On Tuesday Lego announced that it plans to lay off 1,400 people — about 8 percent of its workforce — as it does that thing all companies are trying to do: Pivot to digital.
Yes, even a highly successful maker of children’s modular toys cannot resist the digital world.
The news comes as Lego reported its first fall in sales in more than a decade. The company also admitted it’s not too optimistic about the next couple years, setting expectations low for a return to sales growth in the immediate future.
“We have now pressed the rest-button for the entire group,” said Jorgen Vig Knudstorp, chairman on Lego, to Reuters.
Until recently, Lego had been thriving. The company built an impressive array of partnerships with brands including Star Wars, Harry Potter, and Minecraft.
Lego has also been moving beyond its physical bricks with products that either incorporate digital experiences or rely on digital products entirely. Lego Boost incorporates coding into physical products. Lego Dimensions has moved the company into gaming. And there are the Lego movies and other Lego-themed video games as well.
But it’s not enough.
“We will find more opportunities to engage with kids and parents, including innovative ways to blend physical building and digital experiences, such as our successful Lego Life social platform and Lego Boost building and coding set,” Knudstorp said in a statement.
The reality for Lego is similar for many other companies, whether they be in children’s toys or media or manufacturing. The future is digital, and many organizations just aren’t currently structured in a way that makes sense for that.
It’s a future where children are spending more time on computers, including for recreation, particularly on smartphones. Games like Minecraft (which has clear similarities with Lego) have shown how experiences with real-world inspiration can engage kids digitally and offer much more.
For now, the job cuts will trim Lego’s operating costs, improving the company’s balance sheet to help offset its sales decline. The move could also mean hiring for more digital-focused positions that will help Lego develop new offerings.
Don’t worry: Lego isn’t going to stop making its iconic bricks anytime soon. Physical products remain the company’s core business.
It can’t, however, just be about the bricks. Even Lego has to get more digital.