SM: While you were doing Orbitz, did you already join the board of LeapFrog?
JK: No, I joined the board in April of 2005.
SM: How did they find you?
JK: Leapfrog had been in the process of restructuring its board of directors, moving from insider directors to independent directors. They were looking for somebody who had more marketing and technology experience in a consumer marketplace to put on the board. I fit that bill, just kind of happenstance more than anything. I was in California and it was a California based company, so I met the Chairman of the board and for me, I was interested in doing something which utilized technology, was consumer facing, and was not travel. LeapFrog was a great fit for that. It had a known brand, a very well respected brand.
In many ways it is a technology company, but it is definitely consumer facing. I came to their attention in their board search and now here I am.
SM: What was the situation when you came to LeapFrog? Can you spend some time putting leapfrog into perspective? What was the genesis?
JK: The company was founded in 1995 by a lawyer who had a dyslexic son. He was convinced he could teach his son to read better than the schools could. He was very knowledgeable about phonics and he invented the phonics desk, letters, and magnets. He pitched this to all kinds of retail, and the thing nearly went bankrupt until Mike Milken found it and thought there might be something here. Mike was very interested in pursuing education in a commercial way. The Milkens introduced the founder to a little company in Los Gatos that had built a talking globe; you would point the Stylus at Spain and it would say “the capital of Spain is Madrid.” The two came together with their technologist and decided they could build a talking book. Ultimately that became LeapPad which sprung to huge success.
When I joined the company, LeapPad had gone its course. It peaked in 2003, it was 60% of the company sales, and it was a huge hit on a Barbie sort of scale. Things in the Toy industry are unpredictable. I joined the board when it was already declining and the core product, which accounted for 60% of sales, was in decline. A company begins to decline when its star product declines. When I joined it was clear to me and other board members that we did not know what the company was doing about it. We could not tell.
The company had this Fly 1.0 product which it was really excited about, but in retrospect it was never expected to replace the LeapPad because it was designed for 10 – 15 year old kids. We could not figure out what the company was doing about the younger age group which was their sweet spot. When we would ask, we were not real confident in the material and the information that would come back. Ultimately that led to a change in the leadership of the company.
I often say that I was demoted from the Board to Management. I had been on the board for a year and I knew the company. I was motivated by the idea of the consumer facing, strong brand, technology levereged company. That is how I began to get involved.