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

Technology writers gravitate to early-stage startups for roughly the same reason that Willie Sutton robbed banks: because that’s where the money is. Or at least, where it could be if the founders get everything right. We love the brash, young CEOs who are out to disrupt entire industries—in no small part because they’re usually happy to talk to reporters.

By contrast, it’s much harder to find innovators inside larger, older corporations, where they’ve either long since departed, or have been hidden away where visitors can’t see them, like the crazy uncle who might give away a family secret or say something embarrassing. As Scott Adams wrote in Dilbert, “Large corporations welcome innovation…in the same way the dinosaurs welcomed large meteors.”

The pattern has been thoroughly documented. Once a company is mature enough to have lots of well-paying customers, it starts having trouble imagining how it might serve those customers in new ways. Innovative product ideas that could undermine existing revenue streams get squashed, and promising new technologies go unexploited.

Eventually, newcomers move in and take over the market, the way ate Siebel’s lunch in the CRM business, or the way Apple and Google are currently destroying Nokia in the mobile business. Harvard Business School professor Clayton Christensen spelled it all out in 1997 in The Innovator’s Dilemma, a book that’s become gospel inside companies both large and small for its study of how established companies get disrupted by new technologies and business models.

But understanding the problem doesn’t make it any easier to solve. A case in point: Intuit (NASDAQ: INTU). Next year, the Mountain View, CA-based maker of financial software for consumers and small businesses will turn 30 years old. For a company its age, Intuit has done as much as any other Silicon Valley outfit I can name to foster an innovation-friendly culture within its walls and to bring in fresh outside talent when necessary—witness its shrewd 2009 acquisition of But no giant payoff has yet arrived.

Make no mistake—Intuit is a solidly run company whose earnings have been rising steadily, from $477 million in 2008 to $792 million in fiscal 2012. Over the last half-decade, its stock has outperformed the S&P 500 by a factor of two, and this year the firm began paying cash dividends for the first time ever.

But the 8,000-employee company, long dependent on its aging triumvirate of products, Quicken, QuickBooks, and TurboTax, went for nearly a decade without introducing a major new, homegrown product. And when it finally did—with the launch of the GoPayment mobile payment service, in 2009—the effort was quickly overshadowed by red-hot competitor Square. [Corrected 11/6/12. A previous version of this paragraph incorrectly stated that GoPayment itself was introduced in 2011; in fact, it was Intuit’s free credit-card reader for GoPayment that appeared in 2011.]

Yes, Intuit successfully negotiated the transition from selling shrink-wrapped desktop software in the 1980s and 1990s to selling online services today. But it’s still in the midst of making the next big leap, to serving consumers and businesses on their mobile phones. And the company remains a relatively small player on the Silicon Valley stage: its market capitalization is a mere $18.2 billion, compared to Oracle’s $152 billion, Google’s $223 billion, or Apple’s $550 billion.

Over the last few months I’ve been speaking with Intuit executives and current and former employees, trying to get a read on this interesting company and whether its numerous and earnest efforts to stay innovative—spearheaded largely by founder Scott Cook, CEO Brad Smith, and chief technology officer Tayloe Stansbury (pictured above)—have positioned the company for big successes in the future. The answers aren’t clear-cut. But the question is one that should concern the leaders of every tech company that’s past the startup stage. If, after trying every trick in the book, Cook and his colleagues still can’t find ways to bring out startling new products, win new fans, and compete with upstarts, then it’s a sure sign that disruptive innovation is the province of young companies like Square who have nothing to lose (except, of course, a few hundred million in venture cash).

Intuit’s leaders are acutely aware of the challenges. While the company enjoys high brand recognition in the personal-finance market, it knows it has precious little hold on the loyalty of today’s mobile consumers. “We live in an age now where you download an app, you play with it, and if it doesn’t work you hold your thumb long enough to make it wiggle, hit the black X, and it’s gone,” Smith told Intuit shareholders at an investor day presentation in September. “If you don’t have an awesome product that’s been reimagined for mobile and has an amazing first use experience, you are out of the game.”

Many of the people I talked to inside Intuit, from founder Aaron Patzer to the creators of the new SnapTax mobile app, believe the company is still very much in the game—and that it’s learning how to generate and refine ideas faster and simplify its existing products for the era of smartphones and tablets. Yet in the one market niche that Intuit should arguably have owned from the beginning—mobile payment processing for small businesses—it’s been lapped by upstart Square. The Goths, in other words, are banging at the gate.

“They do a really good job of understanding the trends and trying to stay in front of them, but I think they are just a big company, and so it’s very hard not to suffer from the innovator’s dilemma,” says Mark Goines, who led Intuit’s consumer and banking division throughout the 1990s and later became an investor and board member at “I think the company has recognized this, but its ability to embrace that and take risks as a public company is constrained by their own shareholders’ need for profits and predictability.”

A Company of Geniuses?

From the beginning, Intuit has had one giant truth working in its favor. People hate managing their money. Balancing a checkbook, paying taxes, understanding basic double-entry bookkeeping for a small business, making payroll—it’s all a huge pain. Yet it’s also emotionally fraught, given that our worries about money are hard to untangle from our feelings about power, freedom, and obligation.

In order to feel calmer about their dollars, Intuit learned early on, many consumers and small business owners are willing to part with a few of them. That fundamental insight came back in 1983, when Scott Cook watched his wife paying bills by hand and decided that 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 quick-and-dirty customer surveys and experiments. (If those sound like pages from the “lean startup” philosophy being advanced by author Eric Ries around the same time, it’s no coincidence—Cook had noticed Ries and invited him to speak at Intuit in 2008.)

As the Innovation Catalysts went back to their groups and modeled the design-for-delight ideas for their colleagues, Cook and Hanson began to notice more ideas bubbling up through the ranks. The next year, they trained 30 more catalysts. True to the company’s bias against the solitary visionary, they tried to find team-builders and weed out the prima donnas. “There are people who want to be known for being good at designing for delight, as opposed to being known for being good at getting others to do it,” Hanson says. “Over the years we realized that the Innovation Catalysts who had a posse, who had buddies, were much more willing to take risks than those who were on their own.”

Painstorms and Brainstorm

Today there are 200 trained catalysts across Intuit. In June I sat in on a class where instructors were showing the latest group how to lead “painstorm” sessions focused on identifying customers’ most urgent needs. “The Innovation Catalyst training is not something that some crazy aberrant is running with, but rather something that is part of our theory on broad-based innovation,” Stansbury told me afterward. “There might be some people who are more prolific than others, but there is always going to be some guy off in the corner who might come up with a doozie of an idea once in a decade. If you don’t have a mechanism to capture that, you are losing a lot of the potential that the company might have.”

The Innovation Catalyst program was only the first of these mechanisms to be rolled out. Another was unstructured time, Intuit’s version of the fabled “20 percent time” program at Google. Intuit employees don’t get quite as much time to noodle as their Google peers—it’s pegged at 10 percent, averaged over the course of a year—but the idea is the same. “That’s time you spend on some project where your manager doesn’t get to tell you what to do,” says Stansbury. “The projects may or may not be aligned with our present business. Typically they are, but sometimes they’re just off in left field.”

Employees are encouraged to pool their unstructured time to pursue bigger projects. But when that happens, there’s at least a little structure: teams are pressured to adhere to lean-startup methodology. “One of the things that teams can do when they are running off with unstructured time is pursue an idea out of passion when it turns out not to have a lot of grounding in what customers want,” Stansbury says. “You want to be able to distill the ideas down to their essence and figure out what is the cheapest experiment you can do to validate or invalidate that essence.”

Tayloe Stansbury, CTO of Intuit

Tayloe Stansbury, CTO of Intuit since 2009.

Yet another company-wide mechanism for capturing innovation is a private online clearinghouse for ideas, called Brainstorm. Tad Milbourn, a senior product manager at Intuit, co-created the tool shortly after his arrival in 2007. He told me the initial goal had simply been to create better ways for new employees like himself to get plugged into the organization. “Folks who are new to the company don’t have a network of connections and therefore can’t get anything to happen,” he says. “So solving for the innovators was the first unique aspect of it.”

But Milbourn was also reacting to the company’s previous idea-tracking system, which he says actually discouraged innovation. “It was pretty onerous. It had 30 questions you had to answer for every idea, like ‘What kind of revenue is it going to generate three years out?’ Things you can’t possibly know when you’re just starting out.” Brainstorm asked innovators for less information, but still enough to give executives a view into ideas popping up across the company.

Within the first year after Brainstorm’s release, the number of employees contributing ideas to the system quintupled, Milbourn says, and more than 300 ideas that began as Brainstorm posts have now evolved into Intuit products or features in products. Two examples: ViewMyPaycheck, a feature of Intuit’s payroll system that lets small-business employees view their pay stubs online before paper copies arrive in the mail, and the Intuit Payment Network, which allows small businesses to pay vendors, or get paid by customers, through ACH (automated clearing house) technology.

Big products like the payments network can’t happen through unstructured time alone, so there’s yet another program at Intuit to make sure that the most deserving ideas don’t die from lack of resources. “The best way to get more money is to say, ‘Here are the six experiments we’ve run that get at the crux of the idea, and they are all positive,’” says Stansbury. “If we think we want to sink a bunch more money into this, we have a CEO Fund of many millions of dollars set aside at the beginning of each year for things that pop up. So you can get something off the ground without having to wait for the next year’s planning cycle.” (Intuit’s overall R&D budget for fiscal 2012 was $669 million, or a respectable 16 percent of net revenue.)

Catalyzing innovation through training; providing unstructured time; having mechanisms to capture, test, and temper ideas; providing off-cycle funding to the best ones: “All of that fits together into a system that supports broad-based innovation,” says Stansbury. The results are visible each year at Intuit’s Innovation Gallery Walk, an event where employees get to demonstrate their projects to press, investors, and fellow employees. At a 2011 Gallery Walk event (see video), I saw projects that clearly fit with Intuit’s existing businesses—for example, a mobile version of QuickBooks for Android devices—and others that were definitely in left field, such as an iPad-based check-in system for patients at doctor’s offices, and a fancy project-management app for iOS devices called Weave.

Now that the lion’s share of Intuit’s revenue comes from subscription-based online services, rather than retail sales of shrink-wrapped software, product managers need to change their definitions of what Intuit can be good at, Stansbury says. “It’s not about how many features you’ve introduced over the last year, but how delightful and sticky the experience is for the customer,” he says. “That might mean taking things out rather than putting things in. It’s about figuring out what the customer needs deep down—not what they say they need, but what their real problems are—and then coming up with an elegant technology solution.”

Complexity Is Enemy Number One

You don’t have to look far for products where Intuit has been changing things up by taking things out. After it acquired in late 2009, Intuit put founder Patzer in charge of its personal finance group, home to Quicken as well as a pair of bill-paying services called Quicken Bill-Pay and PayTrust. “They told me, ‘Remember all those things you said were wrong with Quicken? Well, it’s yours now,” Patzer says.

Aaron Patzer, Vice President of Product Innovation at Intuit

Aaron Patzer, founder of, is now Intuit's vice president of product Innovation.

Patzer was given total control over personnel decisions and the product vision for Quicken. Today he describes that situation as “an interesting challenge,” given that at age 28, he was the youngest officer in the company by a good 10 years—and that he was “totally unproven as the executive of a $100-million-plus business division with 100 people.”

Patzer’s first move was to redesign Quicken from the ground up, implementing what he’d learned at about how to keep users engaged. “It’s always been my belief that, particularly around things in the financial world, complexity is enemy number one,” Patzer says. “Intuit’s biggest competition is all of the people who don’t want to manage their personal finances because budgeting is too hard, or understanding interest or rates of return is too hard. We need to boil that down to something that seems simpler.”

The old Quicken, where setting up a single user account required users to fill out nearly 40 screens of data, was far from simple. Patzer declared war on the bloat and cut the setup process to five screens. At every point, he challenged designers to justify the inclusion of extra screens, pop-up boxes, and form fields.

“If you had an input form asking for city, state, and zip code, I’d berate you for asking for three fields when you could have asked for one,” Patzer says. At the same time, he connected Quicken to more banks and ripped out the program’s purchase categorization engine, replacing it with’s more accurate one. The ensuing products, Quicken 2011 and Quicken 2012, have won praise for their Mint-like simplicity.

Patzer gives Intuit a lot of credit for handing over its flagship product to one of its most outspoken critics. “It was a sign that they were consciously trying to bring in outsiders and infuse innovation throughout the organization,” he says. “If they had just wanted’s customers and technology, they could have bought all of that and fired me and fired the team—and I wouldn’t have blamed them, given the stuff I had said about Quicken. Instead, they incented us well to stay on and stick with it.”

In June 2011, Patzer gained the additional title of vice president of product innovation, which means he now consults with groups across the company on simplifying everything from TurboTax to payroll services to QuickBooks. His job sounds pretty similar to Cook’s. He says he spends a lot of time meeting with product teams, reviewing their visual mockups, and coming up with easy, accurate ways to test beta designs on potential users.

There’s lots of room left for Intuit to improve its product lines, Patzer says: “I think the average person can do their taxes on TurboTax in 35 minutes, but it could still get better. The end goal is zero work.”

Filing Your Taxes In a Snap

While Patzer has been busy helping Intuit fix old products, others in the company have been working on brand new ones. One of the most fascinating cases I found in my reporting was SnapTax, a mobile app released in 2010 by members of Intuit’s TurboTax team in San Diego. For people with simple (1040EZ) tax returns, SnapTax could represent a big leap toward Patzer’s vision of zero work.

If you’ve ever used the Web or desktop versions of TurboTax, you’ve been through the tedious steps of transcribing data from your paper 1040 form into the program manually, one field at a time. SnapTax dramatically speeds up that process by letting you snap a picture of your 1040EZ form with your iPhone or Android device’s camera. Optical character recognition software grabs the data and automatically inserts it into the right fields on a digital form. After you answer a few questions to help the IRS verify your identity, you can e-file your return wirelessly from the phone, and even request that your refund be automatically deposited in your bank account.

SnapTax was born in the summer of 2009 as an unstructured-time project involving five designers and product managers from Intuit’s consumer technology group. “There were a number of us who were really attracted to the iPhone,” says senior product manager Carol Howe. “We pooled our time together to see if there was a more innovative way to do taxes on the device.”

The audacious goal: to help customers file their taxes in just 15 minutes. With regular guidance from Cook, the team started roughing out ideas. Before anyone wrote a line of code, there were many generations of paper prototypes.

“We would go out to coffee shops and just share the papers with customers and see what they thought of the concept,” Howe says. “Once we felt like we had something, we started sharing it with the senior executives, and they and Scott were so supportive that they let us carve out more time from our daytime jobs.”

The team’s weekly routine sounds a lot like the process inside an early-stage startup. According to principal experience designer Alan Tifford, it went like this: On Monday, the team would evaluate feedback from customers and prioritize the list of problems they were having with the application. On Tuesday the team would “go broad” and brainstorm ways to fix the problems. On Wednesday they’d “go narrow,” crystallizing the ideas down to just a few.

Thursday was coding day—“I was usually up really late putting together the prototype,” Tifford says. Friday was testing day, when the group either brought mini-focus groups into the office or went out to coffee shops to get feedback from strangers. On Monday, the whole cycle would start over.

After about 25 weeks of that, in January 2010, Howe and Tifford’s team released a California-only version of SnapTax. A 50-state version, for both iPhone and Android, came a year later. It’s been a huge success for the company, with over a million downloads so far. At $29.99 per return, it’s usually the top-grossing app in the iTunes App Store during tax season. And it’s winning the company new customers: over half of the people who used SnapTax to file their taxes in 2012 had never used an Intuit product before.

That could be an important sign of the company’s future. “People just expect that they will be able to do these everyday tasks without having to be tied to a computer in any way,” Howe says. “Young kids in their twenties haven’t done their taxes a lot before, and they think it’s scary. When they see it on the phone, represented in such a simple streamlined way, there is a little surprise and delight.”

Afterburners on Mobile

But even as Intuit introduces new products like SnapTax, overhauls old ones like Quicken, and adopts a range of new tactics to cultivate broad-based innovation, it’s got the rest of the world to worry about. Consumer expectations of mobile technology continue to rise, fueled by an unending stream of hardware innovations from the likes of Apple and Samsung. Mobile could turn out to be the best thing that ever happened to the company—or it could be the beginning of the end. It all depends on how the company’s leaders respond. To stay relevant and competitive, the company will need to be strategically smart, not just tactically smart.

Already, Intuit has completed one big strategic shift, as it has introduced online versions of the big moneymakers, TurboTax and QuickBooks. (Intuit killed the online version of Quicken in 2010, reasoning that performed the same functions better.) “Moving from the desktop to connected services was a big change,” says Stansbury. “The skills required to do that are actually quite different, and you encounter issues of scale, data privacy, and performance that are just not relevant when you’ve got an overpowered PC on your desktop just to run one program.” Over the last four years, Stansbury says, the company has systematically retrained hundreds of software engineers who used to work on desktop programs like the original Quicken so that they understand how to deliver database-driven applications over the Web.

QuickBooks on an Android device

At Intuit's 2011 Innovation Gallery Walk, an Intuit product manager demonstrated QuickBooks running on an Android device.

But even before the company had completed that journey, the smartphone arrived, changing everything once again. The acquisition was part of the company’s response, but Intuit couldn’t expect Patzer and’s 34 other employees to infiltrate and alter the larger company’s culture overnight. So nearly two years ago, the company undertook what Stansbury calls a “change management exercise,” beginning with another off-site meeting for CEO Brad Smith and other top executives.

“That was when we first rolled out the idea that we need to be getting going on afterburners on mobile” across the company, says Stansbury. Meetings with vice presidents came next, then product managers. The exercise was partly about making sure Intuit executives understood the opportunities and challenges inherent in mobile app development and distribution. It was also about getting more retraining and hiring underway, so that Intuit didn’t have to outsource as much of its mobile development. (Luckily, “moving from SaaS to mobile turns out to be easier than moving from desktop to SaaS,” Stansbury says.)

The exercise ended in summer 2011, and Stansbury says the results so far have been “stellar.” In the last year, the company has introduced more than a dozen new mobile apps. The number of people using its mobile products has tripled; mobile revenue has increased by a factor of 10; and the average rating for Intuit apps in the iTunes App Store has increased from 3.0 stars to 4.3 stars.

And there are more mobile products in the pipeline. But already, Intuit is moving on to the next thing. The change management exercise for 2012, according to Stansbury, is all about platforms—that is, getting everyone in the company thinking about how to open up Intuit’s infrastructure so that outside developers can connect to it and, in theory, build apps and services that enhance the value of Intuit’s own network.

Building a platform also means tapping the expertise of users themselves. One model here is TurboTax Live Community, launched in 2007 as an online forum where taxpayers can answer one another’s questions. “Amazingly, there are people who spend tons of time, out of the goodness of their hearts, answering all kinds of tax questions, and people are as happy with those results as they are with our own customer support,” says Stansbury.

The Live Community model has spread to other Intuit products, and now there’s so much data in the forums that the company has been working with MIT Media Lab computational linguist Henry Lieberman to come up with natural-language search tools to help users find the answers they need faster.

Risk Tolerance

Still, for all its exercises and off-sites and initiatives, there are reasons to doubt whether Intuit is moving far enough, fast enough. The company remains perilously dependent on TurboTax for its revenue. Because it is, in effect, the nation’s biggest tax accounting firm, its revenues are extremely uneven; it usually loses money in the first and fourth fiscal quarters and makes it up in the second and third. (Intuit’s Black Friday is April 15.) Even scarier, there’s a risk that the entire TurboTax business will go away after 2014, when an agreement keeping the federal government out of the e-filing business is set to expire.

At a more fundamental level, Intuit is a company that came of age during the PC era. Microsoft’s success spreading Windows (and its failure spreading Money) created the perfect conditions for Intuit to build a near-monopoly in personal finance and small-business accounting on the desktop. It’s hard to imagine any company achieving a similar feat in the era of Web and mobile apps, where personal data is far more portable, free is the dominant price, and upstarts can come out of nowhere to gain big market share faster. Intuit won’t be able to deal with every new that comes along by acquiring it.

Indeed, the one company that Intuit arguably should have tried to acquire a year or two ago, Square, is probably beyond its price range now. Jack Dorsey’s startup raised $200 million in venture capital in September at a valuation of $3.25 billion, or roughly 20 percent of Intuit’s entire market capitalization. And it’s showing no signs of slowing its growth in the areas of mobile credit-card processing for merchants and, more recently, mobile digital wallets for consumers.

Credit-card processing for small merchants is a market that, by all rights, Intuit should own. It already helps many small business owners keep their books, send invoices, and collect payments from vendors; why shouldn’t it also help them handle transactions at the point of sale?

In fact, that’s the exact reasoning behind Intuit’s GoPayment mobile card reader. Because GoPayment is part of the QuickBooks ecosystem, Scott Cook has argued publicly that there is “not a direct competition” between Intuit and Square; he thinks Square’s main appeal is to customers who are comfortable carving together financial solutions from many different vendors. And Chris Hylen, Intuit’s vice president and general manager of payment solutions, has said that GoPayment is mainly for small businesses, not big enterprises like Starbucks (one of Square’s biggest investors and customers). But that hasn’t stopped Intuit from precisely matching Square’s pricing—both companies keep 2.75 percent of each swiped transaction.

Mark Goines, the former Intuit consumer and banking head, says he’s “investing pretty actively” in digital payments startups, and he calls Square “the poster child” of the small-business payments market. He says Square is overtaking Intuit because it’s more risk-tolerant. In essence, the startup has either figured out ways to mitigate chargebacks, fraud, and the other hazards that go along with a major processor of credit card transactions, or it figures it’s got so much cash on hand it doesn’t need to worry about it. “Square has a very aggressive pricing model and terrific marketing, and they take on a lot of risk in taking on new customers,” says Goines.

“Intuit has essentially all of the same capabilities—they have a big payments infrastructure, they have this Square-like device, and they service merchants better than just about anybody on the planet. But it’s very difficult for them to take on the type of credit risk that Square is taking.”

It’s not just about technology or platform innovation, Goines says. “It’s about a full understanding of the innovation around the business model, and the willingness to sustain losses for a long time in a new business to establish a foothold. If you said to stockholders, ‘I’m going to lose $50 million a year for five years to be the biggest player in micropayments, is that okay?,’ what would they say? They would say ‘No, that’s not okay.’”

Goines stresses that he has “heard nothing but great things” about Brad Smith’s leadership at Intuit. “The success they’ve had at transitioning the organization toward creating new products and new business models is clearly evident,” he says. “And when they are not being internally successful, they are smart enough to find people who have done a better job and grab them, like they did with Mint. So they are doing a lot of the right things. I just think the innovator’s dilemma is such a powerful force that they are always going to have to keep a watchful eye on what others are doing, and do better, either by buying them or by trying to do it internally.”

That’s a tall order. But Intuit has been written off before, only to come roaring back. (A 1998 quote from then-CEO Bill Harris is instructive: “Isn’t it amazing how quickly you can become a company of the past—or a company of the future?”) And the company has the advantage of a loyal, enthusiastic employee base—everyone I’ve met at Intuit seems to love their job, which is no small thing.

“I feel like very few companies are able to reinvent themselves, and Intuit has shown again and again they can,” says Kaaren Hanson, the designer. “Right now we’re in the middle of reinventing ourselves once again. This is Silicon Valley at its best.”

Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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