September 1996: The Assignment
It was one of those don’t-pinch-me-I-might-wake-up moments that people move to Silicon Valley to write home about. Alison Berkley, then a freshly minted MBA from the Harvard Business School, had been working for Intuit Inc., headquartered in Mountain View, California and one of the world’s leading software companies, for just six weeks. She’d been summoned to a conference room adjacent the office of Scott Cook, Intuit’s legendary cofounder. Just outside the room, Berkley met Carl Reese, a vice president from Intuit’s tax group. Reese had joined Intuit four years earlier, a few months before Intuit bought the company where he worked, ChipSoft Inc., creator of TurboTax, the best-selling tax-preparation program.
Reese had a perplexed look on his face. Berkley was equally puzzled. Why had they been summoned? She’d been a Baker Scholar at HBS; she’d worked in mergers and acquisitions for Morgan Stanley; she’d spent a summer at Microsoft. She signed on with Intuit because recruiters persuaded her that she could blend her interests in finance and software, and that she could look forward to becoming a product manager.
But when she arrived at the company, Berkley found herself assigned to work as an associate product manager with Quicken, Intuit’s oldest, and in her view, stodgiest product. “It was not the premise under which I took the job,” she says. “Immediately, I was frustrated.” She expressed her frustration to coworkers, to supervisors, and to former colleagues at Microsoft. One day, a colleague, Lisa Jean Borden, dropped by Berkley’s cubicle to say that she was about to leave Intuit to join a startup. Borden had heard that Berkley wanted a different project, Borden decided to hand off an idea that she’d begun investigating with Reese. She dropped three files on Berkley’s lap – sketchy data on the nascent world of online mortgages.
That brief encounter was a precursor to this session. The meeting began in a low-key tone, as did most meetings chaired by Cook, Intuit’s soft-spoken, deliberate visionary. But there was no mistaking his sense of urgency. The market for Quicken, Intuit’s wildly popular personal-finance software, with 10.6 million users, was flattening out. Intuit’s stock, which had hit an all-time high in November 1995, was dropping fast. No one was questioning the company’s survival. But there were doubts, inside and outside Intuit, about its future as a leader and innovator.
Cook wanted Berkley and Reese to do something about those doubts. He challenged them to build a business from scratch – and not just any business. Creating a Web-based service to help customers compare and apply for home mortgages – analyze their financing needs, evaluate terms from lenders, get prequalified online – would be a crucial test of Intuit’s capacity to reinvent itself in the Internet era. “The Net was forcing us to learn fast, change fast, even fail fast,” says Cook. “The only thing wrong with making mistakes would be not learning from them.”
The company’s unwavering commitment to product quality, its keen understanding of consumer brands, its dominance of retail channels, its deliberate style of decision making – these skills had worked wonders in the market for shrink-wrapped software. But they were less relevant – sometimes even counterproductive – in the fast-paced, freewheeling, make-it-up-as-you-go-along world of the Net. QuickenMortgage would be a test of whether one of the defining software companies of the 1980s could handle the new competitive realities of the 21st century.
To be sure, Cook’s actual invitation was more subdued than all that. “Is there a business here?” he asked. “Could you guys spend some time on this – on your own?” Reese hesitated. He was still running an important arm of Intuit’s business. Berkley was more outwardly enthusiastic. “For me it was a big WOW!” she says. “Here we were being asked by Scott Cook to galvanize our thinking about the Net and explore a completely new venture.”
She looked imploringly at Reese. He agreed to go along. On the way out, they bumped into Bill Harris, then the executive vice president for Intuit’s consumer and tax divisions. The encounter was not coincidental. Harris, Reese’s former boss, had been evangelizing for Intuit to develop its Web presence. Harris had become the company’s point man for the Net, its most senior change agent. “At this point, we had no real models, only muddles,” Harris admits. “But you have to test the company’s willingness to try new things, to break its own mold, to reevaluate its traditions. You have to test its willingness to fail.”
Over the next four months, Berkley and Reese worked to create QuickenMortgage as part of a conspiracy of change – sanctioned from the top and drawing on more than 70 people from a variety of functions and ranks – to reinvent one of the world’s most successful software companies. The conclusion to this story has yet to be written: No one knows if Intuit will be as prosperous on the Web as it’s been on retail shelves. But no one doubts that Intuit is a real player again. “Isn’t it amazing,” asks Harris, now Intuit’s president and CEO, “how quickly you can become a company of the past – or a company of the future?”
Lots of software companies have won big over the last 15 years – generating huge sales, employing lots of people, introducing products that became signposts of the new economic landscape. But few have won with the sense of simple elegance that has characterized Intuit since its founding in 1983. Intuit isn’t just one of the most compelling success stories in software history. It’s one of the classiest software companies in history.
Behind every great leap forward for Intuit has been a simple – but powerful – idea about how to meet customer needs. Cook is fond of saying that Quicken, his company’s best-known product, never took off until Intuit figured out how to make it so easy to use that it could “beat the pen” as a tool for managing personal finances. QuickBooks, Intuit’s software for small-business accounting, was designed around two simple insights: that the “accountants” for most small companies were the owners themselves, and that these owners did not understand the basic principles of double-entry bookkeeping. A truly useful accounting package was one that did not treat its users like professional accountants.
The result of these simple insights, and the products that grew out of them, was absolute dominance of the financial-software market. Intuit has 10.6 million users for Quicken, 2 million users for QuickBooks, and 3 million users for TurboTax – and a stunning 80% market share in each of these three product lines. It remains one of the very few companies that has faced Microsoft head-on in a major product category and emerged with its head above water. Indeed, back in October 1994, Microsoft grew so frustrated with its inability to unseat Quicken (with Microsoft Money) that it offered to buy Intuit for $2 billion – what would have been, at the time, the biggest software deal ever. Seven months later, after meeting with opposition from the U.S. Department of Justice, Microsoft withdrew the offer. Intuit was now back on its own – and facing one of its most severe business challenges ever.
That challenge wasn’t Microsoft’s sudden move from (nearly) friend to foe in retail software. It was the rise of the Internet as the next great competitive playing field – and unfortunately, Intuit failed to recognize this seismic shift. “We’d become arrogant,” Harris says. “Then, after the Microsoft deal fell through, we lost confidence. During the highs, we were giddy. During the lows, the situation was depressing. It felt like we were heading into a long, slow, enervating decline. Look at Apple, Novell. It was becoming clear that even successful companies can stumble.”
Avoiding a downward spiral meant facing up to the Net, which had huge implications for Intuit’s strategy. The company had always generated revenue directly from retail customers. And it had always operated as a proud, stand-alone entity. But doing business on the Web meant discovering indirect sources of revenue – selling ads, collecting origination fees from mortgage lenders, or licensing software to banks. And growing fast meant striking partnerships and alliances, an acquired skill with which Intuit had limited experience.
The company, says Harris, had demonstrated “a collective lack of urgency” on strategy. “We’d seen Netscape’s beta test – it was a brilliant advertisement for itself. We’d watched Yahoo!, Excite, and Amazon introduce businesses. We were suffering a corporate midlife crisis. We had to rethink our entire business model.”
Intuit also had to rethink how it operated. Intuit’s dominance of the market for financial software had been built around an obsession with customers. In one form or another, at least half of the company’s employees worked in customer-service roles. Cook liked to say that word of mouth on Intuit’s products was so strong that the company’s customers were its best salespeople. Its “Follow Me Home” program, in which Intuit reps from product development met new customers in retail stores and visited their homes to watch them install the software, became a case study in market research. Intuit’s famous “Usability Lab,” filled with customers trying out new products while engineers watched their every move, symbolized its commitment to developing reliable, easy-to-use software.
But the Net challenged much of that tradition. The Web demanded a faster pace, a more directly interactive approach. “We had always thought of ourselves as fast and schedule-driven, with predictable cycles,” says Harris. “But suddenly everyone was fast. That’s why the struggle to change from within was so important. The question we had was, Can we execute? Adapting to new business cycles meant rethinking certain processes we had grown comfortable with.”
Intuit was already feeling the effects of Web culture on its core business. When Brian Ascher joined the company in 1995, he recalls, “I didn’t even have the Internet on my desktop.” A year later, Ascher was named senior product manager for the upgraded Windows version of Quicken. In 1997, he moved to the Internet group. He was told to work with a team of engineers to relaunch a new expanded version of Quicken.com that would be a resource center, offering information such as stock quotes and market analysis. What’s more, he was told to do it within three months – faster than Intuit had ever revised Quicken. “We had always made consensus-driven decisions,” Ascher recalls. “Now you could feel the urging to move ahead. Things were beginning to happen like lightning.”
Cook and Harris understood that the company was at a crossroads. “Our integrity was never at stake,” Cook says. “The best companies stand for something. In our case, it is to do right by the customer.” But Intuit’s leadership position was at stake. This was a company that was late to “get” the Net – and wasn’t sure how to behave once it did get it. “We had to ask ourselves some basic questions,” says Harris. “How good are we? Are we as good as we thought we were?”
January 1997: Green Light
Alison Berkley and Carl Reese had not been at Intuit for much of its remarkable history. But they had been tapped to help create its future. They returned to their home bases – Berkley in Mountain View, Reese in San Diego – and conferred three or four times a day. It took them only two weeks to return to Cook’s conference room, armed with a single sheet of paper hypothesizing the principles behind a Web-based mortgage site. The Web could offer loan comparisons and approvals faster and cheaper than could existing channels, including brokers and banks, they argued. Intuit could collect origination fees when customers found lenders online. The Quicken brand name would be a huge advantage in a confused market. There were no major regulatory barriers.
Cook and Harris challenged the duo to prove that they were right. But Berkley and Reese had no doubts. Their concern was how to do justice to their “day jobs” and find the time to create a business model to tap this enormous opportunity. Cook and Harris knew that they were overloading Berkley and Reese. But that was the new reality of doing business on the Internet. The pace of this world didn’t allow for big teams and comfortable project schedules – the finely tuned ways of working for which Intuit had become famous.
Berkley and Reese made a list of lenders and divided up the cold calls. “The Quicken name opened doors,” Berkley says. “We found that some banks were suspicious of Intuit going into the lending business. I remember one banker saying, in no uncertain terms: ‘We build our customers one way: face-to-face.'” But after calling 20 major lenders, she and Reese were able to report some institutional warmth for Intuit’s online mortgage concept. Through intermediaries, they set up focus groups comprising Quicken customers and non-Quicken customers, and explored consumer experiences in obtaining mortgages the conventional way. They asked mortgage customers about the Web: Did they trust it? Would they pay to use it?
Berkley and Reese assembled a 45-page business plan and presented it to Cook and Harris in December 1996. The bosses challenged some of the plan’s assertions and shot down a few of its conclusions, but expressed enough encouragement that Berkley took it to heart. “If they don’t approve it,” she thought to herself, “I leave the company. There are going to be 15 zillion Internet startups, and one of them is bound to be interested.”
Cook was comfortable with that attitude: “The way to make change is to do it entrepreneurially, not when the chairman thinks it should happen. The day companies stop upholding entrepreneurial standards to benefit customers is the day they start to die.”
Cook and Harris invited Berkley and Reese to present their plan to Intuit’s executive committee, at a meeting scheduled for January 18. They got 30 minutes. Berkley showed up wearing a lucky red sweater over a black turtleneck and remembered suddenly feeling “kinda young – and pretty new to the company.” Reese showed up wearing his game face.
They had decided to ask for between $1.5 million and $2 million in seed money, even though they had learned in advance that the company had earmarked only about $500,000 for unnamed projects. Reese remembers the session. “People seemed interested and asked good questions: Can we pull it off? How soon? Can we make a deal with technology companies to provide connections between customers and lenders?” The presentation lasted under 30 minutes. As the two walked through the parking lot, they debriefed each other: They hadn’t heard any no’s. “Well, then, was that a yes?” said Berkley. “Yeah, let’s assume so,” Reese answered.
When Reese returned to his office, he called Jim Heeger, then Intuit’s CFO. Early on, Reese had cultivated Heeger’s support. He left a voice mail thanking Heeger, concluding with an oh-by-the-way: He was calling to confirm that he and Berkley had the company’s formal backing and the money they needed. Heeger (who today is a senior vice president in charge of QuickBooks) called back to confirm Reese’s read on the meeting. QuickenMortgage had a green light.
It was, argues Harris, a step in Intuit’s comeback journey: “Here, at a time when we were beginning to doubt ourselves, Carl Reese and Alison Berkley raised their hands. Carl had no fears of what he might be giving up, and neither did Alison. As a company, we had to accommodate them.”
Who’s in Charge?
To be sure, one project does not a comeback make. As Berkley and Reese worked on inventing QuickenMortgage, Cook, Harris, and Bill Campbell, then president and CEO, worked on reinventing Intuit. What would drive profits on the Web? What investments (people, technology) would the company need to deliver on its strategy? How could they galvanize the troops around Intuit’s long-term promise, when Wall Street was pummeling the company for disappointing short-term results?
Their answer: a grassroots approach to strategy making that drew on Intuit staffers from a variety of backgrounds, functions, and hierarchical positions. Cook and Harris formed a 70-person team in the spring of 1997, then divided it into five working groups, each charged with wrestling with a different strategic challenge. The small teams convened at least once a week. The full group met every six weeks. “Our culture encourages inclusive decision making,” Harris says. “The embarrassing part was dealing with the company-wide notion that we had no well-articulated strategic mission. We put 70 people in a room and began sessions to devise a new strategy.”
The sessions ran close to six months. Software engineers teamed up (and sometimes argued) with Webmasters, marketing managers with operations people; Intuit’s long-standing obsession with product quality jostled against the Net’s speed-to-market ethos. “It was complete chaos,” says Brian Ascher, one of the 70 participants. Adds Bill Campbell, now Intuit’s chairman, “It was nothing short of traumatic.”
Over time, though, an Internet strategy did emerge. Intuit paid about $40 million for 19% of Excite, the Web-navigation company that garners millions of daily visitors. It identified the new services it would offer on Quicken.com, its Web site, and announced a launch date of October 24, 1997 for the site. It paid $30 million to secure a high-profile presence on America Online. It announced a joint development effort with a consortium of banks to allow Intuit customers to connect with financial institutions over the Internet. All told, the company now has more than 140 programmers, producers, editors, engineers, technicians, and salespeople working on Web-related services.
Still, skepticism persisted. So a second key role for the grassroots strategy team was to evangelize on behalf of the changes. Intuit did not rely on technology – email blasts, intranet sites – to persuade employees that the company was back on track. It relied on old-fashioned, face-to-face persuasion – including revival-style mass meetings. “We did rolling ‘tent meetings,”’ says Mari Baker, Intuit’s senior vice president of human resources and corporate communications. “We put up a big tent in the parking lot and gathered all the employees. People went out to pitch their new piece of the strategy. Scott Cook, Bill Harris, and Bill Campbell gave the overall picture.”
These were not your run-of-the-mill off-sites. In August 1997, just two months before the launch of Quicken.com, Fortune published a damning article about Intuit’s future titled “Is Intuit Headed for a Meltdown?” The article led with a quote from an industry analyst: “Quicken is over! It’s done. It’s almost a nonfactor.” Harris addressed the article head-on at a tent meeting. A bit of a ham (he does a cool Letterman), he whipped himself into a frenzy – and urged his colleagues to do the same. “Are we going to melt down?” Harris hollered. “Hell no!” came the reply.
November 1997: The Launch
Berkley and Reese weren’t concerned about melting down. They were more concerned about booting up. They agreed to launch QuickenMortgage to coincide with the launch of Quicken 98, an upgrade of Intuit’s flagship consumer software, and the launch of Quicken.com, its all-purpose Web site. Reese was named vice president of Intuit’s online mortgage market space, Berkley its senior product manager. (She has since become group product manager.) “It was like we were working in a startup inside the company, with Bill Harris and Scott Cook as our board of directors,” she says. “I was elated with the opportunity to pull together a team and ramp up.”
The team was seeded with engineers from Reese’s tax division and marketing types from company headquarters at Mountain View. It also drew on Intuit tradition. The team recruited potential customers to help test the Web site for usability, paying them $50 each to point-and-click their way through shopping and prequalifying for loans, while Intuit researchers watched and learned from what they did.
Cook’s role was to keep the team focused on the only constituency that mattered. “Scott would ask us: ‘What does the customer think?”’ Berkley remembers. “He didn’t understand anything unless it was from a customer’s point of view.”
Most potential customers were impressed; most skepticism came from inside. “I remember one colleague telling me that I was crazy because our whole venture was still so ill-defined,” Berkley says. “Another said: ‘You just got out of business school. Why don’t you cut your teeth on Quicken for Macintosh?'”
The team fine-tuned QuickenMortgage through September. The week of the launch, Berkley did a press tour while another band of Intuit marketers undertook a nationwide road show to promote the service – even as it was undergoing tests. Revisions continued right up to the launch, which had been rescheduled from late October to November 4. By Intuit standards, a one-week delay – especially in the name of quality – was no big deal. But by Web standards, even a short delay can be a sign of weakness – especially in a company launching its first major Web service.
The site went up. Reese and Berkley counted hits (about 10,000 on the first day). More important, they counted how many visitors worked their way through the questionnaire to prequalify for a mortgage. At the end of the first day, more than 100 people had prequalified. “We have customers!” Berkley shouted.
The next day, the numbers were down. And then the numbers started building – and building. “This is what the Web is all about,” Berkley says now, as she and Reese get ready to launch a third generation of QuickenMortgage – only a year after the service’s debut. On the new site, customers can fully qualify and apply online for mortgages from at least 11 major lenders. Intuit is licensed in 48 states as a broker to collect an origination fee when loans close, and will collect ad revenues from companies eager to reach customers in the market for a new home.
QuickenMortgage has become one of the most high-profile features of Quicken.com, which has become the most-visited personal-finance site on the Web. Last April, less than six months after the launch, page views on Quicken.com exceeded 76 million, up 25% from the month before. Advertisers on Quicken.com now pay as much as $1.5 million per year.
“The whole time we were building our site, I never had the feeling that someone was holding me back,” says Berkley, savoring the taste of entrepreneurial freedom that Cook and Harris granted her. “It was almost extreme – the freedom and executive support we had. The doors were always open. We’d ask for input or feedback, and it would come back within 24 hours. There was a strong degree of trust, and that creates even greater expectations. On the other hand, we knew we were building value. We knew it was going to be good business for the company.”
Good business, indeed. over the last 12 months, intuit shares have traded as high as nearly $68 – almost triple their price during the depth of Wall Street’s doubts about the company’s prospects. The very same analyst who had told Fortune in August 1997 that Quicken was “over” recently estimated that Quicken.com can generate $45 million of revenue in fiscal 1999 and contribute a full one-third of the company’s profits in five years.
None of which guarantees such results, of course. That requires an ongoing commitment to wrestle with what President and CEO Harris calls “the multiple faces of change.” What new Web services should Intuit offer? How can the company best integrate its well-established consumer and business software with its still-evolving online capabilities? How does it continue to balance its traditional passion for quality with the need for speed?
“It’s rare,” Harris says, “when people arrive in the morning and know what they’re going to be working on.”
Of course, there’s nothing like a taste of success to whet people’s appetite for change. Last March, to celebrate its 15th anniversary, Intuit pitched a tent in the very same spot that Bill Harris had led the defiant cheers during one of the company’s “revival” meetings. This time, the mood in the tent was palpably cheerier than it had been seven months earlier. And this time, Cook, not Harris, was master of ceremonies. But the “meltdown” article did make one last appearance. Cook simply held it up for everyone to see – and then crumpled it in his hands.
Intuit was a company of the future again.
Pat Dillon (email@example.com), a regular contributor to Fast Company, wrote “The Next Small Thing”, the untold story of the PalmPilot, for the June:July 1998 issue. His new book, “Lost at Sea: An American Tragedy,” is being published this month by The Dial Press.