How Intuit Found Fame and Fortune, and Beat Out Microsoft

It was 1982. Scott Cook was keeping his wife company as she sat at their kitchen table paying bills and balancing the checkbook. “I hate paying bills,” she groused. “Really, Scott, this has got to be one of the most tedious, repetitious jobs around.”

It occurred to Cook that bill payment – writing checks and reconciling balances – was a chore a computer could do with ease. Personal computers were still a novelty then – IBM had introduced its PC only the previous year – and people were wondering what, besides spreadsheets and word processing, could be done with them.

And so it was that Cook, then 30, quit his job as a management consultant with Bain & Company, and in 1983, founded Intuit to create Quicken, the personal finance software that overwhelmingly dominates its market today. He named the company Intuit because he wanted its products to be so easy to use that customers would intuitively know how to do it. And he named its first program Quicken because a dictionary said one meaning of quicken was “to speed up and give life.”

In a new book Inside Intuit: How the Makers of Quicken Beat Microsoft and Revolutionized an Entire Industry, Suzanne Taylor and Kathy Shroeder recount the 20-year history of Intuit, detailing what seems to be every acquisition contemplated or completed, every new product introduced, every change in top management, every blunder overcome, and every challenge faced in those two decades.

Taylor is a marketing consultant who worked at Intuit for eight years. Shroeder left the marketing department of Ford after seven years to write full-time.

The book’s sub-title might give the impression that it’s mainly about how Intuit beat Microsoft. In fact, Bill Gates and Microsoft appear on fewer than 50 of the book’s more than 300 pages. But those pages do make it clear that Intuit did beat Microsoft. And that’s no small achievement.

Microsoft’s marketing muscle pushed aside one-time market leaders like WordPerfect, dBASE, and Lotus 1-2-3 . Quarterdeck memory management software and Stacker disk compression software disappeared when similar features were built into the Windows operating system. How hard could it be for mighty Microsoft to take over the personal finance software market?

Intuit faced that threat in 1991 when Microsoft decided to produce a competitor to Quicken called Money. According to Taylor and Schroeder, writing a Windows version of Quicken, then available only in DOS, went from zero to first on Intuit’s priority list. But there was no doubt that Microsoft’s product would hit the market first.

In Intuit’s favor, the authors write, was the fact that people hate changing financial systems. So Intuit pre-announced the release of its Windows version in hopes that its customers would be willing to wait for it. To win retailers’ loyalty, Intuit included a $15 rebate coupon, redeemable on software purchased in their stores, in its direct mailing announcing the Windows version. This was the first time a software company offered a rebate, say the authors.

And once the price for Money became known, Intuit not only set a lower retail price for Quicken, it set a significantly lower price for distributors and offered retailers big discounts for ordering in quantity. Retailers appreciated the opportunity to reap greater profits and many advised customers to wait for Quicken for Windows rather than buying Money. When Microsoft fought back by lowering the retail price even more, Taylor and Schroeder write, retailers had almost no margin and thus were not inclined to be helpful.

In the years since, Microsoft has continued to release new and improved versions of Money but Quicken continues to have some 70% of the market. Microsoft’s efforts to compete with other Intuit products have fared even worse. Profit, a 1993 program designed to compete with Intuit’s small business finance program, QuickBooks, never got a foothold in the market and was sold in 1994. And, in 2000, Microsoft announced it was getting out of the tax preparation business. Its program Tax Saver never came close to threatening Intuit’s 1993 acquisition, Turbo Tax, then and now the market leader.

In 1994, Bill Gates apparently decided that if he couldn’t beat Intuit, which had gone public the previous year, he’d buy it. Over the opposition of many Intuit senior managers who prized their company’s independence, Scott Cook and Gates negotiated a deal paying Intuit $1.5 billion in Microsoft stock, a 40% premium over Intuit’s then-value.

Cook e-mailed employees a list of “10 top reasons to get psyched about merger” that included: “Close-up view of what a state of the art pocket protector looks like.” “New business cards for everybody.” “Makes spying on Microsoft much easier.”

However, when the Department of Justice announced it would file suit to stop the merger, Gates withdrew his offer. He felt Microsoft would be hurt if it had to sit in limbo awaiting the outcome of a legal fight. For those Intuit execs who never wanted to be part of Microsoft in the first place, this was a happy day.

According to Taylor and Schroeder, handling competition from Microsoft was only one of many things Intuit has done well. They write admiringly about how Intuit dealt with crisis brought about by bugs in its software. In 1987, they relate, Intuit got complaints from Quicken customers who got only the message “getcache” on the screen when trying to record a transaction. Twenty thousand copies had been sold. So Intuit staff created 20,000 bug-free disks and mailed one to every customer. Customer satisfaction increased. Similarly, the initial release of QuickBooks contained a data-destroying bug, possibly affecting 5-10% of copies sold. The repair required deleting and re-entering hundreds of transactions by hand. Intuit sent out new disks but also told business owners who had the problem to hire temps to re-enter data and send Intuit the bill.

But the authors frankly relate that this customer-is-always-right attitude was modified when the company grew larger. In 1993, serious bugs appeared in Quicken 2.0 for Windows. The product manager thought the $1 million cost of replacing every disk sold was too much and decreed that Intuit would respond only if a customer complained. That, the authors say, became the new Intuit standard.

The authors have taken on a formidable task in telling the Intuit story from its early days when Scott Cook couldn’t meet the payroll (the programmers quit and the company survived only because the three remaining employees agreed to work for months without salary) up to the year 2002 (that year Intuit had income of $140 million on revenues of $1.36 billion). The cast of characters is vast and the deals seemingly endless as Intuit expanded from a company with a single product that only wrote checks and reconciled balances to a maker of multiple sophisticated products to perform on DOS, then Windows, then the Internet.

But the tale told in Inside Intuit isn’t as exciting as you’d think it should be. Perhaps that’s because there is no single “hero” to provide perspective. Founder Cook appears in the beginning of the book but disappears through most of the rest of it as other executives take center stage in turn. Perhaps it is because the authors only occasionally offer background like the fact that Cook rejected the name Instinct for his new company because it sounded too much like “it stinks,” and too often relay specifics like the names and company of origin of six managers hired by Steve Bennett when he took over as CEO of Intuit in 2000 without accompanying anecdotes to illustrate why this is important.

What Inside Intuit offers is a straightforward, if not dramatic, portrait of a company in a constant state of crisis or change brought about by shifts in the software industry, software bugs, new products, acquisition decisions good and bad, and changes in top management.

And, of course, for Microsoft-phobes, it offers interesting details about one of the few times that Bill Gates came in number two.

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