This past week, my wife received an extremely attractive catalogue in the mail. You know the ones, all soft-lighted, sepia-toned, featuring a company's products in pleasant settings. The company offering these wares was FranklinCovey (NYSE:FC).

Oh, you remember FranklinCovey, don't you? Franklin produces those day planners that every up-and-coming executive-type hauled around in the early 1990s, while Covey is the author of The 7 Habits of Highly Effective People and its various sequels and spinoffs. Together they offer organizational solutions (have I mentioned how much I despise the term "solutions" in this context? Feh, my own problem), training seminars and programs, and all sorts of motivational/organizational aides.

FranklinCovey and its leading competitor, Day Runner, were absolutely mauled when they missed the PDA revolution launched by folks like palmOne (NASDAQ:PALM), then a part of 3Com (NASDAQ:COMS) and Apple (NASDAQ:AAPL). (OK, the Newton was a failure -- it was still a definite part of the revolution.) Neither company has been the same since then, and although both offer PDA products today, they have never been able to catch up or regain control over the organizational market, and their common stocks have reflected this failure. FranklinCovey stock recently traded below cash value for the company, and still trades well below book. This is a reflection of the market's belief that the company will continue to destroy capital rather than generate it.

OK, here's what's interesting about this particular catalogue: It had nary a description of any organizers -- paper or electronic, no training seminars, no books, nothing. It's all about leather tote bags and binders, heavily fashion-oriented. In other words, FranklinCovey has decided to take folks like Louis Vuitton, Coach (NYSE:COH), and Wilsons (NASDAQ:WLSN) head on, in a complete departure from its core business. It has teamed up with designers like Kenneth Cole (NYSE:KCP) to compete directly and credibly.

We're not the biggest fans of companies that diversify, but what FranklinCovey is trying to do is put its stake in the ground in a few more links on the value chain. Positive results in its core business have proven elusive, and it's running out of time to hope that training expenditures will rebound. So where the company started with the planners, then the binders, it has now gone for the totes that carry the binders that may or may not carry the planners. The trouble with such a move is that it is going into a space that is extremely competitive, where other companies with substantial brand awareness dominate and can command a premium, while off-brand totes are also legion and muddy the landscape for the marginal players.

But it doesn't seem like FranklinCovey had much choice. It could sit around and wait to die, or it could fight for a new market beachhead. It chose the latter. And in an informal poll of one, my wife noticed the catalogue, thought the totes were "attractive and inexpensive," and was not entirely dismissive of the potential for FranklinCovey to develop credibility in the business tote market.

Such a risk is fairly worth it for a company that finds itself on an iceberg in the tropics.

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Bill Mann owns none of the companies mentioned in this article.