Lego Joins Toy Industry’s Online Transformation, Bets Digital Bricks Will Click With Kids

When Lego was founded in 1932, its name was derived from a shortened version of the Danish words “leg godt” or “play well”.

Today, 90 years later, the giant privately-held toy company is embarking on an unprecedented investment that will transform the notion of “playing well” to include more electronic versions of fun, where kids of all ages can seamlessly play, shop and share their brick-clicking escapades in the physical and digital worlds.

The firm “will step up its digital investment across all areas of its business from play to shopping and technology infrastructure,” according to a company announcement, which outlined its plans to triple its digital workforce over the next three years via a global hiring spree of engineers, product managers, UX/UI designers, technical program managers, digital security specialists and data scientists that will swell its IT staff to 1,800 people.

“The LEGO brick will always be the heart of our business but we’re seeing great success making LEGO a digitally enabled brand,” Chief Digital and Technology Office Atul Bhardwaj said in the release, calling the digital transformation the company’s single largest investment in a generation.

“We’ve been blending physical and digital experiences for many years and are excited by our progress. But we have big ambitions so are accelerating our investment and expanding our digital team,” Bhardwaj added.

Transforming Toys

To be sure, the Danish block maker is not alone in facing the changing digital realities that are permeating all aspects of the connected economy, from how we work and eat, to where we shop and play.

While Lego enjoys the clout of being the world’s largest toymaker as it pursues its omnipresent future — which also includes plans to expand its physical footprint of retail stores this year by adding 150 new locations to a current roster of about 800 — it is not alone in this mission.

Last week, 3rd ranked Mattel announced that it had sold over $1 billion worth of Barbies, Hot Wheels and Fisher-Price toys in Q1 amid new reports that it was holding talks about possibly taking the $8.5 billion business private. As a result, Mattel’s stock has bucked the downtrend in the market this year and has risen over 13% so far in 2022 at a time when the S&P 500 has fallen 10%.

“These results are in line with our strategy to grow Mattel’s IP-driven toy business,” Mattel Chairman and CEO Ynon Kreiz said in the company press release. “Having completed our turnaround in 2021, we are firmly in growth mode and operating as an IP-driven, high-performing toy company.”

Those comments and results came in the wake of similar reorg plans laid out by the new CEO of Hasbro, as the $13 billion Rhode Island-based maker of toys and games outlined its own way forward in a changing digital economy, via a comprehensive review of its strategy and operations.

“A major theme of this effort is focus and scale; focusing on fewer bigger opportunities and [then] scaling those with reinvestment to drive profitable growth and enhanced shareholder return,” Hasbro CEO Chris Cocks told analysts and investors on the company’s earnings call in early April.

Minecraft 2.0

The renewed digital focus at Lego is being likened by some industry insiders as an effort to develop the next iteration of the blockbuster video game Minecraft, the block-building fantasy world gaming title that is now owned by Microsoft.

“On that digital journey we’re really upping and increasing our capabilities, and we’re insourcing capabilities that were done by consultants before,” Lego CEO Niels Christiansen told the Financial Times, adding that the company’s hybrid gaming approach uniting physical and digital play was coming together, and easier than ever to link into a single experience.

“Today, [digital] is our single biggest investment,” he added.