cators to customize LeapFrog’s award-winning technology and products for the classroom. A new, school-oriented line was developed, called “Leap Into Literacy,” with its core LeapPad platform—a toy that could hold various electronic, interactive books. The device enabled children to use an electronic pen to point at words or letters, and the LeapPad audio system would produce the corresponding sounds. When LeapPad was launched, there were just a few books, but by the turn of the century, there were more than 30 titles in the line. LeapPad made LeapFrog Enterprises a force to be reckoned with, as its sales jumped from $160 million in 2001 to $680 million in 2003. In 2003, the LeapFrog SchoolHouse division experienced an 86-percent net-sales increase compared to the previous year, which helped establish it as the fastest-growing K–12 instructional software publisher, according to Simba Information’s “Electronic Media for the School Market 2003–2004” report. The division’s net sales of $37.4 million that year were a result of the growing success of its core products, including the Ready, Set, Leap! program, the English Language Development program, the LeapTrack Assessment & Instruction System, The Literacy Center and a growing library of LeapPad books. The growth continued in 2004 with $55.2 million in net sales, a 47-percent increase over 2003. The Decline Then, in late 2004, the company’s growth spurt came to a halt. The decline started when, according to The Washington Post, “The president of SchoolHouse, LeapFrog’s education division, [Bob Lally] resigned in December after the California company found that he had broken [undisclosed] ethical rules.” The Post reported that Lally’s resignation was related to a company investigation that was launched into the sale of nearly $1 million in educational software to a Prince George’s County (Maryland) school official, whom another LeapFrog employee (who also resigned) was living with at the time. In early 2005, news of the COO’s resignation, a “string of high-level management changes at the firm” (SFGate.com, Feb. 15, 2005), and what some considered an abrupt resignation by a board member added to the company’s woes. That year, net sales for LeapFrog SchoolHouse fell to $40.3 million, down 27 percent from 2004. In 2006, net sales dropped another 8.4 percent to $36.9 million. Marketing guru and best-selling author Seth Godin believes that LeapFrog SchoolHouse hit what he calls “ ‘a dip’—a temporary setback that will get better if you keep pushing.” “Breaking through that difficult spot isn’t easy, and the only way to do it is to stop most of what you’re working on and focus obsessively on being the best in the world at one thing,” Godin says. “They have to dominate a niche, not be mediocre at many things.” In late 2006, LeapFrog Enterprises President and CEO Jeffrey G. Katz announced major changes to the LeapFrog SchoolHouse division, with a plan to focus on its strengths. “Going forward, SEPTEMBER 2007 | BookBusinessMag.com
The LeapPad is the original interactive platform at the core of LeapFrog SchoolHouse’s success.
the SchoolHouse division will focus on what we do well and what we are known for—innovative, technology-based approaches to early literacy and reading,” said Katz. “As a result, we are reducing the size of our SchoolHouse organization, and focusing our sales and product-development resources on reading curriculum for core grade levels.” The Turnaround To lead the LeapFrog SchoolHouse division’s transition, the company brought on Mike Lorion as president. In the weeks and months that followed, the division cut its operating expenses in half, primarily through a head-count reduction of approximately 60 people. “Our strategy to ‘right size’ our expense relative to our business was key for LeapFrog SchoolHouse,” says Lorion. “The result to date has been better-served customers by having a clear focus on our strength, PreK-5 literacy solutions, which serve not only schools who have students in need (to improve their basic reading skills), but have also served the needs of English language learners and special education students.” Lorion has a strong digital and educational background, including a former position as vice president of the education division at Apple Computer Inc., which LeapFrog found particularly relevant to the position. “LeapFrog SchoolHouse, along with traditional publishers, is committed to creating lifelong readers; but to reach them in today’s digital age, you have to add technology to the curriculum to provide an engaging learning experience, while providing the teacher with methodologies to better understand their students’ learning needs and provide them with the individualized instruction so all students can unlock their learning potential,” Lorion says. One of the major changes under SchoolHouse’s restructuring plan is the development of successor products to the LeapPad Learning System, which will be introduced in 2008 and sold in the school market. According to Lorion, connectivity and mobility are critical to being able to deliver and individualize an instructional experience that can be used in both the classroom and the home. “The LeapPad continues to be the best mobile ‘personal learning tool’ that delivers a multisensory learning experience,” he says. “So, as we evolve our ‘Touch and Talk’ technology > 17