Getting it right before going global: A conversation with LingoAce’s Hugh Yao

| Podcast

In this episode of The Venture, we sit down with Hugh Yao, CEO and founder of LingoAce, an online service for children learning Mandarin and English. Yao created the Singapore-based company in 2017 and set a strategy of slow growth, only to experience a huge expansion during the pandemic. The business spread to more than 100 countries and grew by almost 4,000 percent. Yao speaks with McKinsey’s Andrew Roth about LingoAce’s early days, why he first kept growth at such a slow pace, and his plans for the future. At the close of the interview, McKinsey’s Zee Fakier weighs in.

An edited transcript of the podcast follows. For more conversations on venture building, subscribe to the series on Apple Podcasts or Spotify.

Podcast transcript

Andrew Roth: From Leap by McKinsey, our business-building practice, I’m Andrew Roth, and welcome to The Venture, a series featuring conversations with legendary venture builders in Asia about how to design, launch, and scale new businesses. In each episode, we cut through the noise to bring practical advice on how leaders can build successful businesses from scratch.

In this episode, I’m excited to share a conversation with Hugh Yao, CEO and founder of LingoAce, a Singapore-based online language-learning service aimed at children. Hugh founded the company in 2017, and after a couple of years of deliberately glacial growth, the business skyrocketed during the pandemic, growing some 4,000 percent and attracting students in more than 100 countries. You’ll hear Hugh tell us about the genesis of LingoAce, why he kept his foot on the brake for so long, and how the company is dealing with its rapid global expansion.

Welcome, Hugh. Great to have you on the show. I’m excited to talk about LingoAce because education is a slightly different topic from our other episodes. It was announced about a week ago that you raised $160 million in your latest round of funding. That’s encouraging and impressive to see for Singapore, and for any start-up. Congratulations!

Hugh Yao: Thanks very much. It’s a key milestone for us. It’s also encouraging for the entire team in Singapore, the US, China, Malaysia, Thailand, and Indonesia to keep going.

Andrew Roth: How you started LingoAce is an interesting story. You had a career at places like Oracle but then stepped into education. Share with us what inspired that change in direction.

Hugh Yao: Before I tell my story, I’d like to provide a high-level introduction of our business. We are a Singapore-based company providing online language-instruction services focusing on Mandarin, although we recently entered the English-language teaching market. The company was founded in 2017 and works with certified Mandarin-speaking teachers from China to teach students from three to 15 years old around the world. We operate in more than 100 countries, and the business grew very quickly during the pandemic, almost 4,000 percent in the past two years.

As you mentioned, I wasn’t an educator. I previously worked for Oracle, IBM, and Salesforce. When I moved my family from China to Singapore about ten years ago, my young son learned English very quickly, which became his preferred language. But we wanted him to maintain his Chinese-language ability, both for his future career and personal life. But when I investigated language services, I didn’t find any well-known brands. That’s when I realized the opportunity to build something for him and my family. And many families in this part of the world are like mine. Whether they are Chinese or not, if they remain in the Asia–Pacific region, they want their kids to be ready for the future by learning Mandarin.

So from day one, we were very clear about the need to build a very high-quality service and become a global brand. And I think my corporate experience was really helpful, because it taught me that being a global brand really matters. So we started our journey in 2017, and since I wasn’t an educator, it was a very bold decision to enter this space.

Andrew Roth: One thing we often hear from corporate entrepreneurs considering any kind of new venture is the point at which they ask themselves, “What’s our right to play in this space?” And I would imagine you’ve had some moments where you ask yourself the same question. Take us to the point where you knew you were going to take that leap. What gave you the confidence to make the switch?

Hugh Yao: My work with multinationals trained me to analyze situations, so there was a lot of analysis about my ability to manage supply, hire a team, and build a marketing function. But I think it’s very important to move beyond that kind of very logical analysis and take a leap of faith. So I asked myself, “Do I feel there is actually a demand in the market? Will I provide long-term value to the customers?” That’s what’s most important. I encouraged myself to make the big jump, because in the end, it’s really about a calling, rather than relying strictly on logical analysis.

Andrew Roth: Those are formative times, when you cut the cord from corporate life and become an entrepreneur. And I would imagine you knew you had some sense of product-market fit or traction when it came to the value proposition, because for the audience in Singapore, there’s no lack of Mandarin tutoring. Many students learn Mandarin at their school during the day and then get extra tutoring in the evening. Where did you see a gap in the market between the traditional student and tutor structure and what you’ve created at LingoAce?

Hugh Yao: From day one, my vision was bigger than just Singapore. When I analyzed the market, I realized it was very fragmented, with quite a lot of services but no leading brand. Our ambition was always to build a global brand, but we found a niche area to start: the international school market in Singapore. But if we put that in a broader context and count the US, Australia, and other countries, it’s not a niche market at all. That’s why we chose a different approach from other Singapore-based companies and serve international school customers, whose needs are not being fulfilled very well. We focus on one segment to understand their needs and build a very good customer experience, which is critical. You also need a replicable solution, and we believe students in the US, Australia, and the UK are very similar to the students in Singapore’s international schools.

Finally, Singapore is a perfect location to try out a lot of new ideas, because unlike other countries, Singapore is a very diverse community. In Singapore, we can easily engage with first-generation Chinese immigrants and overseas Chinese such as Singaporeans, Aussies, and Americans. Once we tested the market here, we were able to bring the service to other markets.

Andrew Roth: The growth has been impressive. I would imagine LingoAce has a different approach, curriculum, and methodology for teaching. When did you start to realize that your approach was getting better results than traditional tutoring?

Hugh Yao: From day one, we were very confident, because I built this platform for my son and for families like our family. My son was the first customer, so I could really observe what worked and what didn’t in terms of the product, the process, and the customer service. And with that firsthand information, we could iterate every week or two, because we were a very small and nimble company at that time and could change very quickly to respond to customer demand. During the first couple years, we served only a few hundred customers and were very patient and listened carefully to them. We also developed a very interactive and gamified experience, because traditional tutoring is all about the content. That was in 2017, when e-learning wasn’t that popular, but we built this capability from day one. So the combination of being a customer, my technology background, and listening to users helped us build a very different customer experience.

Andrew Roth: I think you just made a key point about taking your time. The first year, you had hundreds of customers, not hundreds of thousands. You were iterating, and learning the gamification part seemed to be one of the hooks in the learning experience. You mentioned that you’re in 100 different markets, so it sounds like a lot of organic growth. Share a bit on the scale side.

Hugh Yao: In terms of scale, we grew very fast. Of course, one of the reasons was the pandemic, which accelerated everything. But as a company, we were also very bold to drive the expansion. So from the third year, we had already expanded into other countries such as Australia and the US. But when the pandemic hit, we really accelerated.

Andrew Roth: I would imagine with all countries going into lockdown, there was a demand for web-based learning and to try something different, like gamification. Was your go-to-market plan to reach new customers through online marketing or a referral program? Did you have a sales team? What was driving the growth? What about branding and online direct marketing?

Hugh Yao: As we scale our business, there are many approaches, and we work on every single front, including paid marketing. But the most important approach—and the key success factor for us—is referrals. As I mentioned, we only served hundreds of customers in the first two years, constantly iterating our services with them. As a result, we developed a very good reputation among our core customers and quickly realized referrals is the most powerful tool for educational services. I believe it’s very powerful for many other services as well, but for education it’s critical. Because when parents buy a service, it’s about quality, not about value for money. And they trust the advice of their friends, who probably have kids the same age.

At the beginning, we had a very organic referral system, but then I realized we could really double down on that, so we built a structured referral system to allow parents who were happy with us to share our brand and their experience on Facebook and WeChat. We layered some incentives on top of that, and then added the third layer, which is paid referrals. As an entrepreneur, I found it a very interesting experience. At the beginning, we had no idea which channel and which approach would work best. But once we found an approach that worked well, we doubled down in that area. That’s why, in the past two years, we built a very robust, very structured referral system. And as of today, 60 percent of all new customers every month come from referrals, which helps the business scale very quickly and into multiple countries. And in some of the countries where we operate, we don’t even have an operation or a team on the ground. It was simply word of mouth that helped us expand into those markets.

Andrew Roth: That’s also a testament to a product that’s working. Let’s dig into that a little bit. You have an enormous amount of data on your students. How do you approach that in terms of onboarding new customers, or helping a student get the right type of learning? You have that Netflix-level of customer data from the perspective of education. How are you building your data and analytics capabilities?

Hugh Yao: That’s a very strategic capability for us, and even today, I think we are still on the journey. We leverage this kind of analytic capability on two different dimensions.

One dimension is really about providing a personalized learning experience. Because we can measure which questions students answer correctly, which questions are difficult, and how quickly they grasp something new, all these kinds of data allow us to build a learning journey where we can really personalize the learning experience and provide recommendations to our students. That’s critical for the learning outcome as well as for the joy of learning.

We iterate our curriculum every year, but how do we make sure we are going in the right direction? This is the second dimension where the data helps guide us, so we can understand the customer profile and whether they are enjoying certain curriculum elements or feel like they are too difficult or too easy. That’s why all these kinds of data are collected: to help our curriculum and R&D teams improve our service. And they’re based on customer feedback.

We have a very dynamic curriculum compared to traditional schools, which may use the same textbook for many years. So we are very different.

Andrew Roth: Besides moving beyond textbooks, is your curriculum a combination of online learning plus one-on-one video tutoring? How does it work? Does the data tell you when students need a live tutor to tune up their skills?

Hugh Yao: Currently, we are not there yet. But it is on our road map. We have multiple programs for students to pick and choose from, but it’s very difficult for them to decide. That’s why we use placement tests and the learning experience to define a learning unit, and every unit includes an assessment. We also have learning advisors who use the data and assessment to provide a recommendation. That way, students can find a suitable program and even upgrade to another one, since we have the ability to fast-track their curriculum. That helps our parents and students understand where they are and how they can improve their learning efficiency. Because all kids are different. One size never fits all, so they all need a personalized learning plan. So that’s how our learning advisor, together with the data, provides high-quality advice to parents.

Andrew Roth: It seems like parents are liking it, since 60 percent of new customers are coming from referrals. What about the students? Can you share anything about what students are saying? Is it more fun or unique because of the gamification or the fact that they can learn at their own pace?

Hugh Yao: Mandarin is a very difficult language to learn, and the traditional teaching approach is a bit boring, which is why we use a lot of gamification and animation. For example, with younger students, we start with one or two minutes of animation to get their attention. Then they can really start to learn with the teacher, because the teacher-student connection is very important. After the teacher finishes the lesson, it’s time to practice, and that’s where gamification comes in, because repetition is still very important when learning a new language. Right now, we have very few one- or two-star classes, and more than 90 percent of them are four- or five-star classes. We think the teachers, animation, gamification, and the curriculum structure work together as a system to help students enjoy learning.

Would you like to learn more about our business-building practice, Leap by McKinsey?

Andrew Roth: That’s very interesting. You’re collecting real-time feedback and data on the energy level of the class to make changes to your curriculum, which might take traditional educators years based solely on qualitative feedback from students. Now that you have this platform and you figured out certain things around personalization, with the $160 million in new funding, what are some of the highest priorities going to be?

Hugh Yao: First off, we would like to enter new markets. Currently, we already have a very strong presence in the US, Southeast Asia, and Europe, but we would like to expand further in the US and Europe to build our leading position.

Another priority is the expansion of our product line. Right now, Mandarin is the focus, which we have focused on exclusively for the past four years to perfect. But we’ve learned that a lot of the technology, methodology, and learning experience can be replicated in other languages, so we launched English-language services a month ago in Southeast Asia.

The third area is about data and analytics, and all these kinds of things are still in the middle of the development process. We’re still enhancing our AI capability to make sure we can provide more personalized and flexible learning plans and really iterate our curriculum more quickly.

So that’s our ambition: geographical expansion, product expansion, and enhancing our fundamental capability to support multiple subjects.

Andrew Roth: Seems like the combination of the content, the teacher-student connection you’re describing, and the gamification is the core of it; then you’re expanding into new topics, which is exciting to see. I’m going to have to enroll my kids soon. How big is the team right now?

Hugh Yao: Currently, we have 4,000 teachers, together with nearly 2,000 other employees, so 6,000 globally. We operate in Singapore, the US, China, Indonesia, and Thailand, which is a big challenge for a company just four years old. Actually, most of the growth happened during the past two years, when we grew from a team of just about 100 people.

That’s huge growth, but it also creates a lot of challenges. As everybody knows, hiring 6,000 people is never an easy job, and it’s much tougher during a pandemic. That’s why we built a remote-working culture so we can share our values, collaborate using the same tools, and make sure everyone is on the same page. But it’s really hard, and I think we still have a long way to go. But so far, the results indicate we are doing OK with thousands of people in five countries serving customers in 100 markets around the world.

Andrew Roth: This notion of a company culture is a big one for corporate entrepreneurs. How do you engender that sort of start-up mentality? How do you get your personal message out there? When it comes to team culture, are there any lessons learned or tactics you might share with those who are going through similar challenges right now? Certainly, people are getting fatigued with video meetings. Anything you do to connect that might be different?

Hugh Yao: If we look at the culture, it’s really an everlasting journey for the entrepreneur. From a strategy level, we think small successes are the best for culture building, so we set objectives and key results (OKRs) every three months and review them weekly. We celebrate each other with these small successes, and that’s very important. We don’t really define very ambitious goals, although as a company, we’re very ambitious. But in terms of quarterly targets, we make it very realistic. That’s why the team can always hit the targets, so we can celebrate, believe in each other, and trust the company. You can have a cocktail during our team calls or do other things to celebrate, but a small celebration is better, because everyone likes success.

On a tactical level, there are many things we have done. For example, we have an all-hands call in different languages every month to make sure we connect to every single employee, no matter their role. We share very transparently with them the company’s progress, the challenges we face, and the mistakes we made. For example, I once got on a call and admitted, “Hey, I made a mistake, because three months ago, I didn’t have enough information. And so that’s why I made that decision. And at that time, it was right. But after three months, we realized we need to adjust a little bit.” This kind of transparency is very important, so when I make a mistake, I let them know.

But we still have some struggles, because in terms of culture, Thailand, Indonesia, and Singapore are all slightly different. That’s why I really look forward to the end of this pandemic, so we can start to travel and enhance our culture on top of the cadence we execute right now. I know we can do much better after the pandemic.

Andrew Roth: I like what you said about transparency. It seems to come naturally for you, but in a corporate setting, it’s not your typical culture. I think for someone in leadership to admit when they’ve made mistakes really sets a good example by letting people know making mistakes is OK. I also like the idea of celebrating small wins on a quarterly basis. I’m very inspired by this. I’m going to have to get my kids signed up, and then we’re going to see how they do on the quizzes and games.

Thank you so much, Hugh, for joining, and I look forward to hearing more about LingoAce’s continued success.

Andrew Roth: Now comes a segment where we invite experts from McKinsey to provide more context and to draw practical insights. Today I’m joined by Zee Fakier, an associate partner and venture builder with McKinsey, based in Singapore. Zee, welcome to the show and thanks for joining us.

Zee Fakier: Thanks so much for having me, Andrew.

Andrew Roth: Hugh talks about his go-to-market strategy and his referral program driving 60 percent of their new customers. What was also interesting about that is how the referral program, which is a common go-to-market technique, is almost a proxy for product-market fit. They tested the product with a few hundred customers in the first few years, and it drove enough value where it was organically just driving more growth. What’s been your experience with referral programs, and any comments in general on product-market fit?

Zee Fakier: It’s a very interesting approach. I think, firstly, most people look at referral codes as really a very basic approach to marketing: “It’s so basic, why do you want to use that?” But actually, it’s a really good litmus test of product-market fit. The effectiveness of it is unparalleled if you have everything else in place.

Andrew Roth: That’s true. And there are so many definitions of product-market fit. Depending on the business, it’s hard to know: Is your product really driving traction, or did you just buy customers at the top of the funnel? And seeing customers make referrals—whether organically or through incentives—is a great way to measure the product-market fit and stickiness.

What’s also interesting about LingoAce is that they started in Singapore and then grew into new markets. In the past ten or 12 years, we’ve seen lots of concepts come into the region. This is a Singapore-born concept. Tell us a little bit about your experience in moving from country to country or entering a new market. It’s sort of like starting from zero sometimes, isn’t it?

Zee Fakier: It is. I would almost go as far as saying there’s a bit of a pivot that most businesses have to make to localize in particular markets. If you had a business in Singapore, you couldn’t just take your product into Indonesia. It’s not going to work, no matter what it is; whether it’s a vehicle or an ed tech program, it’s not going to fit. And that’s the perfect example, because geographically, it makes sense, but in terms of adaptability and adoption, it doesn’t.

It’s particularly interesting to see a product like LingoAce thrive in Singapore, because Singapore is sometimes looked at as a very odd market. It has a ceiling: it has roughly five million people. So there’s not a lot of opportunity, but the revenue per capita or per user is relatively high. There are these conjoined differences—it’s really like a little bit of a Bermuda Triangle, if I can put it that way. So to see a business take initiative and start to expand and go into different areas is really a testament to itself. Another great example of that is Razer, or even Grab. They’re businesses that are homegrown in Singapore and could find that product-market fit elsewhere. They have a very strong go-to-market strategy and can adapt that and know how to play that.

To your point, people usually think, “Singapore, the UK, Australia—they’re very similar markets. Let’s just adapt, hire country managers and launch managers, and put some bucks behind it, and we’ll get it out there.” But it doesn’t quite work that way. And we both know that, and we’ve seen that countless times. I think, if I can put a stake in the ground, that’s actually been one of the failure points for a lot of startups. They have a bit of product-market fit, and they’ve raised a bit of cash. And now they’re saying, “Well, what else can we do? How do we expand that? Let’s go into another market.” And they’re around for just six months to a year to 18 months. They end up burning so much cash, because they couldn’t adapt and couldn’t create the solid go-to-market strategy.

Andrew Roth: Maybe one way LingoAce has been de-risking is by not just building a network of tutors and matching those tutors up with students but by creating their own curriculum. They’ve experimented with content and gamification, and perhaps that is the intellectual property that makes it a little bit easier to localize and to adapt to some of the local markets. And with the new funding that they’ve just raised, they’ll have the opportunity to grow.

But some of the challenges when you’re growing this fast—as I think you’ve seen, too—is maintaining team cohesiveness or culture. And Hugh was open in saying, “OK, maybe we haven’t figured that out 100 percent yet.” Because when you’re growing at this pace, it’s hard to hit your numbers, prepare for that boardroom meeting, and also engender a culture of work-life balance and inclusivity.

Tell us a little bit about that. We talk a lot about this word “culture” on the show. Is there anything from your experience you would share that, in small or big ways, creates that cohesiveness?

Zee Fakier: I could go on and on about this. We’ve actually had quite a few conversations about culture in particular, and it’s easy to build it when you’re a start-up with a 20-person team. It’s easy to own that culture. But when your organization is in ten different markets and has 500 people, it’s a tricky thing to navigate.

I think a perfect example from my own experience was at Groupon. We went from about 500 people to 4,000 people in the space of roughly 18 months, which was ridiculous growth. We went into different markets and had people coming in from different backgrounds, from tech start-ups to very corporate organizations.

There are different ways of trying to cultivate culture, and the ways I can tell you in which we were ineffective was in sending out memos and talking to people about the culture we wanted to instill. But you don’t create a culture from a memo. You don’t create a culture from an email or some posters around the office. That’s not going to create the culture.

What’s going to create the culture is leaders leading by example. If you have a culture of being open, of creating transparency, the leaders need to live that. They need to be held accountable when they’re not being open, when they’re not being transparent. It’s the duty of their second-in-command and the people just below them to kind of tap them on the shoulder and say, “Hey, that wasn’t exactly holding to these values that we have or to these cultural aspects.”

It’s super important to be held accountable from each and every single level. That’s when we start to see leaders in the organization reacting in a certain way and including the rest of the people in the organization—asking the most junior person who just joined the company two months ago, “Hey, what do you think about this problem?” as opposed to having this view of, “Well, I know better.” This doesn’t have to be the exact approach, but if you’re working toward a culture of transparency, of equality, of a flat structure, then implement that. And be OK with being held accountable and being called out when you’re not doing that.

Andrew Roth: It sounds like it starts from the top, when leadership is open to getting that sort of tap on the shoulder and being called out.

Zee Fakier: Definitely. There would need to be that limit of accountability. I’m guilty of this sometimes, too, of not following through on the values that I’d like to adhere to. The people around me will say, “Hey, that wasn’t quite right that you did X, Y, or Z,” and it makes me pause for a second, step back, and be like, “What should I have done if I was holding true to our values?” And so this is where that culture comes from. The people closest to you will feel that accountability first. Once they start to feel that, they start to embody that in different ways, too. And so the broader team feels that effect. So when people say, “It’s the staff, the junior levels, or the most recently hired staff who are not living the culture,” it’s because that ripple effect is taking too long to reach them.

Andrew Roth: In other words, there’s not enough role modeling of the values and the principles.

Zee Fakier: Exactly. And role modeling is probably the easiest way to communicate the culture, but it actually has to be implemented. It’s a soft skill for sure, but it’s not something that’s just spoken about and everyone’s holding hands singing kumbaya. There are sessions about this. There are strategies about how to integrate this. There are strategies for internal communication. How does communication flow in our organization? How do we encapsulate our culture? How do we end every meeting? When someone’s late with something, how do we hold them accountable? If someone hasn’t delivered on something that they’re meant to, how do we manage those situations? The culture is what gives life to every action and inaction in the organization.

Andrew Roth: I love that. Like you said in the beginning, you can’t just write a memo and send an email out and expect people to follow the values. But you can be strategic about it. You can be intentional about what the routines and rituals are, the expectations—from the way you communicate to the way you can check in with each other—that can lead to that flat structure and the team culture.

It’s one of those topics that I think we’ll just always have to talk about. And hopefully, listeners will take little bits away here and there, but the big takeaway for me is that if leadership doesn’t live the values in very specific ways—and if they’re not open to being called out by anyone in the organization, not just their direct reports—then, like you said, new joiners to that organization will not live the culture, because of the lack of ripple effect.

Zee Fakier: Definitely. The problem is it’s not the fault of one particular person who’s doing badly. We’re all guilty of doing that sometimes.

Andrew Roth: It’s like a series of checks and balances. It’s not solely on the leadership’s shoulders, and it’s not solely on the rest of the organization’s shoulders. But you have to be open to those constant checks and balances. Zee, thanks for joining, and I look forward to catching up again soon.

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