Many people have never heard the name Scott Cook and would not recognize him if you saw him on the street. But you have certainly heard of the other, more recognizable figures of his generation, such as Bill Gates and Steve Jobs. Cook, who visited Israel last week, is regarded as one of the most distinguished and groundbreaking entrepreneurs in Silicon Valley and his impressive resume doesn’t fall short of those names mentioned above.
Intuit, which Cook founded in the early 1980s, may not have scaled to the heights of Microsoft or Apple. Thirty years later, however, it is considered one of the world’s leading and most innovative financial technology companies, with a Nasdaq market cap of nearly $32.5 billion.
In the early 1990s, after founding the company and leading it to sales in the hundreds of millions of dollars, Cook passed the reins of the company over to the next generation. He became a mentor and active investor in the Silicon Valley startup scene and was among the early investors in companies like Amazon, eBay, and Snapchat. He is also one of Alphabet (formerly Google) founder and CEO Larry Page’s close mentors.
Cook, who still plays an active role at Intuit (chairman of the executive committee), visited Israel this week and delivered an innovation workshop to Intuit development center employees in Israel. Intuit’s Israeli development center was founded three years ago as part of their acquisition of Check, and later Porticor. It is slated to grow substantially in the next two years to become one of the company’s strategic development centers, together with their U.S. and India offices.
All beginnings are difficult
Cook came up with the idea behind Intuit in 1983 because of his wife. She had complained to him about something fairly ordinary in the United States: bothersome home bookkeeping procedures. Although most people in Israel do not bother doing much beyond periodic checks of their bank account, in the U.S., managing home spending and income is taken for granted: Every resident and family is obligated to file a personal spending and income statement to the Internal Revenue Service at the end of each year. Depending on their circumstances, they have to pay additional taxes or get a tax refund.
Cook thought that his wife was probably not the only one regarding this as a burden. He started planning a product for her that would use a computer to make the paper-based bureaucratic process a little less frustrating.
Cook remembers, “I started designing the system by myself. Since the last time I did any programming was in school, however, I realized that I had to get help from someone who could do it a little better than I. I asked Tom Proulx, who studied with me at Stanford University, to join me, and we founded Intuit together.”
The road to success was not easy. The two founders were unable to raise money from investors for a long time. “It took us almost a year to get our first product to the market, and even then, I couldn’t afford to buy any luxury for at least three years. The first time I bought something was in 1987 – it was a disk player,” he says.
Quicken (the first bookkeeping program developed by Intuit) was one of the first software programs developed and sold to consumers. Marketing software was unknown at the time.
It is amazing to consider that Cook sold software to people who did not know what software was, and at a time when there was no money for marketing, nor any way to reach users through the Internet, which did not exist. When we ask him how he managed to do all this, he replies, “After we closed several distribution deals, we managed to reach several banks. They offered the product to their customers, and we got several dozen customers through them. These customers told their friends. By word of mouth, the number of users grew.”
The rest is history. After three difficult primary years, the company’s products now serve 42 million customers in North America, Europe, Australia, and Brazil.
“Behavior doesn’t lie”
What contributed to the success of the company’s product was listening to customers in order to understand their needs.
Long before Eric Ries and the lean startup movement, Cook and Proulx were among the first to use what we now know as “usability testing.” This means conducting tests in which potential users are allowed to use the product. In doing so, developers observe their user experience and discover things that may seem obvious to developers, but are not necessarily so clear to people who are going to use the product.
Cook says that, “After we developed the software, we showed it to friends and people not used to working on a computer or doing bookkeeping, and simply looked at what they were trying to do. We asked them to perform operations, and saw where they got into trouble. When there was something they couldn’t do, we went back to the code and redeveloped it until it was simple enough.”
What was the most surprising thing you found out from your users?
“For years, we did a user’s survey for various features in the system. At the end of every survey, there were a number of catalogue questions, such as gender, age, and place of residence. One of the things we asked in every questionnaire was, ‘Do you use the product at home or at work?’ For several years, we saw that almost 50% of our users answered that they use the product at work. We assumed, however, that since the product was designed for personal bookkeeping, they were probably bringing their accounts to work and using the software from work because there was a computer there, not at home. We simply ignored this question. Only after quite a few years did we catch on and decide to go into the question more deeply. We discovered that many users use Quicken for bookkeeping for their businesses. It was really odd for us, because the product was unsuitable for this, but many small business owners didn’t really understand how to cope with bookkeeping, and our product was simpler and more intuitive.”
Following this discovery, the company developed its second product, QuickBooks, which later became the most popular bookkeeping software in the U.S.
“This revelation was what led us to focus on user-based innovation. Instead of relying on speculation, we let the customers show us what they needed, what worked for them, and what didn’t work for them. We allowed the customers to try out the solutions we were developing out as early as possible, so that we could learn how to improve the product.”
There is no doubt that lean startup is an excellent way to work … for startups. How do you maintain this way of working in a company that has grown to thousands of employees?
“When we think about how to take our products to new countries, our engineers accompany businesses in those countries, and see how they really do things. We observe and learn from this situation, and the product reflects it. Instead of relying on theory and what we think we know about a specific country and its culture, they really get out there and research it.”
A successful venture for an investor
Cook was one of the early investors in Amazon, eBay, and Snapchat. When we asked him what he looks for when he invests in a startup, he sighed, and answered that investing in startups is very difficult.
“I wish I had a magic formula. Sometimes the idea is better than the entrepreneur, and sometimes the entrepreneur is better than the idea.”
With Snapchat, for example, Cook decided to invest after he saw a young and diligent student, even though he did not believe in the idea and thought it was terrible (“Who needs disappearing pictures?”). On the other hand, he invested in Facebook 13 years ago because he believed in the idea. “When I heard the story about an Internet site with pictures and notices about all the people in university, I thought to myself how glad I would have been had there been something like this when I studied at university. I heard that Mark moved to Palo Alto, and asked for a meeting with him. I liked the idea so much that I wanted to invest. I asked Mark to develop an internal social network like that for Intuit, so that everybody would know everybody else. Mark told me that they were a little busy right now.”
Do you think that there is something in common between Pierre (Omidyar, founder of eBay), Jeff (Bezos, founder of Amazon), Mark, and Evan? Is it something that you acquire and can learn, or is a person born with it?
“It’s a combination. Each of those people you mentioned is very talented. They can see things, opportunities, that ‘ordinary’ people don’t always see. In addition, these people don’t follow rules. They go on developing their idea, even if other people tell them that they’re crazy. But they also know how to listen to the surroundings.”
What is the most useful advice you ever gave someone?
“The advice I frequently give entrepreneurs at every stage is advice that I wish I had taken many years ago – to take a coach. If you’re a CEO or senior executive, one of the things you certainly won’t hear from your employees is the truth. The employees will tell you the good things that you’re doing, but not the bad things. They won’t take the chance of insulting you with the truth, so you definitely won’t hear about things you did badly. But you have to learn this. The coach can tell you what you did right and what you did wrong. I wish I had done that when I was a young CEO. When I did do it, I didn’t really get along with the first coach I worked with, so I decided not to take any other coaches. Some years later, I gave this advice to Sal Khan, the founder of Kahn Academy. He found a good coach, and that coach now works with me, too.”
What was the best business advice you ever got, and from whom?
“The most successful advice I got wasn’t necessarily given to me directly; I learned it by looking around and trying it out myself.” Cook says that at his company, they used to hold enrichment meetings for managers given mostly through presentations. In retrospect, however, it turned out that even a short time after that training, there were not many changes in behavior.
About 10 years ago, that same group of senior executives went for advanced training outside the office. It included a 45-minute practical exercise, and the rest of the workshop was lectures and presentations. A week later, the participants were asked what they had taken with them, and 70% of them referred to the 45 minutes of the exercise, meaning things that they did and practiced, not things that they saw. In other words, months of preparation for a presentation are not something that people remember; they remember what they actually did. “It shook up my world. I realized that I had wasted my time up until then,” he says. The conclusion is that people learn by doing, not by watching presentations. “That also connects with what I said about how decisions are made in a company: when there’s indecision about a certain question, the culture in the company is that it’s preferable to let the data speak: to do a trial and check the results, and make a decision on the basis of the results, not on the basis of a decision by some manager or other.”
The future of fintech
Intuit is almost 34 years old, a veteran company. The fintech industry is heating up, and we have seen quite a few revolutions in recent years: banks, insurance companies, everywhere people are talking about money. Now, people are talking about location, bitcoin, and electronic payments. How do you see us handling money 20 years from now?
“Today, various companies are interacting with each other frequently. The ‘real’ connection between them, however, still includes a paper invoice or mail and checks, for example. These transactions are still taking place like they did 20 and 50 years ago. All this will become automated, and will all meet somewhere in the middle with location-based technology and systems. Once you combine this technology with machine learning, the users won’t have to deal with it. As a result, payments of bills will never be late, or get to the stage of a bank overdraft.”
Cook explains that he sees Intuit in the middle of all this. He gives an example of how up until now, the company focused on serving private people and small businesses by helping them solve bookkeeping problems. In recent years, however, they noticed a growing group of freelancers – 750 million worldwide, according to Cook – who must monitor their income and expenses carefully. To address this sector, Intuit recently launched a new system, called QuickBooks Self-Employed, to simplify the process for them. For example, the system enables self-employed people to organize their receipts and monitor them using smartphone photographs. The application stores the photos and feeds in the particulars of the transaction, so that they can be retrieved easily in the tax season. Another feature tracks how many kilometers self-employed people drive in a car for work purposes. Intuit says this is likely to save over $7,000 a year per self-employed person.
The future, Cook posits, lies in taking the difficult problems – the bureaucracy, the cumbersomeness that no one wants to deal with – and turning them into something visual, simple, and intuitive for the user, and in as automated a way as possible.
Incidentally, if you are wondering about the availability of the products in Israel, we are sorry to disappoint you, but it is not really on the agenda.