CHI 2006: Scott Cook (Intuit)
The CHI conference is in my hometown this week, and Socialtext is graciously sending me downtown to learn some stuff. Intuit founder Scott Cook opened the conference. Here are my notes from his talk.
[Update: what follows is more of an impressionistic transcript; Antonella Pavese put up a really nice "annotated reconstruction" of Scott Cook's CHI talk, complete with pictures and all - go see it!]
Speaker intro (paraphrased): In 1984 Scott Cook founded Intuit, which makes the famously successful Quicken software and is among the first companies to have a public wiki, the Tax Almanac.
Scott Cook: Je suis heureux d'etre ici aujourd'hui. Mon francais... not so good. In preparing for this, my wife told me not to worry about being charming, clever or intellectual. "Just be yourself", she said.
One of the best examples of game-changing invention hails from here in Quebec. Guy Laliberte founded Cirque du Soleil 25 years ago. It became a huge business. They did this in a market that anyone would have said was down. They were asking for more money than the Wringley Brothers were asking. They didn't steal Wringley's customers. They invented a new kind of entertainment.
3M used to sell sandpaper. Employee Dick Drew was in an automobile shop, heard a worker complain that he couldn't remove the tape without taking the fresh paint off, too. Then he'd need to sand a lot. This led him to invent the masking tape (even though his boss didn't want him to), and later on, the cellophane tape, which turned 3M into a huge business.
Said Peter Drucker: "The bottleneck is always at the top of the bottle".
What kind of company are you building? That depens on your model of innovation. Here are five: (1) the lone genius (the Edison / Bell model); (2) the boss is the genius (popular among some Silicon Valley CEOs); (3) copy competitors' inventions; (4) Cloister the geniuses in a lab - but the innovation never seems to make it into a product; (5) make your people the geniuses.
The model I prefer is the last one. The people who are in close contact with customers are the unit of innovation. Managers' jobs are to create the greenhouse, enable those little teams to form around customer needs.
Dilbert slides in which a VP of marketing gets punched and spit on elicits general laughter.
Look at the evolution of shipping. By 1960 this industry had reached an apex with the NS Savannah, nuclear-powered cargo ship. Malcolm McLean was a trucker who observed tremendous amounts of delay in transferring merchandise: unloading and loading to and from ships. In the mid-50s he sold his truck company. He bought a rusty old tanker, the SS Maxton, which he put a flat bed on so he could put rectagular containers. SS's maiden voyage was 50 years ago last week.
Containerized freight revolutionized shipping. The cost used to be $6 a ton. Containerized freight costs 16 cents a ton. There are today millions of people in Asia who owe their middle-class status to Mr. McLean. He didn't focus on the speed of the ship, he focused on speed of loading and unloading.
Anyone with a science background should read Kuhn. It explains how some young scientist, generally under 30, invents a new paradigm that nobody believes in at first but is eventually embraced by all. Germ theory, Copernicus, etc. That's science.
Intuit's mission is "to change lives so profoundly that people cannot imagine going back to the old way".
Here's the story of how we moved from Quicken to QuickBooks. We had less than half the features and were selling at twice the price of the market leaders. The advertising was terrible. Our first ad, I wrote. It was a catastrophe. Second was an ad firm, which produced probably the worst ad in history. Exposed to a million readers. We got 4 responses.
That's the brilliant launch of QuickBooks in 92. Here's how it happened. In one monthe we got to 70% market share. What explains this? It wasn't the advertising. It was something we discovered along the way. We used to make a home consumer product. We surveyed our users, and 40% said they were using our product "in an office". We surveyed again. Same results. We actually called those people.
What we discovered was that most people hate debit/credit accounting. Everyone else who made accounting software had debits and credits. What we did was build the first accounting software without debits/credits.
QuickBooks revenue growth over 13 years looks great. (note: QuickBooks services grow a lot towards the end.) Here are some of the teams who were responsible for this (shows pictures).
Success starts with humility. "Empathy is not just about walking in anothr's shoes... first you must remove your own shoes." (There's a variant of that quote, "Never criticize a man till you've walked a mile in his shoes. That way, when you
criticize him, you're a mile away and you have his shoes.")
What business operates in over 100 countries, has grown 10,000% since 1970, serves 500 million people, volume > $1 trillion annually? Dee Hock's VISA. Hock says, "The problem is never how to get new, innovative thoughts into your mind, but how to get old ones out. Every mind is a room packed with archaic furniture."
Get face-to-face with your customers. In their office, in their home. Find out what's happening.
The Intuit process is: (1) Involve UX, (2) Find the Customer Problem, (3) Define the requirement, (4) Build.
IRS mails 8 billion pages of tax forms and instructions each year. They could circle the globe 28 times. Americans spend > $200 billion, more hours than it takes to make every car and truck in the US, on taxes.
When you look at market share, we look good, but compared to manual, there's still a lot of people doing it by hand or not using software. We identified 5 taxpayer types and found that TurboTax had 2 of them well covered. The "Worry warts", who want to do their own taxes together with a tax preparer, have different needs. Our design for TurboTax Personal Pro was to "put an expert in the box". You can get into live conversations with experts while doing your taxes.
Look at the fancy underwear business. Victoria's Secret's share was flat at just over 20%. They went to the customers' houses, combed through their underwear drawers. On the vast majority of occasions, women didn't wear their product. Discovery: sexy underwear isn't thought of as comfortable. This led to Body by Victoria, seamless underwear. This has been huge, it is not the best-selling product line - their share doubled to 45%.
Follow the customers while they work. All of us at Intuit do this. Executives do this. We post pictures and reports in the office when we come back. Drucker's Seven Sources of Innovation: the most reliable is The Unexpected. That's what you see when you follow the customers.
Raid had perfected a slow-action formula. The idea was to leave a slight trail, that bugs would get some on themselves and it would not kill them instantly, so they could make it back to the nest and kill the other bugs. They observed that users would not leave a slight trail to the nest: they would drown the one bug in front of them before it could make it back to the nest. So they diluted in a lot of water so it was hard to kill the bug and so the stench wasn't overpowering. Sales up 50%, in an old, established market. And the bugs now survive the flood and can bring the product back to bring down the nest.
QuickBooks Point of Sale. We didn't think it could work. Users needed to get too much hardware. Despite my resistance, we made a version with hardware. The version with the hardware is twice the price of the other, but it's selling twice more than the other.
The best we can hope to bat is .500. If you're getting better than that, you're not swinging for the fences. Even Barry bonds, steroids or not, is not getting that. We need to celebrate failure. Failures are shitty but they let us learn. Here is me hugging the guy who won the Greatest Failure award. There was a learning from what he did. His failed effort produced the learning that young users don't care about taxes, but they do care about the refund.
What happens when you have a battle between financial metrics and customer metrics? Typically the customer metric gets blown off. You need a solid customer metric. Andy Taylor, Enterprise Rent-a-Car: "The only way to grow your business is to get your customers to recommend to a friend." Ask your customers if they would recommend you to a friend. 9's and 10's are promoters. Get your business a Net promoter score. There is a clear relation to 3 or 5-year revenue growth. The winners actually get back to detractors, the people who rate them in the bottom half of the scale ("would not recommend").
Among our smallest customers, QuickBooks didn't really deliver what they needed. So we looked at tiny businesses. They needed something simpler. In our Simple Start, "Accounts Receivable" came to be called "Money In", etc. Simple Start is successful.
1. Invention comes from mindset change.
2. Mindset change comes from seeing differently.
3. Savor surprises... as learnings.
4. Focus managers on a customer metric.
5. Nurture and protect invention teams. Optimize for these teams.
There is another taxpayer type, who likes it simple. Here's the simplest tax form. This one line, requires you to go into th 50-page guide, and you need this page, this one, this one and this one. This is not easy. Only the IRS would call it easy. Here is one prototype they called Taxtasy. It became SnapTax. That idea was invented by a QA person.
"The boundaries between disciplines blur, and that's how things work best"
Teams without barriers. There are cases where you want to prevent management from interfering. Questions can kill an entrepreneurial team. There's only a few questions from management that are actually worth asking.
Here's Dan Robinson, an engineer on the Quicken team. His child was born with medical problems. Our medical insurance paid, so cash was not the problem. But the paperwork was amazingly complex. Dan decided this was a real problem we needed to work on. I didn't think we could do it. Others didn't either. But Dan got green lights because he kept answering the questions. The result is the Quicken Medical Expense Manager. (shows user interview excerpt)
Questions and answers
Q. Skills? A. We need people who care, and have curiosity. The best people are those who say "I don't want to see the requirements, I want to see the customers" and will stand for what they know is right.
Q. Usability testing? A. in 1994 we hired the Palo Alto Junior Leaders to do usability testing. The users were totally stumped by what we thought was obvious. No matter how easy the design team believes it is... Simplicity sells. Our real insight was how something that was so obvious for us was so hard for customers.
Q. Basic academic research? A. I think so much invention is needed, especially in an interdisciplinary area like this. I think our eyes will open through research, and the companies will then figure out how to answer the needs.
Q. Governments? A. The idea of having the government actually watch how citizens operate would be so eye-opening.
Q. I work at a small place. How to change the culture from the bottom when the top level doesn't get it? A. A lot of great things happen through guerilla efforts. I think you don't need your boss's approval to talk to customers. this is not expensive stuff. If the company really gets in your way, you may have to go elsewhere.
Q. Do you agree that short-to-medium-term innovation can be customer-driven, but not long-term? Can you go too far in customer focus? A. I think you can't go too far in customer focus, but you can have wrong directions. Some orgs are addicted to surveys, but surveys actually reflect your current mindset. The best insights don't come from quantitative data. As regards the long-term. I agree that customers do not foresee the future. Use the consumer to understand the problem that you are solving. Then it's your job to build it. Of course consumers would never have asked for computers in their homes. Do you remember typewriters, when you made a mistake, it was hell? This was clearly a problem, one that computers can solve really well.
Q. International? A. Automobiles in Japan are used so differently than they are here. In Japan you can have one car for a family of 5 drivers. Nissan sent researchers directly to see families. They got into trouble when an American family figured that the Japanese student they were hosting was actually studying them!