Turning Around LeapFrog: CEO Jeff Katz (Part 6)

SM: What is the strategy you arrived at? And what is the process you used to get there?

JK: It is pretty simple looking back. The process started simply by getting the various constituencies lined up. There was a board constituency, a senior management constituency, and you had key movers and shakers; people who, once a decision was made, could actually implement it. Those people had to be involved. We began to dredge up the data. What did the data say? We created hypothesis, vetted them, and then we went through quite a lengthy, iterative process through the stakeholders many times, through many board meetings until November of 2006 when we publicly announced the strategy. Through that iterative, analytical hypothesis forming and hypothesis proving / disproving series, through those constituencies, we came up with this strategy.

SM: What were some of the nuggets from the data that you found?

JK: Most important was the company’s consumer brand strength and recognition with retailers and consumers. The ultimate sweet spot where there was no competition was in this area of “learn to read”; sort of a consumer “learn to read” product proposition was at the core of the company’s strength. It was at the core of its peak sales decline trend. So to recover product strength it had to offer a really great next generation product around reading. That was mind numbingly clear in the data. Oddly, it was not what the company was pursuing. They were pursuing Fly. They company invested really tens of millions of dollars in fly, a pen-computer product for 10 – 15 years old, yet ours was a franchise with retail shelf space and brand attributes based on 2-4 year olds.

SM: I am sorry, but this sounds incredibly stupid … looks like there was no strategic marketing expertise in the company for many years!

JK: This is what happens to companies. This is not the only company that has pursued a detour. There are many famous companies who have been through this. That detour was happening; the data pointed it out and proved it, reminded everyone that should there be any sort of dissenters the data was solid. That was a key and still is the most important conclusion. Learn to Read for 2-4 year old kids is our key market.

There were a host of others. Another one had to do with the cost structure. The company had historically been inflated which is fine with a superstar hit that generated 60% margins. You can afford the masseuse and chef and so forth. As that product richness wears off, you have to get at your core cost structure. We were adding a lot of complexity into costs in the way we did things. There was no platform of strategy where we built everything on a core software platform with shared libraries, or where we built everything based on one chip for all products. We would have 5 or 6 different chips.

SM: Geez, even semiconductor companies think twice before having 5-6 different chips!

JK: It was entrepreneurial, that was the typical excuse for everything. We had to bring in people who could understand discipline and design in terms of platforms. We had to get the company away from multiple methods of building products down to as few as possible. That was another key and that of course will ultimately impact our cost structure so we have more resilience to the ups and downs of a product life.

Another important one was connecting to the web. All of our consumers are connected. They live a connected life.

This segment is part 6 in the series : Turning Around LeapFrog: CEO Jeff Katz
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