Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How a 50-Year-Old Toy Company Pivoted to Digital Gaming
Transcript
- Lucas: So when you think of a toy company that started in the 1970s, you probably picture plastic bricks and a lot of parental foot-stubbing. But the company we are talking about today made a pivot that surprised a lot of people. Around 2014, they decided to stop just selling physical toys and started investing seriously in digital games. Luna: And this wasn't a small side project. They set up an entire digital gaming division, with hundreds of developers. That took some nerve for a company whose whole identity was physical. Lucas: Exactly. The CEO at the time basically said, 'If we don't figure out where kids are spending their attention, we'll become irrelevant.' And kids were already spending a lot of time on tablets and phones. So the company launched a series of mobile games based on their classic characters. Luna: I remember some of those early games. They were simple, but they had that same building and creating feel as the physical sets. It was smart, but it wasn't an instant home run. Lucas: Right. The first few titles got decent downloads but not huge revenue. The real breakthrough came when they tied the digital games to the physical toys. You could buy a set, scan a code, and unlock special content in the game. That blend of physical and digital created a whole new loop. Luna: So it wasn't just a game. It was an extension of the play experience. And that made parents more willing to buy the toys, because the digital component added value. Lucas: Exactly. By 2017, the digital division was generating over two hundred million dollars annually. That's about ten percent of total company revenue at the time. And it kept growing. By 2020, digital revenue hit around three hundred fifty million, roughly thirty percent of total sales. Luna: That's a massive shift for a company that was founded on injection-molded plastic. And it required a completely different culture inside the company. How did they manage that? Lucas: It wasn't easy. There was internal resistance from the old guard. The head of the physical product division reportedly said at a meeting, 'We're a toy company, not a software company.' But the CEO was persistent. They hired a new chief digital officer from the video game industry, and they created a separate workspace for the digital team, away from the main factory. Luna: That separation is key. If you put software developers next to assembly line managers, the culture clash can kill the initiative. Giving them their own space, with their own processes, allowed the digital team to move fast. Lucas: And they didn't just stop at mobile games. They also licensed their characters to major video game franchises. One of their biggest hits was a crossover game where their characters appeared in a popular open-world sandbox game. That introduced the brand to an older audience, teenagers and adults, who hadn't touched a toy in years. Luna: That licensing strategy is something we've seen with other legacy brands. But for this company, it was a deliberate step to stay culturally relevant. And it worked. Their brand awareness among teens increased significantly. Lucas: Another bold move was investing in augmented reality. In 2019, they launched an AR app that let you project their characters into your living room through your phone camera. It was a marketing tool, but also a standalone play experience. Kids could build virtual structures that looked like they were sitting on the coffee table. Luna: And that was before the pandemic, so it was ahead of its time. Then when lockdowns hit, the digital products became essential. The company's mobile games saw a spike in daily active users, and the AR app got featured by the app store. Lucas: So the pivot wasn't just a hedge. It turned into a core growth driver. And what's interesting is that the physical toy sales didn't suffer. In fact, the digital engagement drove more interest in the physical sets. Parents whose kids played the mobile game were more likely to buy the actual toy. Luna: It became a virtuous cycle. The digital products acted as a funnel for the physical products, and vice versa. That's the ideal outcome for any company trying to bridge two worlds. Lucas: I think the key lesson here is that the pivot was about extending the brand's core promise, not abandoning it. The core promise was creative building. The digital games were just another way to build. So they didn't betray their identity; they updated the medium. Luna: Right. And they were patient. It took about three years for the digital division to become profitable. Many companies would have pulled the plug after a few quarters. But the leadership had a long-term view. Lucas: That patience is rare. And it's worth noting that the CEO who championed this pivot had a background in media and technology, not toys. He was brought in specifically to shake things up. So sometimes, bringing in an outsider is the only way to make a pivot stick. Luna: Absolutely. Internal candidates may be too invested in the old way of doing things. An outsider can see the opportunities more clearly. Lucas: So, as we look at the landscape in mid-2026, this company continues to invest in digital. They've even started experimenting with generative AI tools that let kids design their own virtual builds. The pivot from 2014 laid the foundation for that. Luna: It's a great reminder that a pivot doesn't have to mean starting from scratch. It's about leveraging your strengths in a new environment. Lucas: And speaking of leveraging strengths, if these conversations have helped you think differently about your own business or career, consider supporting the show. Listener support is what keeps this podcast ad-free and independent. You can do that at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to keep the conversations going, and we really appreciate it. Every bit helps us stay focused on the stories that matter. Lucas: So back to the pivot. One thing I find fascinating is how the digital pivot also changed the company's relationship with its fans. They started using social media and online communities to get feedback on new game features, which made fans feel more invested. Luna: That community feedback loop is something a toy company from the 1970s would never have had. It's a whole new channel for innovation. Lucas: Exactly. And it's a lesson for any legacy business facing digital disruption. The tools are out there. The question is whether you have the courage to use them.