The sight was rare: a dot-com entrepreneur whose company is profitable. Last Tuesday, Intuit Chairman and founder, Scott Cook (HBS ’76) treated a crammed Aldrich classroom to his key learnings on what it takes to be a successful entrepreneur and manager. After a brief stint with Procter & Gamble, Cook established Intuit in 1983 with a view to developing user-friendly personal accounting software.
Today, Intuit’s two major products, Quicken, cash management and bill paying software for personal and business use, and Turbo Tax, used for electronic form completion and filing of U.S. tax returns, each have retail market shares of between 70% and 85%. Largely bucking the downward trend that has recently befallen other technology firms, NASDAQ-quoted Intuit’s stock price is four times what it was five years ago, with last year’s operating profits up 42%.
Reflecting on Intuit’s early years, Cook recalled how a dearth of venture capital, established competition, and a recession in the software business in 1983 translated into long odds of survival for his fledgling company. However, by staying “intimately close” to customers-a practice on which major emphasis is still placed today-and by developing an innovative accounting software “without the debit and credit mumbo jumbo,” Quicken steadily built a loyal following amongst personal users and small businesses.
“Recessions are a great time to perform game-changing innovation,” he told his audience. Cook went on to cite how many innovative companies had been founded during difficult times, offering Hewlett-Packard (founded in 1939 at the beginning of World War II), Southwest Airlines (founded during the 1970s stagflation era) and Siebel Systems (founded in 1991, during the last recession), as examples.
Keeping it simple, but getting it right is a major theme at Intuit. Cook highlighted the importance of pricing. He said that when a free, basic version of Quicken was available, 97% of 14 million users still preferred to pay for the deluxe version. Reacting to this, Intuit abolished the basic version and introduced a more expensive, moderately more functional “Suite” product in its place.
Cook has overseen the turnaround of Intuit’s payroll division by focusing on gaining a clearer understanding of marginal costs. His study revealed that historically, Intuit was pricing 85% of customers below true marginal cost. Rationalizing procurement practices and implementing more transparent means of communication between employees are other examples of his philosophy that a substantial part of running a good business is mundane.
Replicating Intuit’s successes outside of the US has proven difficult, however. While a significant presence has been established in the U.K., the capital expenditures required have been so high that Intuit does not believe it will ever see an adequate return from this investment. “We lost our shirts in Germany and France,” said Cook, bluntly. The root cause of the difficulty in transplanting the company’s business model lies in deep cultural differences, as well structurally dissimilar international banking systems.
Nevertheless, going forward, Cook was optimistic that Intuit would develop software engines that were more customizable to international markets, concluding “it’s part of my job to inspire people to keep pushing to be the best we can be.”
