In this episode, we wanted to find out how Rosetta Stone transformed its business from a disc-based language learning program into an educational technology powerhouse. Matthew Hulett, President of Language of the company, shares. He also discusses the different types of Rosetta Stone customers, and how his team designs experiences for each.
Transcript
[MUSIC]
Kaitlin Milliken: Hey, you’re listening to a bonus episode of Innovation Answered the podcast for corporate innovators. I’m Kaitlin Milliken from InnoLead. Today we’re taking a deep dive and focusing on one company: Rosetta Stone.
Whenever I think of Rosetta Stone, I always remember seeing the ads as a kid. It’s sometime in the early 2000s, I’m watching cartoons and an ad comes on the TV, promising that you can learn any language — at home. All you need are the CD ROMs and a computer
AD Audio: You have your natural ability, now all you need is Rosetta Stone. Your natural ability, awakened. There’s never been a better time to try the new Rosetta Stone language learning solution for yourself. Your free demo contains a complete first lesson and more information on how the new Rosetta Stone version four will work for you.
Kaitlin Milliken: I was sold. I had big plans, learning Japanese Tagalog Spanish. Um…I did not do that. Because I was eight and did not have money. But those yellow boxes still stick with me as an iconic part of the brand.
But Rosetta Stone’s brand goes way beyond that. In 2008, the company had a $112 million dollar IPO. In 2010, it acquired five other language learning companies and launched a kid’s division. In 2014, Rosetta Stone started a program focused on helping kids with their reading. By the end of the decade, Rosetta Stone had established itself as an educational technology company.
They also began to transition away from physical disks into a subscription model. Now, you can choose your language and the length of your subscription. So, for example, you can get Spanish lessons today for $11.99 a month. There’s also a version where you can learn unlimited languages for $14.92 a month. With that you get access to online courses, live tutoring and their true accent technology designed to help you sound more like a native. Matt Hulett, the President of Rosetta Stone, played a major role in the company’s transformation.
Kaitlin Milliken: Do you speak any languages other than English?
Matthew Hulett: I barely speak English well, but when I’m not speaking English, not so well, not so proficiently. I’m learning Spanish.
Kaitlin Milliken: Can you introduce yourself in Spanish? You only
Matthew Hulett: Yo me llamo es Mateo Hulett. Mi familia y yo vivimos en Seattle, Washington.
Kaitlin Milliken: Fabulous. [LAUGHS] Matt joined Rosetta Stone in 2017, bringing with him years of experience leading startups and working with artificial intelligence. He understood the importance of moving teams into the future so they can compete with new disruptors. And that’s really important in the age of Duolingo, Babel, and other mobile-first language learning apps. During the conversation, Matt shared the nitty gritty of digital transformation at the company, and what Rosetta Stone’s business model looks like today. We’ll be back with Matt after this break.
[AD Jingle]
Kaitlin Milliken: We’re really excited to have Matthew Hulett not only on this podcast, but also at our Impact event on October 20 through the 23. This year, we’ll be completely online. But don’t worry, we’ll still have the great content that you love. For more, I’ll toss it over to Caitlin Harper IL’s Events Manager.
Caitlin Harper: Hi everyone, we are fortunately going to turn this virtual event into a global event with more people from more places than ever before at Impact 2020. This is exciting. In fact, 2020 will have this same great keynotes, you’ve come to expect breakout sessions, and even our virtual site visits. So get ready to visit places like Kellogg, the Smithsonian, New Lab, from the comfort of your household. I don’t know what you’re doing, if you’re not buying a ticket right now to Impact 2020. Whether it’s an individual or a team ticket, make sure you are there because it will definitely be as close to in-person as a conference is getting this year.
Kaitlin Milliken: Thanks, Caitlin. You can learn more and get a ticket at innovationleader.com/impact2020.
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Kaitlin Milliken: And we’re back with Matt Hulett. Matt is the President of Language for Rosetta Stone. In his role, he works on driving innovation and growth for the company’s consumer enterprise and education language businesses.
So if you could kick us off by telling us about what you do at Rosetta Stone.
Matthew Hulett: I am the co-president of Rosetta Stone. I also run the language division at Rosetta Stone. And Rosetta Stone is the world’s leader in digital language learning solutions, both in schools, selling software to teachers and superintendents in schools to make literacy actually, something that actually happens in the school. If two-thirds of kids are reading below grade level, we have software that actually solves that. And then we also sell language services for schools, corporations, and consumers as well.
Kaitlin Milliken: I think a lot of people still picture Rosetta Stone as the yellow boxes with the CDs that you load into your computer. But the company has really changed. Can you talk about how Rosetta Stone has digitized its products?
Matthew Hulett: Yeah, it’s a business in transformation. And we’ve kind of gone through that transformation. About two-thirds of the business is selling language services, about a third of selling digital language literacy services into schools. We went through a massive transformation going from CDs to digital, and so we’ve completed that migration. But through that, we actually had to completely transform the company in terms of how we go to market who we hire, and the types of customers that we work with. So it’s been a rapid transformation.
Kaitlin Milliken: When you were moving away from the physical product into that digital offering, what were some challenges that your team encountered? And how did you work through them?
Matthew Hulett: Yeah, it’s a big challenge that most companies haven’t had to go through. I could think of maybe on one hand, companies like Adobe that moved from perpetual software to subscription, maybe some others. But investors first, so moving from perpetual to subscription, actually has a different revenue recognition. So instead of selling a $1,000 CD, you’re selling a software subscription that’s lower price, that’s actually amortized over a number of months. So from a financial perspective, it’s setting the expectations with investors that the revenue is recognized differently.
From a go-to-market perspective, it’s figuring out how to find customers, how to convert those customers in a way that gets them excited about the product. So getting the funnel, right, getting customers to convert in the funnel and trial experiences. And then building products that are really native to those devices. So building an experience for iOS and Android that is really kind of native for today’s mobile consumer.
Kaitlin Milliken: Right. You mentioned getting folks to change their habits. So they were used to having the CDs and getting them accustomed to the new product offering. What was that like? How did you test to make sure people would be able to get on board for that change?
Matthew Hulett: Yeah, and it was a bunch of testing. It was basically, we approached it from an agile perspective. How do you build a minimal viable product in terms of what the product functionality looks, but also the pricing and the packaging. And so we provide, for instance, where we’ve landed is products that are longer term subscription products, as well as shorter term subscription products. And to get there it was, a year and a half of testing, and really modifying the go-to-market. But it really allowed us to think more about the customer.
When you sell a CD, or you sell anything perpetual, you don’t really monitor if people are using it if they like it. And so really thinking about software as a service, you make sure that customers are using the product. You’re building features and functionality that keep customers engaged. It’s a completely different mindset.
Kaitlin Milliken: Now you’re able to get more data than before when it was a perpetual object that people owned and then used on their own device. What are some of the things that you’re measuring to gauge success?
Matthew Hulett: One of the things that I do like to tell teams is “Don’t measure too much.” Oh, because the dashboards that I’ve typically seen in a lot of different companies I’ve been associated with, are so large that you’re constantly hitting page down, because there’s page after page after page of things that are being measured. For us, it’s really about the customer satisfaction rating. And we’d look at NPS and App Store ratings. And really what we look at is active usage. How many of our customers are using the product from the day they install the product from free trial through their journey as a language learner?
Kaitlin Milliken: And do you see a difference? You mentioned that some of the customers are kids who are in school and they’re learning a language or they’re getting used to reading, and I’m sure other folks are in business, as you mentioned, or they’re individually hoping to learn a language. What are the different behaviors for those three groups?
Matthew Hulett: North American consumers are primarily focused… When they’re consumers, they’re pretty much focused on experiences to unlock, how to better enable and empower themselves. So to be blunt, it’s going on a trip and exploring a new culture and really fitting into it feeling like you really get to know and experience those experiences just like someone who lives in that location. For everyone outside the United States, really, language learning is an impediment that if they don’t solve for it, for their next stage in life — whether it’s academic or professional pursuits. And primarily English is the most important language that’s being taught around the world. So completely different. So I think about the hunger scale — 10, you have to learn a language to one you don’t — the North American consumer is pretty much a three or four. Outside the United States, it’s a nine or a 10.
Kaitlin Milliken: And how do the offerings match those differences on the hunger scale?
Matthew Hulett: Yeah, so we have an enterprise product that we sell to some of the largest companies around the world. Think about Accenture, think about Philip Morris, Vodafone, General Motors. We have a product that actually spans beginning level content all the way to advanced. And so we have an assessment product that makes sure that admins are monitoring their learners’ progress, and that we’re shepherding the consumers to where they need to go primarily because it’s a requirement for work. Get a promotion with better proficiency scores in your speaking. And that’s how we’ve kind of packaged that product.
For consumers, we’ve actually built a kind of a one size fit all product for all consumers, primarily focusing on the United States. One of the things that we’re looking to do, though, is really change the product as we think about go-to-market expansion outside the United States. So we’re thinking about doing things like human based tutoring that’s digital, so integrating that into the consumer experience. And so we’re doing a lot of testing there.
Kaitlin Milliken: I want to talk a little bit about your background. So you’ve been a long time entrepreneur, what are some of the skills that you’ve taken from that side of the innovation world, the startup scene, that you’ve been able to bring to Rosetta Stone?
Matthew Hulett: When you’re going into a big company, with an attitude towards creating a startup culture, it’s making sure that you’re aligned with the capital allocation, the strategy to the product. I think so many times big companies say they want to be a startup, but don’t really put the processes and framework in place to do that. So I think the first step is aligning expectations with your stakeholders, whether it’s your board or your investors. And then once you do all that work, it’s largely creating small teams that move very fast, and creating false milestones, creating a sense of anxiety, not for bad, but for creating these guardrails to make sure that you’re not shipping too much of a product before you know that it’s validated in the marketplace.
Kaitlin Milliken: That good nervous energy.
Matthew Hulett: Good nervous energy. So it’s when I run startups before, the extreme is, if you’re running out of three months, you’re very focused. In big companies, you’re a little bit more relaxed, because you know, generally your company’s doing well. And you know, when your vacation is going to happen that year. So if you can bring some of that anxiety and intensity around looking at making sure every effort that you do isn’t wasted, and that every effort that you’re doing is actually focused on building the best product, given the amount of requirements and capital that you have. That’s kind of what I’m referring to, in terms of that good nervous energy.
Kaitlin Milliken: I know something that can be really interesting is in startups, there’s this idea that innovation comes from everywhere. At Rosetta Stone, do you have a dedicated group that’s working on innovation or and research and development? Or do you have it more diffused across the organization?
Matthew Hulett: I’m a big believer on not partitioning innovation. Everyone should be able to have innovation built in. And so the way we do it is, we have a strategic framework. And it starts with the vision, mission, cultural values, and then it actually flows through to the product development framework. And that sounds really fancy but you get alignment around the product roadmap to cultural values and magical things happen. So we have sprints every two weeks. One of those sprint’s every quarter is dedicated to innovation, which is lined up to our product roadmap. And we have found more features in innovation and innovative thinking outside of executives pontificating about what the next big thing is, it’s developers and product managers working together.
Kaitlin Milliken: So there’s a lot of competition in the app base language learning field. I know Duolingo is one of the ones that’s very commonly used, especially because it’s free. How does Rosetta Stone stay ahead of that competition and stay competitive?
Matthew Hulett: Yeah, and I generally make a rule to not denigrate competition. So if someone’s going to use a competitive product versus mine, and they like that better, more power to that person. Rosetta Stone largely has been playing defense, because we’ve been transitioning our business model from perpetual to digital. And now we’re ready to play offense, and we have the best brand in the world, and we see from customers the best product in the world. And now what we’re really going to focus on is marrying HI and AI together. So how do you build the best, most comprehensive, affordable solution to get you more proficient faster, and that’s really where we want to carve out our niche is really getting you proficient.
That proficiency is in the eye of the beholder. So if you want to be an advanced learner, we’d like to get you there. If you want to be a beginning learner, we want to get you there. And really the hallmark of that, for us is speech recognition, in sounding confident, in sounding like a native speaker. And that’s something that no one does. We’re the only language learning technology that has its own speech recognition technology. So sounding confident and sounding like a native speaker is hugely important, especially outside the United States.
Kaitlin Milliken: And do you see any churn especially for the folks, who are looking to be proficient enough to have experiences, but maybe they’re not looking for complete fluency? Do you see a lot of those folks being involved with Rosetta Stone and then turning away and stopping once they’ve hit that level? And how do you respond to that?
Matthew Hulett: Most definitely, the answer is yes. And so we think about that in terms of how we price and package the product. So we have a three month product that customers who want to dabble in a language can use. And for longer term subscribers, we actually have 12, 24, and lifetime subscriptions. For those products, actually, we enable you to learn up to 24 languages, if you want, all for the price of one subscription. And they’re completely different types of customers. And that’s how we think about it is, how do you offer the right pricing and package to the right consumer?
Kaitlin Milliken: There are a lot of teams in our audience that are working on digital transformation, do you have any tips that you’d like them to know that you think are helpful?
Matthew Hulett: Making sure that you’ve got a framework for your development process that’s agreed upon and adopted widely. And so I often find that larger companies fall in love with their frameworks, as well. So it’s two sides to this discussion. One is, you need to have a framework, but also don’t fall in love with your framework. So we use safe, for instance, as a scaled agile framework. But if you only focus on being predictable in everything you do, you never do anything unpredictable, and you never get transformational returns for your business. So I’d hold for larger companies, two different types of postulates: One is, have a framework that’s agile, pick whatever framework you’d like, that’s a methodology that everyone understands.
Two is, don’t look at the framework too much, because it’s really about outcomes. And so I look at things still like sprint velocity, innovation developed in my driving the key behaviors, and my KPIs that move my business forward. And so it kind of parry that framework and the process with the outcomes is what I would do. And then with digital transformation, I think the big one is understanding what those key performance indicators are as you make that transition. So for instance, if you’re trying to build a product that’s supposed to be a recurring revenue product, you really have better thought through how to get onboarding right. That’s something that probably wasn’t in your product roadmap prior to the transformation. So kind of marrying the outcomes, the framework, and then really thinking through the specific use cases that you’ve never had to think through before.
[MUSIC]
Kaitlin Milliken: My initial conversation with Matt was recorded at the end of February in 2020, long before the US lockdown due to the COVID-19 pandemic. Since then, kids and adults have been stuck inside. A lot of people have claimed they were going to use quarantine to learn a language. Parents have been looking for educational entertaining ways for their kids to spend time at home. To top it all off, at the end of August, Rosetta Stone was acquired by Cambium Learning Group for $792 million. With a lot of changes to discuss. I called Matt back in September.
And thanks so much, Matt, for coming back to do a really quick update.
Matthew Hulett: Yeah, thanks for having me. It’s been a while like maybe seven months since we talked.
Kaitlin Milliken: So in that time, has your team seen any changes in the way people are using the products offered by Rosetta Stone?
Matthew Hulett: A couple things happen. One, obviously, the global pandemic which forced everyone inside and changed fundamentally how we’re all working. Working from home, working remote. And for our products — not just our language products, but also our K-12 literacy products — we saw a dramatic increase in usage because we’re a really good solution to learn remotely. And so we saw usage go up both for tutoring as well as our e-learning activities. And that was just a fundamental consumer shift that happened immediately, as soon as the United States primarily that’s where most of our bookings are locked down. We saw a dramatic increase in usage all across our product lines.
Kaitlin Milliken: Just to focus a little bit more on the education element. Have there been any changes to the product itself when it comes to education since a lot of younger students may be learning remotely this fall?
Matthew Hulett: Our last public earnings report had us growing our consumer business at 90 percent year over year. And what we did to answer your question is a couple things. One is, we gave away a three month free subscription to our subscription software for students. We knew that parents were, and are still, stressed out and feeling somewhat lonely, as well as people wanting to upskill and extend learning. We offered free three months of group tutoring. So this is digital tutoring that we provide in our software. We’re the only leader in the space that really combines tutoring with their education software. And we offer that for free for three months. Those two programs we launched in early March, and really helped a lot of people in our business increased as well.
Kaitlin Milliken: I really love how you mentioned a lot of the feedback you were getting from customers, how were you assessing their needs and staying connected and realizing these new demands?
Matthew Hulett: We’re a really customer centric organization. So we capture feedback from lots of different sources. So we get a lot of great feedback from our tutors. We have over 400 tutors that we employ as part time employees. We get a lot of feedback from them, because they actually have the most intimate relationship with our customers. We also hear a lot from customers directly, whether it’s in the App Store reviews, or directly into our customer support organization. And then we also just look at usage as well, we look at what people are responding to buy every tap or every click of the mouse. We look at what people are doing intrinsically and how they’re using the product.
Kaitlin Milliken: So I have two more questions. One is sort of looking back and the other is looking forward. So looking back, what are some of the takeaways or learnings that you’d like to share since the start of the pandemic and all of the challenges in 2020 thus far?
Matthew Hulett: I would say always have a plan B. And what I mean by that is from the top of the stack to the bottom. Always have a plan for disaster recovery that scales for people and processes. Always have a plan for cash flow remediation, if things don’t go your way, whether they’re internal or external, where the structural, always have a plan B. And then align your business so that it’s much more agile than than you even think it should be today. Like we thought we were pretty agile, we do OKRs quarterly goals, we’re pretty much remote first. Anyways, I thought it was pretty agile. No, I wasn’t agile enough. And I would say that, you know, establishing more agile processes in your business, not just in the traditional R&D and product areas, but across all your functions is going to be important moving forward.
Kaitlin Milliken: My final question is about looking ahead. So I know that the economic outlook, as we go into 2021, there’s a lot of uncertainty. What are your innovation priorities? Right now as we move through this really uncertain time period?
Matthew Hulett: Yeah, it’s a really timely question. In fact, last week, Rosetta Stone actually announced that we are selling the company to a private equity firm, and being acquired by one of their portfolio companies. That’s the leader in K-12. So we basically have now established that we’re one of the largest education powerhouses both digital and offline. And that’s pretty exciting for us. And so for me in the future, it looks like how do we enable adaptive, blended learning, which is tying together human based instruction, which is super valuable, with AI? And so how do you tie those two things together so that learners of any age whether you’re talking about K-12, whether you’re talking about adult learners, or whomever, get the results they want, economically in a faster period of time than what was previously expected or known?
Adding in a little bit of human instructions with some qualitative feedback does provide accelerant and also provides you some fluency that you normally wouldn’t get even speaking into speech recognition software. So we think there’s a lot of ways to get results faster by blending that traditional offline, personalized learning with AI.
Kaitlin Milliken: Fantastic. Thank you so much, Matthew, for that update.
Matthew Hulett: You got it. It’s great talking to you.
[ACKNOWLEDGEMENTS]
Kaitlin Milliken: You’ve been listening to Innovation Answered. This episode was written and edited by me, Kaitlin Milliken, special thanks to Matt Hewlett for sitting down with me and giving me a call for this episode. Matt will also be a leading one of our sessions at Impact 2020. If you want to hear more from him, join us. You can learn more at innovationleader.com/impact 2020. For more updates on our show, be sure to subscribe to Innovation Answered wherever you get your podcasts. You can also get bonus content on our website. Thanks so much for listening, and we’ll see you soon.
