Intuit Goes All Out to Solve the Innovator’s Dilemma. Is It Working?

11/6/12Follow @wroush

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in the new era of the PC, there had to be an easier way. The next year he and co-founder Tom Proulx shipped the first version of Quicken, which went on to become the most successful piece of personal-finance software in history.

Quicken offered such a big improvement over checkbooks and shoeboxes full of receipts that by 1995—a time when only about 25 percent of U.S. households even had a computer—Intuit had amassed more than 10 million paying customers. The company was so dominant in its market that Microsoft tried to buy it rather than keep competing with its rival Money software. (Antitrust concerns put a halt to that plan.)

By that time, the company had already expanded into areas like accounting software, tax preparation, insurance, and online mortgages. And it would go on to add more businesses, in areas like payroll services and business website hosting. Cook stepped aside as CEO in 1994 but has remained active as chairman of the executive committee—and as the company’s resident visionary. Intuit’s official mission statement, formulated by Cook, is “to improve people’s financial lives so profoundly that they can’t imagine going back to the old way.”

Executives insist that Intuit has never been an Apple-style company with a guiding genius at the top. “On a spectrum, there are extremes between companies that believe in a narrow group of lead innovators and companies that believe anybody can innovate,” says Stansbury, a former VMware exec who joined as CTO in 2009. “We believe the latter, quite systematically.”

But while he may not be its Steve Jobs, Cook is Intuit’s omnipresent cheerleader, helping to pluck good ideas from the company’s ranks and make sure they get resources. He cleared the way for an “Innovation Catalyst” program that’s credited with birthing several new mobile apps and other products. And it’s standard operating procedure inside Intuit to e-mail Scott if you have a good idea, or sit down with him in the cafeteria for a lunchtime brainstorming session.

“The focus is not: Can you find one person who is a genius?” Cook said at a 2010 Economist conference. “Instead, focus on: How do you build a company of geniuses?”

Designing for Delight

If you’d walked the halls of Intuit’s Mountain View campus around 2007, though, you probably wouldn’t have said the company was innovating brilliantly. In its key markets, small-business accounting and tax preparation, the company enjoyed a 90-percent-plus market share, meaning there wasn’t much pressure to innovate. Only four of the 50 new products introduced by the company between 1998 and 2008 broke past $50 million in revenue, according to an analysis Intuit shared with Forbes magazine.

On top of that, customer satisfaction levels had begun to stagnate. And over time the anchor products, especially Quicken, had come to seem clunky and antiquated. “To sell a new version of Quicken every year, you’ve got to have a bunch of new features to put on the side of the box,” says Stansbury. “Over decades, you end up with bloatware.”

Startups, sensing that the giant was faltering, began to circle like sharks, offering consumers simplified ways to connect to their financial accounts and view their balances and budgets. Patzer, who founded Mint in 2006, was one of Intuit’s loudest critics. He compared Quicken to “a castle of 100 rooms” full of loops and hidden stairways guaranteed to get consumers lost. “My issues with Quicken and Money were the reason I started Mint,” Patzer says.

It was time for a change, and 2007 was the year Cook and then-CEO Steve Bennett began implementing a chain of initiatives that have since transformed Intuit into a veritable laboratory for innovation. As noted above, it’s too soon to tell whether the experiments are paying off, and there’s still a good chance that Intuit, with its 8,000 employees, will be outmaneuvered in key markets by companies a tenth or a hundredth its size. But Intuit’s tactics are worth examining anyway, since they’re the kinds of things any middle-aged software company should be trying if it’s serious about staying competitive.

One of Intuit’s key worries in 2007 was that its Net Promoter Score—representing the fraction of users likely to recommend a product or service to their friends or colleagues—had stopped going up. Cook and Bennett decided it was time to start rethinking the way Intuit’s products worked to improve word of mouth. Using concepts drawn from research on customer-focused innovation at the Stanford Institute of Design, as well as design-centric companies like Procter & Gamble, Cook formulated an approach called “Design for Delight.” He reasoned that a piece of financial software shouldn’t merely ease a user’s pain around money, but should actively delight them, by exceeding their expectations or greatly reducing the effort required to accomplish something.

Intuit design vice president Kaaren Hanson

Intuit design vice president Kaaren Hanson

“If you have delighted customers, that is how you get word of mouth, and that is how you grow,” explains Intuit vice president of design Kaaren Hanson.

Cook summoned 300 top managers to a two-day off-site meeting intended to teach them the method. It wasn’t an overnight success. “We had this big process that we called D4D, with a lovely diagram that goes through all the steps one might need to get to delight,” recalls Hanson, whom Cook had tapped to help lead the off-site meeting. “But what we found was, after a year, nothing was changing.”

The problem was that Design for Delight was seen among the rank and file at Intuit as just another showy but empty management initiative—as “something that would go away,” in Hanson’s words. (The story is laid out in greater detail in a June 2011 case study in the Harvard Business Review.) Cook and Hanson eventually realized they might have more luck spreading the idea if they started from the bottom up. So Hanson assembled the 10 people inside Intuit whom she believed were the best at designing for delight, and put them through an intensive training class designed to help them go back to their business units and inculcate others in the D4D method.

These were Intuit’s first Innovation Catalysts. Cook and Hanson taught them to base their product brainstorming efforts on observed customer needs, rather than what product managers thought might be cool; to dig deep for the beliefs and emotions that drive customers to like or dislike a particular product or feature; and to test each new hypothesis immediately through … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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