Q&A With Scott Cook: Intuit Founder On Expansion And Customer-Driven Innovation

InformationWeek senior editor Tony Kontzer recently spent time with Scott Cook, founder and chairman of Intuit Inc., which will be profiled in the Nov. 22 issue of InformationWeek. The company, best known for its Quicken, QuickBooks and TurboTax products, has in the last few years embarked on an acquisition strategy aimed at propelling itself into new vertical and horizontal markets. Cook talked with Kontzer about how the company's move to expand its sights evolved.

InformationWeek: Why has Intuit been attempting to go beyond its "Quicken company" roots and become a bigger player with larger companies?

Cook: You remember the comedian [Flip Wilson] who used to say the devil made him do it? In our case, it was the customers who dragged us into it. We didn't start out to do this. But without us really knowing it, customers had started using our stuff in far larger enterprises than we had ever dreamed. It's a little like eBay, where they started doing something for one reason, but people started using it for another reason and it took off.

We started Quicken, and we were quite successful, but a funny thing happened that we ignored for a while. The Quicken business grew, and small businesses started using it. We ignored it because it made no sense--we were building consumer software. But eventually we started paying attention to it. We found out that the same thing was a problem for business, because most small businesses couldn't use debit/credit accounting. That's how we started two businesses. The first was what we now call Standard Payroll. The second was QuickBooks. Both were supposed to meet the needs of small businesses, and today they're pretty successful.

But without knowing it, we were picking up mid-market businesses. It was 5% of the QuickBooks base, so we said, eh, that's minor. But when we compared that with what the other mid-market companies had--companies we would never have compared ourselves to, companies like Great Plains [now owned by Microsoft]--we had more customers than they did. Then we started paying attention. And that was without even thinking we had them as customers. Now we've had a team focused on them for 3-1/2 years.

So we then acquired a small company that was building an information-sharing system for small and medium business to run on, Turning Mill Software. It hadn't gone to market yet, and it looked like a pretty cool solution for an upper small business/lower midmarket kind of company. We brought it to market quickly, and a funny thing happened. Even more dramatic than the others, the whole thing kind of shifted up. We found that small businesses used it, but the real fans were the upper midmarket, and then we got these corporations buying it. This wasn't the plan.

InformationWeek: Intuit has made a series of acquisitions since it bought Turning Mill in 2000, and several of these have taken you into new markets, such as real estate, durable-goods distribution, and IT asset management. What were you looking for in the stream of acquisitions that led you into all these new markets?

Cook: There weren't any markets we were looking to get into. We were looking for good leadership teams where we could add our skills to what they have to make success happen.

InformationWeek: How much of Intuit's resources are now devoted to these new business units?

Cook: I don't look at resource allocation across all of our divisions. But I can give you one piece of data: Quicken is now 5% of our revenue. It was 100% at one time.

InformationWeek: What's the impact on Intuit of all this? Are you looking to evolve into an enterprise software company?

Cook: I think the reason why these businesses are succeeding is because we're not an enterprise software company. Those huge paybacks--15-to-one [ROI], that sort of stuff--couldn't be delivered if we had an enterprise software cost structure. The personal intimacy and drop-dead ease of the solutions is only possible if you're a consumer-driven company. Our goal and challenge is being even more customer-driven. That's what has produced the big innovations, like QuickBooks, like QuickBase--things that are just so different than what anyone else is doing. And now we're trying to deliver that in a form that corporations also find exciting and solves their real problems.

InformationWeek: What do you have to do differently as you move up the stack and your list of competitors evolves?

Cook: We don't run into any one competitor that often. Often, what people switch from are custom systems. So you've got to be enough better that they'll pay a lot of money to replace that. As a result, we don't really change that much. We still focus on the customer and solving their problems by building solutions that work so well that they can't imagine going back to the old way. Generally, you do that by not focusing on the competitor--otherwise you end up with what the competitor has, and that's no innovation.

InformationWeek: If you took a poll of 100 CIOs and IT managers, most of them would have very little clue that you'd gotten into all these areas. How do you reach them? And do you want to?

Cook: We do, but they tend to reach us. The single largest driver of sales to new customers has always been one thing, and it hasn't changed, and that's word of mouth. With QuickBooks, about eight times as many customers come from word of mouth than from the next thing on the list. You've got to do a lot to earn that word of mouth. And the only people who give great word of mouth are extremely happy customers. Not merely satisfied, not merely happy, but extremely happy. That's what it takes for them to tell their friends, tell their coworkers, tell their peers in other companies.

InformationWeek: How do you see Intuit five or 10 years from now?

Cook: I think we'll have solved some problems so large that most folks don't even imagine a solution. One example is in TurboTax and the way it will work with corporations. TurboTax, of course, does consumer taxes. It's a great tool. It interviews you so you don't have to think. It just asks you questions and it has all the logic in it to produce tax returns 20 times more accurate than one done with a pencil, or 20 times less likely to have an error the IRS catches. So that's great. But in fact, I have a dream much bigger than that.

With TurboTax, you still have to answer the questions and type in the data, and it turns out that much of that data already exists in corporations' mainframes. Your employer, or your payroll service, has all the information on your W-2, yet it gets reduced to ink on paper. So it comes to you in the mail, and you have to type it into TurboTax. For interest income, banks, brokers, mutual fund companies--all those companies have that information in their mainframes, but they just don't give it to you electronically.

What I see someday is that in late January, you'll get an E-mail from your employer that says, "Hi, we've sent your W-2, but we've filled in your tax return for you. Click here to see it." You click there, and our engine behind it will bring up your tax form with much--potentially all--of your information already there, pulled from your bank or broker. You'd look at it, say yep, and click on it. It'll ask you if you want payroll deductions, and you'll say "yep," click, and you're done. And then you'll get confirmation back from the IRS.

So it's kind of like virtually instant taxes. It's a combination of thoroughly connected and intimately personal with guardrails. That's an example of the kind of future that there are already pieces of today. The same thing will be true with the way small businesses and midmarket companies communicate with enterprises. It's like the difference of going from the radio to an iPod.

Read more about Intuit's expansion strategy, "New Horizons For Intuit".