SM: How did LeapFrog miss the Internet?
JK: This is an interesting question, one that I used to ask a lot. The company was, in 2001, very active with a product called MindStation which was a dial up hub where customers would subscribe and get learning applets from LeapFrog. It was a flop because it was a dial up download application. It was pre-broadband, and it was just a bad subscription model that was never going to get big. Rather than take those lessons learned and go to the next stage, they just shut it down. “LeapPad is on this tear, and we just need more of those; different colors, sizes, and languages.” They felt “more LeapPads” was the answer to everything.
If you look at the IPO deck, it only speaks to LeapPad. The world more or less ends in 2003 or 2004, which pretty much is what happened with LeapPad. I think they were frustrated by their first venture into the internet and they were not web savvy. They had this other huge success which was unrelated to the Internet. It was a very technologically outdated product. The LeapPad was a piece of plastic and an unsophisticated chip. There were no graphics at all. Their success hid the possible importance of the web.
SM: When you decided to take on the new role, what was your vision? And what is your vision now that you have been there a while?
JK: My initial thinking was to essentially find out what was going on. When I joined I would tell people I was not a toy guru, and I did not know retail. I was really there to develop a strategy for this company that made sense. There was no strategy!
SM: That is quite obvious and the valuation reflects that.
JK: To stay on the strategy was very, very important to make sure we built the breadth of talent we needed to build a successful company. If I carry away any sense of belief from my Orbitz days it is that the reason Orbitz thrived against a lot of adversity is because we had a really capable set of people. We had the best marketers at the time, in 2001 and 2002. Google, which was another story, said they had never worked with better e-marketers than people from Orbitz. It was that way in those days, in every area; finance, marketing, paid search, application development, transaction systems… we just had a lot of strong people. That was the other key element. It was to determine a strategy with the company, keep it on strategy and then build a talented team who could execute and evolve the strategy.