Berlitz had to learn a new language to save its business

Quartz

It all started with a decision by my daughter, Anne, to take German lessons—together. I wanted to improve what our teacher resignedly calls my “kitchen German,” and Anne was interested in adding another European language to her repertoire. We signed up for intensive German lessons—as often as three times a week for three hours each—at an on-site studio run by Berlitz in Princeton, New Jersey.

Berlitz sure didn’t make it easy. When I first called to set up the series, I was told that I would have to make an appointment and come in to the office in person, just to schedule the course. Well, given my travel schedule, that pushed things back by three weeks! When we finally did get in, we were presented with a fixed menu of options, and very expensive options at that. Although we loved Charlie Townsend, our teacher, we seemed to be struggling with Berlitz policy all along the way. Whether it was asking Charlie to teach us grammar (“I’ll do it,” he said, “but don’t tell them that, because it isn’t the Berlitz method!”) or trying to figure out a schedule that worked for us, or figuring out whether I could find a way to continue the lessons once Anne went back to school, the company was one big, inflexible, grumpy old organization.

Our experiences were typical—Berlitz was very hard to do business with. Its performance showed; when contrasted with hip, upbeat competitors such as Rosetta Stone, with its ubiquitous ads about glamorous Italian supermodels being wooed by American farm boys, Berlitz looked downright dowdy. Rosetta Stone was gearing up for an IPO; Berlitz was treading water. In transient-advantage terms, Berlitz was well on its way to a long, slow, deadly period of erosion of its competitive advantages.

I got to thinking about Berlitz from a strategy point of view when I met Marcos Justus, at the time Berlitz’s head of operations in Brazil. Justus is tall, razor thin, and intense. He speaks English ever-so-slightly accented with Portuguese (his native language, one of several that he speaks fluently), and when he gets excited, his thoughts seem to race ahead of his ability to get the words out. He’s constantly looking for new ideas, and when he finds one he likes, he grabs on to it with ferocious intensity and will not let go. The quest for new ideas brought him to my Columbia Business School short course, “Leading Strategic Growth and Change.” He still gives the course—and the people he met in it—credit for helping him reinvigorate the business in Brazil.

Rather than positioning Berlitz as a simple language training company, he changed the branding and positioning to that of a luxury brand. Brazil, like many emerging economies, he reasoned, had a few really wealthy people at the top of the economic pyramid. Why not target the company to serve them? Advertisements changed from common or garden-variety ads for language proficiency to ads showing elegantly dressed women carrying their Berlitz materials out of their Audis to go to class. It worked.

Based on his success in Brazil, Justus was asked to help reinvigorate the company’s US operations. I went and chatted with him at Berlitz’s offices near Princeton, New Jersey. The denial stage was long gone by this time, and everyone knew the company was having problems. The first challenge was figuring out what to fix. One of his insights about the United States was that language skill training in America is a “nice to do,” not a “need to do.” As he explained, in most of the world, if you can’t speak English, it is a career setback, so selling language training is relatively easy. In the United States, however, you have to create a need. So where to start? Berlitz keeps track of everyone who calls to inquire about a course. What Justus found was that for every 10 inquiries the company received, only three people actually signed up. So the first thing he started to do was survey those who did not convert. What the survey-takers basically were told was that the company was too expensive, too inflexible, and not innovative. As he said, “It was kind of depressing, but we had a huge opportunity—there was lots to do.”

He and his team set about doggedly tackling the problems of expense, flexibility, and innovation by introducing new formats, new products, new delivery models, and new pricing structures. The goal was to reinvigorate the basic offering as a place to start. He eliminated the rigid Berlitz schedule requirements (most of which grew up over time to suit the teachers, not the students) in new products such as “Berlitz Connect.” Lessons can be face to face or virtual. They can be recorded. A cultural component has been added, as well as quizzes and the chance to replay lessons that may not have sunk in. The fees can be paid by subscription (as opposed to the traditional Berlitz upfront payment plan). The company also introduced the “Berlitz Virtual Classroom,” which makes group pricing and interaction costs possible even for people who are widely dispersed.

Justus told me about how this led to a thriving business in Arabic. As it happens, some 1,500 inquiries per year in the United States were for Arabic language lessons, but they were too spread out for the traditional Berlitz group-class approach. By combining the students virtually, people who never could have become customers were now signing up. Rather than sticking with the original, proven model, Justus has invigorated the business in the near term. For the longer run, Berlitz’s new CEO seeks to position the company as a cultural training organization and a global education company that can partner with your company to have a global-ready team. Think of it like a pyramid with language at the base. Then comes cultural understanding. Following that is what the company calls diversity and inclusion, and then global leadership skills. The company has also taken a fresh approach to its brand, using humor to promote the idea of language proficiency. In one viral video with millions of YouTube hits, a member of the German Coast Guard is seen responding to a desperate plea on the radio:

“May Day, May Day, we are sinking!”

“Hallo—Zis is ze German Coast Guard.”

“We’re sinking, we’re sinking!”

“What . . . what are you sinking about?”

The scene cuts immediately to the phrase “Improve Your English,” set against a backdrop of stirring music and the tag line “Berlitz, Language for Life.”

Reprinted with the permission of Harvard Business Review Press. Excerpted from The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business. Copyright 2013 Rita Gunther McGrath. All rights reserved. We welcome your comments at ideas@qz.com. 



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