tephanie Alexis couldn't get out of her car.

She knew that if she sat there much l onger, she'd be late for her meeting with her board member and friend Rob Cooley, but she still had no idea what she was going to say to himhence the paralysis. Rob had asked Steph to his office in downtown Vancouver to discuss the future of Alexis Products, the company she'd launched three years ago with one great produc t: the Brrrd, the first interactive language-learning tool to incorporate artifi cial intelligence. It looked like a stuffed animala cartoonish plush bird with a beetling brow and goofy eyesbut it was equipped with a microphone, tiny speaker, headphone jack, and computer chip, and contained enough speech-recognition and v oice-generation technology to engage in sassy, conversational banter in Mandarin . The Brrrd couldn't teach you a lot of grammar or vocabulary, or help you to recogn ize or write Chinese characters, but it was a fun, effective way to learn the ba sicskey words and phrases having to do with food, transportation, clothing, movie s, music, money, personal hygiene, and business. For a while the Brrrd had been wildly popular, especially with students and young professionals trying to learn a little Mandarin before their first trips to Shanghai or Guangzhou. But the Brrrd's heyday had come and gone. The media attention generated by the pro duct's novelty had died down, and in spite of incremental technological improvemen ts, sales were slipping. For Alexis Products to survive, Steph needed to either come up with another hitquicklyor formulate a cohesive strategy to take on the lan guage-learning market as a serious competitor. Rob had summoned her because the company stood at a crossroads. He was one of her most important investors and a leader on the board; if she could earn his support for a new strategy, the other members would follow. So what should the company do for its second act? Her emp loyees and investors were counting on her to make the right decision. Fun or Functional? The Brrrd was hatched during a laughter-filled car ride. Steph and Tina, one of her grad school classmates at MIT's Media Lab, were driving to Chicago for a confe rence and heard an ad on the radio for the language-learning company SimpleLangu age. I keep meaning to order that for Mandarin, Tina said. I'll be in Shanghai next semest er. I've tried books and CDs, but nothing is sticking. I just can't seem to retain i t. Oh, stop complaining and try harder! Steph blurted outin Mandarin. Don't rub it in! Not everyone grows up in a bilingual family, Tina moaned. Actuallytal k to me in Mandarin. Help me learnin a way that's fun, not boring. Steph was no teacher. She was an engineer and a programmer. But she'd learned Mand arin just by listening to her Taiwan-born mother. Maybe she could teach Tina the same way. Steph launched into Mandarin, chatting about passing cars and the fac es of kids on a bus and Tina's new purple eyeglassespretty much anything that came into her head. When Tina hesitatingly repeated the vocabulary, Steph mimicked he r atrocious intonation, and they laughed and joked until Tina got it right. I wish you could make me a little Steph Robot to carry around, Tina said near the end of the ride. For the next few days, Steph couldn't get the comment out of her head. Back at the Media Lab, she started working on the Brrrd, and within a year she h ad forged a solid partnership with a manufacturer in China and turned her protot ype into a commercial product priced at $79.99 and sold through high-end retaile rs such as the Sharper Image and Hammacher Schlemmer. It immediately became a media darling, and sales hit $3 million in the first yea r. Journalists, retailers, and customers seemed to embrace it because it was a c ategory smasherboth a toy and an educational product. Its speech-recognition soft ware and AI brain could figure out what language areas were giving a user troublema king it a highly functional toolwhile its deep reservoir of conversational phrase s, including jokes and retorts as well as praise and encouragement, made it a we lcome companion. Steph had gotten used to explaining the Brrrd's dual nature to anyone who asked. B ut lately her marketing chief, Gregoire Ferron, had been raising difficult quest ions about what that duality meant for Alexis Products.

Are we a toy company or a language company? he had asked testily at a team meeting just that morning. We can't be both. Steph was worried about Gregoireworried that he might leave the company now that sales and morale were sagging. She knew he felt outnumbered by the gadget people on the staff. She was trying to formulate an answer that would be respectful of his viewpoint when Mia Yoon, Steph's top sales executive, piped up. We all know wh at our unique selling point is, she said. Fun. Steph sensed Gregoire's exasperation and jumped in. What's cool about the Brrrd is th at it is both. It plays with you in an educational way. It teases you into learn ing.