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CLEVELAND—Despite his position as founder and chairman of Intuit, a leading developer of accounting software for consumers and business, Scott Cook sounded a strikingly low-tech note when he addressed the HBS Global Alumni Conference.
"The biggest business innovations are not technology-based. Major breakthroughs come through a unique mindset or paradigm," said Cook (HBS MBA '76), citing eBay's revolutionary e-commerce model as an example. "There was no inventory, no guarantee that merchandise was authentic, and no easy way to pay for or receive goods—it might take a customer one week to buy a $10 item, and another two to three weeks to receive it," he remarked. "Needless to say, retailers and venture capitalists ignored him, thinking he was either irrelevant or crazy."
When Benchmark Capital finally took a chance on the new auction site, eBay's IPO and subsequent stock movement rewarded the investment company with the single largest gain in the history of venture capital.
The technology supporting the eBay Web site took its founder, Pierre Omidyar, less than a week to build, Cook continued. "What was significant was the power of this new paradigm or mindset," he said. "People who shift paradigms have the same facts as everyone else, but they see them differently. The end result either revolutionizes the customer experience, or the economics of the business, or both, as was the case with eBay."
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| People who shift paradigms have the same facts as everyone else, but they see them differently. | |
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| —Scott Cook |
Wrong beliefs die hard
Cook underscored the importance of psychology when it comes to accepting or resisting breakthrough developments, referring to a consistent pattern that is characteristic of scientific discoveries. Frequently, he said, a solitary scientist would propose a new theory, only to be shunned by all prominent researchers in the field. Most of these authorities persisted in believing the old paradigm long after their colleague had disproved it. "Science was anything but logical in this case," Cook said. "Psychology is so powerful that it causes the greatest scientists of the ages to persist in wrong beliefs until the day they die."
When Intuit's best selling QuickBooks accounting software was introduced in 1992, Cook recalled, poorly conceived advertising and a buggy product hampered its initial launch.
"It's amazing how huffy customers get when weeks of work disappear," he said wryly.
In addition, the company ignored market research indicating that nearly half of its customers were businesses, sticking with its original plan to target QuickBooks at the consumer market. "The facts didn't fit our paradigm," observed Cook. "Our paradigm was that if you're in business, you have an accountant."
After research continued to indicate that businesses were a large proportion of the QuickBooks market, Intuit conducted telephone interviews with current and potential customers to better understand what was behind the unexpected numbers. One of their most significant findings was that the majority of U.S. businesses—approximately 98 percent—have 50 or fewer employees.
"In a company of that size, you don't usually have a CPA on staff," Cook said. "The person who keeps the books in over half the cases is the owner, or the office manager, and the last thing they want to learn is accounting. These are the folks who think General Ledger is a World War II hero," he joked.
"This was a fundamental insight into the customer, and that surprise created our largest business," Cook said, noting that Intuit's experience is proof that innovation can even occur in accounting, a seemingly stodgy business that Cook described as "the second-oldest profession."
Hit or miss?
Looking to the future, Cook briefly previewed an Intuit product currently in development. Described as a "work processor" and tentatively called QuickBase, the new software would automate processes such as managing a sales force, taking customer orders, recruiting, or purchasing.
"The old paradigm is that automating these paper processes requires fiendishly complex, expensive systems that take months or years to build," he said. "The new paradigm—and we'll see if we can make it work—is that it's got to be simple, cheap, and fast.
"I can't tell you if QuickBase will succeed or not," he continued. "That's a truism of any paradigm shift. Early on, no one can tell how big it will be."
What is clear, Cook said, is that the fundamental activity underlying paradigm shifts is directly related to the practice of good business in general. "That means getting the decision makers close to the customer," he said. "That's one of the distinguishing characteristics of HBS, in fact—to drive research and teaching close to practice, close to executives in their day-to-day lives."
"The customer is the compass; that's where the learning comes from," Cook concluded. "And don't forget to truly respect surprises."
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