In the mid 90s, I worked for a toy design startup making plastic parts. Think "Lego + N-scale trains". (It flopped.)
At the time, there were two awesome toy makers, with two very different strategies. Lego was open about their manufacturing, but would hide their designs. PlayMobile was very guarded about their manufacturing, but would happily preview the designs.
Methinks Lego deterred competition by showing just how hard it was to compete on quality, PlayMobile competed by making plastic parts more cost effectively than anyone else.
We play tested everything we could. Made me a toy snob. Sad, I know. Little Tikes and Duplo are the best bang for the buck for their target age group. I snear at Brio, Tonka, MegaBlocks, and many others.
My son has lots of LEGO and the occasional little set from some other sources. It's sad - most of the "inferior" bricks stand out like sore thumbs. You can spot individual bricks in a sea of LEGO from a decent distance because of the difference in quality of edges etc.
The only Lego-compatible brand I've come across approaching them in quality are Kre-O.
I grew up with Lego. I love Lego -- the older stuff anyway; the newer bricks are too specialised -- and what's amazing about Lego is that it is almost impossible to destroy a Lego brick. I still have all my old Lego and all of my dads' Lego from when he was a kid. They do get a bit grimey and dirty after a while -- thankfully they're easy to clean in sudsy water and they'll look good as new, even 40 years later.
Buy it once and give it to your kids' kids one day.
They have reverted some of their more overt specialisation in more recent years and brought back some of the more "classical" elements, like the translucent "lights" etc., alongside new bricks that can be used in many different ways (and some of which I wish I could have had when I was a child). There was a period where everything was pre-made, pre-printed and almost monolithic, with single-purpose blocks, but most of that seems to be gone.
Additionally, their Creator sets actively encourage multi-purpose bricks since the box itself already gives you 3 different models you can build out of the contained bricks, plus the endless possibilities of your inventions.
Thanks for the tip on the Creator sets, I visited my local games store recently but did not see these. Just bought a couple sets on Amazon... now I have Lego again (in a few days)! :D
So build a new 'LEGO' company, build the bricks to the same quality standards as original LEGO does, and let's see if you can beat their price.