How Do Toy Companies Like Lego Stay Alive in a Tech Boom?

Jim Watson/AFP/Getty Images

Jim Watson/AFP/Getty Images

In an increasingly digital world, it seems as if the traditional toys of decades past are waning in popularity among toy makers eager to gain new young fans. In order to capture the attention of children looking for the newest item on store shelves, companies are adding buttons, creating apps, and launching into completely new areas of toy technology to ensure they’re at the forefront of the digital wave in children’s play. Lincoln Logs are cast aside in favor of puzzle apps on tablets, and digital companies are pairing up with toy companies like Little Tykes to create play on a screen instead of the living room floor.

The rise in technology isn’t a bad thing: Parents now have broader access to games and resources that seem like play, but also teach their children the basics of math, reading, and other skills — often through free apps on their devices. But how are “analog” games without computer chips supposed to compete? Through a series of hard lessons, LEGO learned the solution often comes in moderation.

The company, founded in 1926 by Danish owners, has updated over the years, but based much of the company around the plastic building bricks that made the company so well-known. Just as “Kleenex” is so often the general term for tissues, the success of the toy brand means that plastic building blocks will always be called “LEGOs,” no matter the actual manufacturer. But the rise of technology has not always been kind to the company, and it’s taken quite a balancing act to bring the company back from the brink of bankruptcy in 2003.

At the 2015 New York Toy Fair in February, LEGO’s senior director of brand relations Michael McNally told Fast Company the business wasn’t going to buy the idea that kids only want toys with smart chips. “You put the toy industry under one roof and you hear, ‘This is what kids want,'” he said. “LEGO very resolutely stands in opposition to that.”

Dan Kitwood/Getty Images

Dan Kitwood/Getty Images

LEGO’s turnaround story

Perhaps it’s because the company already knows that throwing misguided innovation at children won’t typically yield success. Innovation became a key focus for the company in 2000, and it followed all of the rules. “LEGO followed all the advice of the experts,” said David Robertson, a professor of operations and information management at the University of Pennsylvania’s Wharton School. “And yet it almost went bankrupt.” By 2003, after a series of unsuccessful theme parks and toys that only were popular in niche markets, LEGO lost $300 million and was projected to lose another $400 million in 2004. The company had been innovative, Robertson explained at a conference in 2012, but hadn’t stayed rooted in the reason they were successful. Not enough attention was paid to the literal building blocks of the company.

So instead, the company sought to integrate with the digital world in more balanced ways. When products are developed, the goal is to inspire play among children, no matter the medium they’re using. And at LEGO, today that means a balance of real-life blocks and virtual systems. Instead of making video games that were only created for a virtual reality, the makeup of LEGO’s games inspire kids to build in real life, too. The nature of play started to become noticeably reciprocal, McNally said. “Kids see no difference between the digital and physical world,” he said. “It could be content on YouTube that inspires them to go back and play. Our goal is to surround kids with experiences that drive them back to building.”

That idea is echoed by Michael Cohen, a developmental psychologist and market researcher. Cohen, when interviewed by, said that technology often becomes a means for the imagination, not the core of what the child experiences. “With every new technology there’s a novelty phase,” Cohen told ToyInfo. “The fact that it’s on touch screen becomes the big thing. But then the technology becomes so integrated into our lives that it becomes functional. … The focus will be back on the play rather than the technology.”

High-tech toys

At the toy fair in New York, the emphasis was still on technology. The Verge, a website dedicated to the intersection of technology and culture, picked out several of the latest toys poised to hit the market. Crayola has an app that brings coloring pages to life by recreating the page on screen. Kids can then use a mannequin to make the figure move on the screen. Anki Overdrive mixes video game technology with a real-life race course. Fisher Price has a “Smart Connect” set that allows parents to control their child’s cradle or nursery mobile with their phones.

LEGO made The Verge’s list, too: After a hugely successful movie release in 2014 that grossed $257.8 million in the United States alone, the company introduced technology that allows children to use the toy figures to interact with an app. LEGO FUSION blends building specially-created bricks and scanning them with a tablet. The characters within the app tell a story, battle each other, and more as the kids build the structures in real life. The products were first released in mid-2014, and the video below shows how the interaction works.

The increase in technology can be a concern for parents, though no recent concerns have popped up from LEGO users. Mattel, the makers of Barbie, have been fielding concerns because of how their newest doll interacts with children. Using cloud software, the new Hello Barbie incorporates speech recognition and connects to Wi-Fi. When children (or anyone) press a button on her belt buckle, the doll records what they say and sends it up to the cloud, keeping a growing record of the childrens’ likes and dislikes. The doll is scheduled to go on sale this fall for $74.99, but some critics say the doll is too “creepy” for their children. The company says it’s only providing what children have already imagined: a way to have a conversation with Barbie.

Regardless of trends in toys, and whether some like Hello Barbie even make it onto the gift list, Cohen told ToyInfo that the long-term success of any toy – “unplugged” or not, will have to do with the play value, not the gadgets. “I think part of the reason we’re seeing a resurgence of unplugged toys is that they have immense play value,” he said. “And those are the ones that are evergreens…We’ll see an explosion of digital toys but the ones that are going to make it are the ones that offer extraordinary play value, and that will be used over and over.” In essence, as long as LEGO still inspires kids to play and be creative, the company will be just fine.

Follow Nikelle on Twitter @Nikelle_CS

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