If Tom Adams has his way, his company, Rosetta Stone, could become the Google.com of the $83 billion language learning product industry. Rosetta Stone's disruptive technology enables people to learn a foreign language in an interactive, immersive methodology. The company markets its more than 30 language learning products in more than 150 countries. The millions of customers include the U.S. Army, U.S. State Department, Reuters, and Marriott Hotels. When Adams joined Rosetta Stone as CEO in 2003, annual sales were a palfrey $10 million. His emphasis on technology innovation, and innate immersive language learning helped the company to grow revenue to more than $200 million for 2008. In 2009, the company took a confident giant step by doing an initial public offering. Adams says, "We raised half of the $112.5 million total ourselves. The rest came from the sale by our private equity backers. On the first day, the stock went up close to 40 percent. Because our business was doing well, we felt comfortable going ahead with the IPO."

Enterpriseleadership sat down with Adams to learn about his strategy for growing Rosetta Stone. Here is what he said:

EL. What are some of the factors that have contributed to Rosetta Stone's growth?

TA. The company has grown tremendously because the market is very large and disruptive. We differ from other companies. We are more cost-effective, and a more convenient way to get great results when you learn a language. We eliminate the need to spend thousands of dollars on classroom solutions. In an economic environment, people look to get more bang for their buck and that makes us more compelling.

EL. Can you frame this context of being disruptive?

TA. We teach in a technology enabled way with an immersion method. We do not explain the language. You learn the language the same way you learned your first language. The way babies learn. Toddlers figure out the language by themselves and parents sort of point to stuff. There is a context around the child. We leverage your innate ability with both structured activities and curriculum sequence. In effect, you learn very naturally. That has been very successful because you use your natural language learning ability.

What makes us a disruptive technology company? You can pass tests after you have taken language training with other offerings, such as tapes, books, CDs, online offerings, and classes in school. On the other hand, most likely you will not be able to speak the language to any great degree. People focus on wanting to learn to speak a new language. They do not want to learn how to translate literature in a foreign language. That is how we differ. If you really want to learn to speak a language, you can spend the money, stay in the country for weeks, and immerse yourself in the language. That is a proven way of successfully learning a language. Few people have the time or the money to do that. We have that same immersive type of offering, but we deliver it in a very convenient technology-enabled way.

Based on findings from our massive Nielsen Research study, we learned that people spend more than $83 billion on tools and classes to learn a language. Institutions represent an equal amount of demand again. We have not been able to conduct a survey to get that type of data. Organizations spend massive amounts of money on language training products that are inferior to ours.

EL. What is your growth rate like?

TA. Since I have joined the company, we have had a 20- fold expansion in revenue. In 2008, a challenging year for us, we grew 53 percent. Our revenues last year were $209 million. That was the largest growth year for us. Like everyone else the economic downturn has affected us. For example, because people have been traveling less, we have seen less activity at our airport kiosks. People have to be more careful with the money their because credit is in short supply. Despite all of the things, we still grew at an incredible rate.

EL. What is behind your product's technology? 

TA. We have two kinds of technologies that drive our company: the digital technology and the pedagogical technology. The digital technology leverages our interactive technologies such as speech recognition. The second technology leverages our method and unique teaching system. Our product improves over time as we innovate and find better ways of effectively teaching our technology to speak a new language interactively. Likewise, as the competency of our speech recognition technology expands, we will be able to provide augmented experiences in our offering. You will be able to use your voice to drive a learning experience inside our offering. Again, all of this might sound complicated or abstract, but it is very simple when you start to use the product.

EL. How much do you invest in technology to drive the innovation?

TA. We invest about 10 percent of sales. We have maintained this investment rate for the past several years.

EL. How do you decide what you are going to invest in?

TA. We are a vision-oriented company rather than a customer-oriented company. We do not look to the customer to tell us what to do. We talk to the customer extensively. We try to understand what their problems, such as why they struggle with current methods, and current tools. We are all about customer insight. On the other hand, we do not worry too much about what they say they want. 'Why?' Most people work within the old paradigm of traditional language instruction. We look at what language learning should be like, how it feels, and what you should learn.

EL. What is your business process for making these investments as a visionary company?

TA.  Our senior product team tries to figure how specific innovative technologies can help us move the dial for people who want to learn languages. From here, we will start to define a product concept, design and build, and iterate as we go along. We test the efficacy of our product on an on-going basis. None of us speak 30 languages. Some of our speak six or seven languages. To this end, we can try a new language fresh and see what it would be like for a new learner. This approach gives us a rigorous innovation.

EL. Do you work with your IT organization to make these investment decisions?

TA. Yes. Our IT organization gets involved in that we do. IT, however, functions as more of a support service for what we want to achieve. For example, we depend on our IT staff to track students' activities and progress. We work with them to make sure we follow through on our customer support. CRM applications are important here.

EL. Do you package the product in such a way that you break it into different types of modules for different types of experiences?

TA. Yes. For example, our level 1 and level 2 comprehensive curricula provide us with enough language so you can manage in a country. You will be able to every day functions done in that country. In level 3, you move toward being able to connect with people. You will be able to talk about your opinions, your feelings, and more abstract notions. A grammatical progression follows that.

We currently offer five levels in both English and Spanish. You get about 200 hours of instruction. Most people opt for the three levels. People who try to learn enough of the language for a vacation usually opt for the single level.

Although our mission is to teach you to communicate verbally, we teach both reading and writing comprehension.

EL. Are you looking at leveraging this technology with other types of products?

TA. We plan to launch an online socialization offering. It would allow you to practice the language you learned with reverse sound with other native speakers. For example, a French learner would use his or her voice to interact in a software environment. We augment that by allowing you to go through conversationally coaching class. Here you use the language you have learned to practice speaking with a native speaker. That person is exercising your speaking ability. Beyond that, we will be enabling you to mix with French people who want to practice their English. You will do a language exchange activity with them in French for five minutes, and then the activity will turn to English.

EL. How does your speech recognition technology work?

TA. Speech recognition is one of the unique things about our product. We have developed a proprietary speech recognition technology. For example, as you speak a particular phrase in French, the speech engine will recognize each word you say, and it will highlight the words that you said very well. It will be clear that you said some words not well. If you really said the wrong thing, it will not accept your answer. That is extremely powerful.

When we task people why they want to learn a language, everyone says that they want to speak it. If they use language tapes or CDs, they do not get any feedback from these methods. They do not know if what they said is right or wrong. With us, the system gives you voice prints.

EL.  How are some of your more established competitors falling short with technology?

TA. Berlitz is one of the oldest, established language training companies. It still uses the bricks and mortar classroom approach. It does offer some videoconferencing. This company does not an interactive, proprietary technology the way we do. They are not investing in speech recognition either.

Many companies use technology in the language learning space. They, however, rely too much on translation. They think that the old ways of memorizing vocabulary lists, understanding the difference between direct and indirect objects, and conjugating verbs are a valid way to learn a language. They operate operating on a flawed assumption.

EL. What takeaways would you give to someone you are at the helm of a company involved in disruptive technology? What can management people from your company besides a language?

TA. Do not give customers what they want; give them what they need. Customers struggle with saying what they really want. If Henry Ford asked people what they wanted, they would have said faster horses. Instead, he built a motor car. You have to understand what people really need. Do not listen to customers too much, but care about them enormously.

Do not focus so much on your competitors. If you study competitors over time, you will end up being like them. Happy companies make a difference, especially if they are comfortable and visionary in their own skin. They also need to be passionate about what they do and strive not to be outstanding, not incrementally better.

EL. What is your view of language education in schools?

TA. Education has had too little innovation. Yes, people spent money on technology within school environments or university environments. They, however, have gotten very little for their money. We really do not focus on true innovation within the learning state. Rosetta Stone is only doing this in the language space right now. We think we can transform our schools and make effective pedagogical innovation in language learning.

Elizabeth Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.