of the playrooms of the nation…Dragons, castles and knights may be designed with them, without any distinction.”
Take-away
Seen together, Evans’ account of SMART Play and my earlier “Jekyll-and-Hyde” analysis are best read as complementary lenses on the same strategic journey: his post illuminates how far LEGO has come in building an integrated, data-rich play platform, while mine highlights the enduring governance choices around openness and compatibility that shape this evolution. Combining both perspectives allows platform strategists to appreciate LEGO’s impressive capabilities as an ecosystem orchestrator and, at the same time, to probe how different configurations of openness, interoperability, and control might sustain innovation and value creation in connected play over the long run while preserving the public’s interests.