Why Intuit Founder Scott Cook Wants You To Stop Listening To Your Boss

Why do gigantic companies made up of insanely intelligent people make bad decisions? Because they rely on persuasion and PowerPoint, Cook says, not experimentation.

One thing that's surprising about Scott Cook, the founder of Intuit, is that this intensely smart guy who's become one of the most successful entrepreneurs in history doesn't think you should listen to his ideas. He wants you to run experiments. When he was in New York recently, he told Fast Company why.

The interview below has been condensed and edited.

Scott Cook

The Quandary

As you grow as a company, you get layers and hierarchy that, in theory, should make your decisions a lot better. They get reviewed, and thoughtful people look at decision. But I found myself saying, "Boy, you know, a lot of those decisions—decisions I made, decisions I participated in, decisions we took to our board—many of those decisions weren't very good."

It was perplexing, because I've got an MBA. You're kind of taught that the role of a business person is the decision making. I began to worry: Are some of the things we're doing unknowable? Is it not possible to predict consumer behavior?

You had to say that we didn't have the batting average that we imagined in our minds that we did.

The insight

I spent some time studying Toyota, because how could a loom maker—they made looms. That was their business for 50 years, 35 years—and then they decided to go into the car business after everyone else was in the car business. How could they become the world's branded carmaker, making cars that are higher quality than anyone else in the world? Making cars with parts and systems nobody could match? When Nissan sells a hybrid, it's got Toyota parts in it because Nissan can't make them. Nobody sells a hybrid luxury car that does what Toyota's done. Other guys have passive systems. Toyota has an active system.

How can this loom maker out in the Kansas of Japan become better than Mercedes and GM at the core business of making cars? I went with some professors from when I studied at Harvard, I went to Japan, to the Toyota factories, and I watched and learned together with the professors.

As one of the professors said, Toyota runs itself as a massive series of experiments from the production line worker, all the way up to the CEO, where they teach their production. Their supervisors now, they have the line supervisor manage 70 or 80 people [on] how to run experiments with their team, little scientific experiments to try out their ideas on how to make production.

They were single-variable experiments. I think that's kind of odd. Nobody else does that. We don't make autos. There were some other examples, but the one that hit home was how Google beat Yahoo. I talked to Yahoo people about it. They said, "We got beat because Google runs itself as a series of experiments run by its engineers. They are constantly trying new things at a ferocious rate. A Google chief scientist says they run 3,000 to 5,000 experiments a year. If you use Google in a week, you're likely to be in three experiments. You don't know you are, because they are experiments.

Guys at Yahoo were saying, "They just outran us. We tried management, all the stuff that management did, but we didn't have that experimentation engine.

There's a pattern here. Both companies make much better decisions because they don't rely on hierarchy, PowerPoint, persuasion. They're making decisions based on real experiments. So I said, wait a minute. Whenever reasonable, let's move from decisions by persuasion to decisions by experiment.

What experimentation does

Three things happen. One, you make better decisions because it's actually real consumers or real production methods that aren't based on theory or a PowerPoint. It's based on real results. That's one.

Two, you enable your most junior people to test their best ideas, and when in you're doing PowerPoint presentations, whose ideas are most likely to get lost?

The third is, you get surprises more often, and surprises are a key source of innovation. You only get a surprise when you are trying something and the result is different than you expected, so the sooner you run the experiment, the sooner you are likely to find a surprise, and the surprise is the market speaking to you, telling you something you didn't know. Several of our businesses here came out of surprises.

The Case Study

The traditional way you do payroll is the customer comes in and they want to get a payroll system set up to pay their employees. So you come in and have to do setup first, enter all this stuff about your employees: social security number, tax status, cumulative payments to date. It takes hours to a day or two. What we noticed is when new prospects come to us, 60% of them come to us on their own payday. They don't want to wait to do paychecks if they don't have to. No the payroll company is set up this way. They all force you to do this setup, which on average takes a day.

We'd done an acquisition of a smaller startup that was about four or five years old, and one of their engineers had this idea: If the new customer wants to cut paychecks right now, we'll say "Fine, we'll cut the paychecks right now." We couldn't sell that idea inside this structure because it's so radical. The whole industry does it one way.

So he gets here, and we have an experimentation culture, so they're allowed to consider ideas like this, and they design the screens to do it, and then they did just a quick non-experiment with the consumers. They took 20 payroll customers, showed them the screen. That's not an experiment. That's just showing you the screens and asking their opinion. Experiments don't use opinion, they use real behavior. They showed 20 prospects the screen and said, "Would you decide to do payroll setup after your first round of checks," and zero percent said yes, they would use it. Zero percent. So the team stopped working on the idea.

Then Lean happened

In the meantime, we'd found (Lean Startup author-thinker-badass) Eric Ries. I discovered Eric Ries on an online video and said, "Shit, this guy's talking about the same exact thing we figured out, but he explains it so much better, and he's taken it farther that we've taken it." We immediately had him come in and start teaching it.

We have Eric now coaching in public inside the company. The team went to him. Eric looked at it and said, "Why don't you run an experiment tomorrow. Just put up the option. Show prospects the choices, and let's see what they pick. Don't build it yet. Just show them choices, and if they pick the paychecks first, setup second, we say, ‘So sorry, we haven't built it yet,' and give them a $100 gift certificate."

He challenged them. "In 24 hours, you should have this experiment up." I was in the audience watching, and in 24 hours we had the experiment up, and I remember when they showed customers and asked their opinion, zero percent said yes. When they actually didn't ask an opinion and just watched behavior, 58% clicked, "I want to cut the checks first." 58%.

They then built the functionality, but it took them a few months. Now, our payroll division is going to have their fastest customer growth in 10 years because of an experiment. Without the experimentation stuff, it never would have happened.

Unpacking experimentation

You've got to change your culture, because it's natural for bosses to want to decide. Now we teach our leaders that it's your job to put in the systems that enable your people to run your experiments fast and cheap and to keep making them faster and cheaper. Yield as many of your decisions off to the experiment as possible.

Bottom Line:

Large successful companies need a lean startup more than startups do. Startups have a natural discipline of the market.

[Image: Flickr user Patrick Lentz]

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21 Comments

  • Michael Jackson

    I used Intuit's product for my business from 1997 through 2004, when I sold the company. Loved Intuits product.
    I started a new business in 2012, so I bought the latest Intuit. And guess what, the payroll function was changed. To my way of thinking it was a business model change, not a customer focused change. I can't use what I paid more or less $200 for. I am Angry. I can't be the only one. Does your innovation look so smart now?

  • Ronny Kohavi

    Love the article, which resonates with a lot of things I'm preaching about online controlled experiments. See http://bit.ly/expQCon for a talk at QCon about this with statistics.

  • Mindy Eiermann

    I'm the Product Manager on the team Scott spoke of in the Case Study above and I can absolutely validate what Scott says, as I am living in this experimentation and data-based decision making culture. It hasn’t always been this way, and I still see more Power Point presentations than I’d like, but, as Wendy said, Intuit is a 30 year old company and change takes time. Scott Cook, Brad Smith and other leaders are out there encouraging us to change they way we work every single day. The truth, as I see it, is that it’s up to you to embrace this change and ditch the PPT. All the tools and opportunities are there. And you are much more likely to be successful at Intuit and elsewhere if you start making decisions based on data (real behavior data in the real world) instead of opinion. My team now feels empowered to test any reasonable hypothesis, as long as we can find a quick and easy way to do so. And once we have the data to prove our hypothesis, there’s no longer a question of where we should invest, and it doesn’t matter what Scott Cook or anyone else thinks. Data is king.

  • joe

    I worked at Intuit for many years and can validate the politics and powerpoints. At times I had to create endless powerpoints to explain "new" technologies that the industry had accepted many years ago. Inside Intuit there is a factory of directors and middle management that labors around ops-mechs, power points and politics, while the people below struggle with direction. There is a culture of focusing on the "how" vs the "what". What Mr. Cook describes is a brilliant "how" that would have you on a performance plan in a minute. The group I worked in spewed incompetency and had negative employee survey results that were pushed under the rug with no focus from leaders above. What new products has Intuit created anyways? And to the people supporting the notion that Intuit is leading the space - look at your technology stacks (how old is the guts of tax?), data center (not close to AWS) etc - and lastly look at your speed of execution compared to others.

  • Jeff Zias

    I have been at Intuit 8 years and feel I need to describe my experience here. To give context, I’ve worked at Apple Computer (15 years), 4 VC-backed startups, and now Intuit. I have to say that Intuit is the most forward-thinking, honest, and well-led
    organization I’ve ever been a part of. At this point, you are sure I’ve been
    drinking the cool-aid. Perhaps. But it tastes good, I am excited to come in to
    work every day, I feel like we are using all of the cutting edge innovation methodologies to be found, and I love the fact I work with high integrity individuals who really care about people.

    I am a middle manager in the CTO innovation space, so let me share some mindset:
    - When people ask me if their innovation idea is a good one, I say “it is good if you are passionate about it.”
    - When people (senior leaders too!) present an opinion, I ask “can you prove that or disprove that with an inexpensive experiment that tests customer behavior?”

    I understand that mileage varies per person, so I regret that someone may have historically had a less than stellar experience, leading to a grind-able axe … I wish that weren’t the case. But getting an 8,000 person company to be exceptional, to the person, is a journey. Intuit is great yet imperfect, modest yet communicative, but also - in my book - the best place I can choose to work at. So I do.

  • Prince Gill

    I'm currently completing my 4 month developer internship at Intuit. I'm about halfway through and I'm a little baffled by most of the comments in this article. I cannot make any statements regarding the company's culture from before I started but these discussions make me think that a lot of change must have occurred. Yes, we have frequent (and usually short) meetings among the team. Most of these are scrums and sprints though. Other than that, meetings encourage new ideas and innovation. Employees are given the opportunity to demo new items that they've been working on and receive feedback from the entire team (including interns!). I've personally seen such feedback incorporated into the company's products.

    I'm currently working on a few cloud offerings so we get the opportunity to leverage the latest technologies and are mentored by a talented team. Among the small teams I work in, I personally feel that my input greatly impacts the work that I do. I'm excited about the work that I'm doing - and as an intern - that's what drives me.

  • intern

    Meetings and PPT is all that happens at Intuit.
    The experimentation is discussed, not encouraged. Just keep delivering something, useful or not useful, so that it can be picked up and shown to the upper management that our team is doing something.
    The biggest problem that I have faced at Intuit is very strict fences and politics, there is NO creativity atmosphere.

    As an intern I am disappointed and sometimes I loose faith in my own abilities due to this environment. If offered, I will not accept a full-time opportunity in this environment. I will go for other offers that I already have.

  • Tyler Aldrich

    I'm working at Intuit on an internship from July-December, so I can't speak for what the company was like before July. However, since I've been here, I feel that Scott Cooks philosophies are heavily encouraged and talked about all the time by senior leadership.

    Perhaps in the past, Intuit wasn't following what Scott Cook has said, but ever since the beginning of July there was a major shift in thinking throughout all the upper management. Sure, there are a lot of meetings and a lot of powerpoints, but change doesn't happen immediately. I think Intuit is quickly adapting to Cook's vision and the 'behave like a startup' principles are spreading rapidly across the company.

    I constantly see and hear about how different teams are rapidly prototyping experiments to show to customers, and developing multiple different ideas so once the customers decide on what is best, the team knows which direction to choose. This is a highly innovative time for Intuit, and in a year or so I think the entire company top to bottom will be following Cook's ideas.

  • Dale

    Too bad Mr. Cook's own company doesn't follow his advice! Having been "Inside Intuit" for years, I can only say that this headline/soundbite is very ironic. Don't believe everything you read, even if it is on the internet.

  • wcastleman

    I also work at Intuit and have been a part of the cultural change that has been happening at the company. Yes, we were the culture of meetings and power point persuasion. We've still got that in too many places. However, the shift is visible across the board and our leaders have fallen in line with the perspective that Scott espouses here. If a team is experimenting and has a story to tell, that data and story is king. The entire leadership of the company, from Directors and above have been taught "...it's your job to put in the systems that
    enable your people to run your experiments fast and cheap and to keep
    making them faster and cheaper. Yield as many of your decisions off to
    the experiment as possible."

    To all the nay-sayers, I say: the past is not an indicator of future success. Things have changed here. Expect great things from Intuit. I do.

  • Guest

    Actually, Wendy, past behavior is the best predictor of future
    behavior. As to your career at Intuit, it has been so successful
    precisely because you follow the edicts of the supreme leader faithfully. Obedience gets rewarded over there. That's why innovation has manifested only in PPT and internal teaching materials, not in actual new products that have been successful in the market.

  • Dale

    The very nature of the teaching of what you describe as the "entire leadership" of Intuit belies the nature of the experimentation/entrepreneurial process. The fact that leaders at the company have to be "taught" to be innovative, creative, efficient, or more effective within a structured, albeit political, environment simply reinforces the silo or functional mentality. What's even more shocking is your comment that these leaders have been taught that they have the job of "putting in [the] systems...". Systems by their very nature are non-experimental and process driven. To one of the earlier comments in this post, though, Mr. Cook does a laudable PR job, though, and creates pretty good soundbites.

    If anyone below the Director level ignores their boss, or ignores all the Powerpoints, endless meetings, etc., their career at Intuit wil not be a long one. And, the data is available to prove it.

  • wcastleman

    Dale,

    I hear what you are saying about needing to teach and use systems. I appreciate that you do not feel that that reflects an innovative entrepreneurial culture. However, I do not share your perspective.

    I'm below the director level. I've been at Intuit for over 10 years, and I have been known to completely change the format. My career at Intuit continues to be going strong.

    That may be true of some folks, of course. This is a change. This company is a 30-year old company with products that have existed for decades. Changes do not happen overnight. Powerpoint is still the default, but across the board people respond far more favorably to more immersive, tangilbe forms of communication.

    The key is that this isn't about Intuit specifically. This is about how open-mindedness and experimentation trumps HIPPO in the success of any organization today.

  • Aliza Carpio

    I have been with Intuit for over 11 years and one of the biggest reasons why I have been there is that we do have an open culture towards trying new methodologies and experimenting our way to the answer. The introduction of principles and methodologies like Design for Delight and Lean Startup has been so valuable in helping me and teams I work with in tackling old and new problem spaces. I am such a fan of these principles that I help teach a one week program for our six month interns (co-ops). I really liked this article and I'm even quoting parts of it at an upcoming talk I'm giving on Total User Experience in San Diego.

  • Matt

    I'm going to buch the trend here and say that I really liked the article, I thought he had some great ideas and I find this kind of talk from the top quite exciting (I'm an innovation geek). Sure, we could all focus on whether Intuit practice what they preach, but if they've got it wrong could we at least accept that these are ideas worth being positive about? There is enough evidence now to show that this kind of thinking works, but putting into practice isn't at all easy. My thinking is that if Intuit cramps your style in being creative it might be a good opportunity to take some time out, work out where you can excel, and do your innovative stuff there! There's too much opportunity out there to get bogged down with whether Mr Cook is what he claims to be!
    Matt
    www.team-escape.co.uk

  • Alex Genov

    If you follow Scott Cooks advice, you would be pushed out in no time. He must be so out of touch with all the "snakes in the grass" politics at Intuit ... Good PR effort, though

  • Ralph Matlack

    Disclosure: I work for Intuit. I'm a middle manager. I'm also an entrepreneur having founded and run two startups prior to Intuit. I still have that entrepreneurial itch, yet I've chosen to stay at Intuit for five years. That's because whatever product I've worked on at Intuit I've felt empowered to try new things and make meaningful changes. I try my best to create that environment for the teams I manage. I'm certain I'll venture out on my own again at some point, but for now I'm quite able to scratch my itch within Intuit. Without a doubt we have more PowerPoint and meetings than we need, but it's far from tedious and stifling in my experience.

  • Jorge Cortez

    Cook is delusional and envious that Inuit is not a truly innovative Silicon Valley corporation. Intuit is an endless series of meetings where smart people have to answer the same question over and over again by a series of tedious middle managers. They have not come up with a real innovation, they just follow trends like using computers to do your bookkeeping and taxes and are now following like sheep the trend to the web or cloud, whatever the term du jour. They just talk about innovation to fool some of their employees into leaving for a a company that does real innovation. In reality, Intuit has a 1950s mindset. Their TurboTax and ProSeries programs really haven't changed since the 90s and actually have a lot of features in them that are a hold over from DOS.

  • mikey

    How's that experiment of dropping NORML from your superbowl ad contest going?

  • Bob

    Contrary to what Mr Cook says, Intuit runs on endless meetings and Powerpoints. All the talk of innovation and experimentation is just to keep the employees from leaving to a company that actually does real innovation. Think about it, when was the last time something really innovative came out of Intuit?