The Lego Group began in the carpentry workshop of Ole Kirk Christiansen, in Billund, Denmark. In 1916, Christiansen purchased a woodworking shop in Billund which had been in business since 1895. The shop mostly helped construct houses and furniture, and had a small staff of apprentices. The workshop burned down in 1924 when a fire, lit by two of Christiansen’s sons, ignited some wood shavings. Ole Kirk constructed a larger workshop, and worked towards expanding his business even further. When the Great Depression hit, Ole Kirk had fewer customers and had to focus on smaller projects. He began producing miniature versions of his products as design aids. It was these miniature models of stepladders and ironing boards that inspired him to begin producing toys.
(Note: According to a Lego employee in Denmark, Ole Kirk’s move to toy production was actually inspired by the government rather than self-motivated. Various literature appears to be to the contrary, implying that Ole Kirk actively decided to move on to toy manufacture. However, more personal recollections and retellings suggest that when Ole Kirk’s carpentry shop was going out of business in 1932, his local social worker suggested or otherwise encouraged him to make toys.)
In 1932, Ole Kirk’s shop started making wooden toys such as piggy banks, pull toys, cars and trucks. The business was not very profitable thanks to the Depression. Farmers in the area sometimes traded food in exchange for his toys; Ole Kirk continued producing practical furniture in addition to toys in order to stay in business. In the mid-1930s, the yo-yo toy fad gave him a brief period of increased activity until it suddenly collapsed. To reduce waste, Ole Kirk used the leftover yo-yo parts as wheels for a toy truck. His son Godtfred began working for him, taking an active role in the company.
In 1934, Ole Kirk hel a contest amongst his staff to name the company, offering a bottle of homemade wine as a prize. Christiansen was considering two names himself, “Legio” (with the implication of a “Legion of toys”) and “Lego”, a self-made contraction from the Danish phrase leg godt, meaning “play well.” Later the Lego Group discovered that “Lego” can be loosely interpreted as “I put together” or “I assemble” in Latin. Ole Kirk selected his own name, Lego, and the company began using it on their products.
Following World War II, plastics became available in Denmark, and Lego purchased a plastic injection molding machine in 1947. One of the first modular toys to be produced was a truck that could be taken apart and re-assembled. In 1947, Ole Kirk and Godtfred obtained samples of interlocking plastic bricks produced by the company Kiddicraft. These “Kiddicraft Self-Locking Building Bricks” were designed and patented in the UK by Mr. Hilary Harry Fisher Page, a British citizen. In 1949 the Lego Group began producing similar bricks, calling them “Automatic Binding Bricks.” Lego bricks, then manufactured from cellulose acetate, were developed in the spirit of traditional wooden blocks that could be stacked upon one another but could be “locked” together. They had several round “studs” on top, and a hollow rectangular bottom. They would stick together, but not so tightly that they could not be pulled apart. In 1953, the bricks were given a new name: Lego Mursten, or “Lego Bricks.”
Plastic products were not well received by customers initially, who preferred wooden or metal toys. Many of Lego’s shipments were returned, following poor sales.
History of lego (article from wikipedia)