Assuming it was a research flaw, he dismissed the stat. The next year it was 48%. Stunned, Cook figured there was a big unmet need in accounting software, so in 1992 Intuit launched QuickBooks, tailored to this previously hidden audience.
Fast-forward to today: QuickBooks accounts for some 40% of Intuit's revenues -- and Redmond is lurking, eager to peel off some of those customers. On Sept. 7, Microsoft is set to release its Small Business Accounting product, aimed at a core of the QuickBooks franchise. It's a slugfest Intuit CEO Stephen Bennett has been waiting for ever since he moved into the corner office in 2000 (see BW Online, 8/25/05, "How to Face Off Against Microsoft").
Intuit and Microsoft have a storied past. The two have gone head-to-head with competing financial software six times, yet the giant Microsoft has never been able to dislodge the scrappy Silicon Valley upstart -- which has grown into a $2 billion company. Yet, much rides on this latest clash. Win again or lose for the first time, "I will own a big piece of this outcome," says Bennett.
Bennett recently talked with BusinessWeek Online reporter Sarah Lacy about the Microsoft offensive and why he thinks Intuit is ready. Edited excerpts of the conversation follow:
How is the mood at Intuit different now compared to when you first got here?
When I got here, there were three big threats. Microsoft was entering tax with a product called TaxSaver. [They were] in and out, exiting after six weeks with 4% share, and we had the best tax season we'd had in a long time. Two, the IRS was out for an online free tax prep and e-filing for all citizens. And third, Microsoft was coming [at us] again in accounting. This was five-and-a-half years ago.
[Today, Intuit] is double its size [from then] and [has] five times the operating profits. We're in much better shape now to fight off a challenge from any competitor attacking us in small business.
I think this is the best thing that could ever happen to us because great teams step up in big games and do great things. A competitive threat makes you better. The company has much more confidence now than it had five years ago because we've fought more battles, and we've been successful. And we do have a track record. At the same time, we take every threat very seriously.
When you came on board five-and-a-half years ago and looked at Intuit's businesses, Quicken, TurboTax, and QuickBooks, how did you size each of them up?
The company's heritage was Quicken, and Quicken was not growing. The people that were having strategic influence on Intuit had been the people that were here and started Quicken and had a lot of passion for Quicken. And so at that point we were losing money in every part of Quicken, including the software at the center, Quicken.com, and all the add-on businesses that they had bought. We were losing money in every one of them. And somehow we were going to make up for it all in volume.
I told Scott Cook in the interview I thought the whole company's consumer strategy was dead on arrival. So I dismantled the entire consumer strategy.... We exited Quicken on the Web because I thought we were spending a lot of time and energy in a business where you had no durable advantage. And we were under-resourcing tax and small business.
So QuickBooks was one size fits all. That was the biggest problem?
Exactly. QuickBooks was doing great, and everybody was fat, dumb, and happy. Then what happened? Dec. 31, 1999, Y2K. Wow. Anybody ever think that maybe people were buying a lot more QuickBooks in the last half of 1999 [because of that]? Anybody ever figure out there was a correlation? No. So I got here, and within 30 days of being on the job, QuickBooks units went right off the cliff.
So QuickBooks hit the rocks with its one-size-fits-all strategy, but Y2K had masked it. This is back when the company made $120 million, [and] we had a $30 million problem. Thirty days to make the numbers, 30 days after I got here. So we ended up beating the numbers with some pretty hands-on management from the CEO. And that was when the CEO had to go get QuickBooks out of the rut and into the right-for-me strategy.
Why do you feel good about your chances with Microsoft now?
[Microsoft] came right at the middle. [It] came right at QuickBooks prime. Most people believe it's a new-user battle, primarily. Well, if it's a new-user battle, I love our position because we have a low-end product for people that I think is simpler, easier to use, and lower-priced.
If it's a new-user battle, I've got a whole spectrum of solutions, plus all the add-on services. I think our ecosystem is stronger, and, oh, by the way, keeps getting better.
What was the hardest part about revamping QuickBooks?
It takes a long time, longer than any leader would like. [But] we have the right strategy, and it's all about how we become more effective leading people to help us get more done. And we've made enormous progress.
Intuit has managed to get and hold more than 60% market share in its three products: Quicken, TurboTax, and QuickBooks. What's the secret?
Think about this for a second. What do you think Quicken is really all about? Paying bills. Seeing what's coming in and out, so it's managing your money. What happens if you don't manage your money and you can't pay your bill? Big, negative-consequence bad stuff.
How about TurboTax? Anybody wake up every day and say, "I can't wait to file my income taxes?" What are the consequences of getting that one wrong? How about QuickBooks? If you don't keep your books right?
So, you think about our customer base. [They are] generally small. They have no staff, so they're kind of on their own, they're not very technology-sophisticated, doing tasks that they're never trained to do and don't want to do, with big negative consequences. Kind of a scary thing.
Look at all the businesses, [and] we're really about taking an important customer problem -- that they have to do and don't want to do, where there are severe penalties and consequences for not getting it right -- and [we build] drop-dead, easy-to-use products and services to help them make their lives better.
Why is it so hard to make products like these so easy to use?
How easy do you think it is to build for four million small businesses [when they're] all different? Let me give you the feedback. What do you think the No. 1 reason people love TurboTax is? Easy. What's the No. 1 reason they don't like it?
Mm-hm. What do you do with that? What's the No. 1 reason for QuickBooks -- why people think it's great? Easy. What's the No. 1 reason people don't think it's great? Not easy. So what does that mean? You can't deal with some surface level, you've got to go talk to every customer. Every customer's at a different stage, different competencies.