Q&A: Tom Adams, President and CEO, Rosetta Stone
By investing in the right technologies, the company helps people learn languages more effectively than ever.
Rosetta Stone Inc. (RST) president and CEO Tom Adams knows the value of speaking like a local. Born to Swedish parents, Adams learned French while living in France as a child. When he moved with his family to England at age 10, he picked up English. Adams, now 37, speaks four languages fluently and a few others well enough to get by when he’s traveling. “I love languages,” the CEO says. “If you learn them successfully and you’re able to connect with people, your life experiences are so much deeper.”
Language immersion, Adams says, is what differentiates Rosetta Stone from other self-study aids. In its library of more than 30 software products (sold via CD-ROM or the Internet), nothing is translated. Students learn by completing a series of interactive exercises that build on previous lessons. The programs replicate the way children learn their native languages, Adams says, and are quicker and more effective than translation-based methods.
A graduate of France’s INSEAD and a former commodities trader, Adams says he joined Rosetta Stone as CEO after a close high school friend introduced him to Allen Stoltzfus, who founded the company in 1992. Stoltzfus called his product Rosetta Stone after the artifact that unlocked the secrets of Egyptian hieroglyphics for linguists. Since Adams became CEO in 2003, revenues have grown to a reported $209 million last year, from $25 million in 2004. Adams still makes time for new languages. Recently he’s been learning Russian — and, as a new father, baby talk from his daughter.
Why are your products so engaging?
People have a defined idea of what learning a language is like. They sit through years of language instruction or buy tapes. But our offering is very different. The key is to have someone try a language they’re not familiar with. It’s effective if you know a little of the language already, but it’s best to demonstrate it in a completely unknown language so you get the full effect. Within five minutes, they’ve already learned — effortlessly. It’s an aha! moment.
What else accounts for the success?
First, we invested in the right technologies, such as speech recognition. Second, we figured out how to get people to try our product. Rather than putting it on store shelves or in catalogues, we offer demos online and at kiosks so people can see how it works. Right now we have about 160 kiosks in airports and shopping malls across the country. We are able to open kiosks quickly in high-traffic areas when space becomes available and take down ones that are not performing. We also developed print and online advertising to drive people to a demo, which has increased sales.
How has the company changed since you became CEO?
We’ve grown to 1,500 employees from about 100. We managed to transform the company organizationally while making the culture an even greater asset. We’re very entrepreneurial. We test a gazillion ideas throughout the company — in marketing, product development, Web development and our call centers. We also make sure that any idea is scalable, structured and process-oriented. Everyone is aligned for the mission: to deliver the best technology-based solutions for learning languages.
How has the recession affected Rosetta?
We’ve suffered from lower foot traffic in airports, reduced leisure and business travel, and a weaker sense of urgency about globalization. Still, we’ve grown dramatically in the past two years. People are investing in themselves like never before. Language, and the ability to communicate with people from other cultures, is increasingly important. People are more on their toes about remaining competitive and having the right skills for tomorrow.
Who are your customers?
Consumers account for 80 percent of reported sales, with institutions such as schools, government agencies and corporations making up the rest. Corporations offer high potential for us. This economic environment has made companies stop and evaluate whether they have the right, most cost-effective learning strategy for employees. A good example is Thomson Reuters Corp. (TRI). A language-training audit a few years ago revealed that the company was spending a lot more than it had thought on ad hoc employee immersion classes with private tutors. Thomson Reuters did a trial with us, and now it’s a top customer.
What’s your international strategy?
While only 5 percent of our sales come from outside the U.S., our customers span more than 150 countries. Still, we need to find the local interpretation of a universally sound business model. Kiosks work very well in the U.S., but they’re not a common sight in the rest of the world. We have offices in London and Tokyo, and we will open offices this year in South Korea and Germany. We haven’t entered China yet because of piracy issues. International growth is our biggest challenge and our biggest opportunity.
What are your latest innovations?
This summer we released a new Web-based service, Rosetta Stone TOTALe, that lets users practice with native speakers in real time. If you’re learning French, for example, you’ll be able to connect with someone who’s French and who wants to practice English. We’re also focused on mobile technology.What keeps you up at night?
The prospect of competition. Right now no one else is really passionate about technology-enabled language learning. But we’re not complacent. This is a capitalist society, and it’s possible to have a good idea, develop it and build a successful business very rapidly.