Intuit Inc.

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Intuit Inc.

P.O. Box 3014
Menlo Park, California 94206
U.S.A.
(415) 322-0573
Fax: (415) 592-8324

Public Company
Incorporated: 1983
Employees: 1,228
Sales: $194 million
Stock Exchanges: NASDAQ
SICs: 7372 Prepackaged Software

Intuit Inc. was the leading maker of personal finance software in the world going into the mid-1990s. Its flagship product, Quicken, dominated the market with a share of about 70 percent and was the most popular software program of any kind in the world. In addition to Quicken, Intuit sold QuickBooks, a small business payroll processing program, and QuickPay, an add-on application that calculated deductions and printed payroll checks. Other Intuit programs helped to file tax returns electronically and conduct electronic commerce. After a failed merger with software behemoth Microsoft in 1995, Intuit was pioneering the electronic financial services industry.

Intuit is the brainchild of entrepreneur Scott Cook, who co-founded the company with Tom Proulx in 1983. Cook, then only 23 years old, had moved to Northern California in 1980 and was working in banking and technology assignments for the consulting firm Bain & Co. One night he and his wife, Signe, were sitting at their kitchen table in San Francisco paying their bills. It occurred to Scott that there must be a better way to manage their household finances and automate the hassle of bill paying. Inspired to start his own software company, he went to Stanford University to place an advertisement for a programmer. When he got to the campus, he stopped a passing student, Tom Proulx, for help in locating a bulletin board. Proulx, it turned out, had done some programming and agreed to write a simple check-balancing program for Cook. In his dorm room he created the first Quicken program, which he and Scott used to launch Intuit.

Cook’s idea for a check-balancing program was unique, but he was only one of many people trying to break into the burgeoning personal computer software market at the time. According to many of his associates, it was his background, intellect, and enthusiasm that separated him from the rest of the pack. Cook earned degrees in both math and economics at the University of Southern California (USC). (He credited summer internships with the Federal Government with encouraging him to go into business rather than the bureaucratic public sector.) Also at USC, Cook took it upon himself to resurrect the school’s ailing ski club. He rented out a cabin at the nearest ski area and charged club members a mere $1 per night to stay. The club became one of the most successful organizations on campus and played an important role in getting him accepted into Harvard’s graduate business school. Indeed, Cook was one of only a handful of students to enter Harvard straight out of undergraduate school, and was the youngest member of his 800-member class. “When I look back, that ski club success, as much as anything, led me to believe that I could start a successful company,” Cook explained in 1992 to the Business Journal-San Jose.

Cook was snatched up by the Cincinnati-based marketing giant Procter & Gamble immediately after he graduated from Harvard in 1976, and was placed in charge of the Crisco shortening brand. At P & G he met co-worker Signe Ostby, his future wife. In 1980 the couple moved to California for its climate, with Scott taking the consulting job with Bain and Signe becoming vice-president of marketing at Software Publishing Corp. During the next few years Scott gained important experience related to banking and technology while Signe learned about marketing software. Meanwhile, Tom Proulx labored in his dorm room creating the first version of Quicken. After polishing up the program the pair launched Intuit in 1983.

While Proulx contributed the technical expertise to the original Quicken program, Scott drew on his consumer marketing background to ensure that the program would meet a real need in the marketplace. He conducted numerous telephone interviews and focus groups, for example, in an effort to determine exactly what households needed financially and what features were most important to potential customers. Co-workers called his emphasis on customer input fanatical, and Cook’s fixation eventually became well known within the software industry. The application resulting from this research allowed people to enter data on screens that looked much like a check and a checkbook. The data was automatically processed, thus eliminating much of the tedium of balancing a checkbook.

Cook and Proulx started Intuit in Proulx’s basement with a single product and seven employees. Cook originally planned to sell the software through bank branches, a strategy that soured when he realized that banks were poorly equipped to sell prepackaged software. Moreover, because Intuit was only one of several companies trying to market a personal financial software program, Cook was unable to find a retail distributor that would take his unknown product. By 1985 the company was struggling to stay afloat. Three employees left when Cook and Proulx became unable to pay salaries. The other four, still believing in their product, kept working for six months without any pay.

Cook remained surprisingly upbeat and helped to buoy the Intuit team during their initial struggles. Whenever Proulx’s wife would come down into the basement to see how things were going, Cook would tell her that they couldn’t be better. “The truth is that things couldn’t be worse,” Proulx recalled in 1995 to the San Francisco Business Times. “Years later he told me that in 1985, when we were out of money, if someone had agreed to buy the company from him to pay off his loans, he would have done it.” In fact, Cook was more than $300,000 in debt and was facing a long 30 years of trying to pay off those obligations if his venture failed. “I never had any doubt that he would eventually succeed,” Proulx added. “A large part of my belief was from having been propagandized by Scott.”

By 1986 Cook and Proulx were beginning to see some light at the end of the tunnel. Importantly, the Apple version of Quicken was getting positive attention in the trade press, and sales were slowly picking up. Recognizing the power of such trade articles to generate sales, they made a pivotal decision that turned the company around. Instead of selling the programs through banks, they would sell them directly to customers through advertisements. In a risky move that could have quashed the entire venture, Proulx coaxed a reluctant Scott into placing $125,000 worth of advertisements, despite the fact that they had only $95,000 left in the bank. Cook wrote the ads himself, drawing on his marketing experience at Procter & Gamble. He emphasized the benefits of the program as opposed to its features, unlike most software ads of the time. “End financial hassles” was the key benefit touted in Cook’s ads.

The advertising campaign was a success, and from that point forward Intuit’s fortunes improved. Still, the company lacked a broad retail distribution channel and was only one of a growing number of personal financial software applications hitting the surging PC market. In an effort to expand his advertising efforts and boost Quicken’s exposure, Cook approached more than 30 venture capital firms during the mid-1980s. All of them turned him down, including one represented by his former Harvard roommate. Nevertheless, Cook and Proulx persisted. Cook determined that word-of-mouth critiques of his program and customer loyalty would become the most valuable advertising tools at his disposable. For that reason, he decided that customer service and input would take top priority throughout the entire company.

Stories of Cook’s obsession with customer service abound. Once, while visiting the office of a software association, Cook walked by a clerk entering data on one of his programs. He immediately stopped to interview her about the application, and later incorporated one of her suggestions into a version of the program. When Cook preached customer service to his employees at a meeting in 1988, he told them that he wanted Intuit’s service to improve to the point where customers would become “apostles” for Quicken by purchasing other Intuit products and telling their friends about Intuit’s offerings.

By the late 1980s Intuit was clearly on the fast track to success. In just a few years sales of Quicken exploded, and the program became one of the best-selling personal financial applications. Intuit suddenly had little problem securing more financing. Several well-known venture capital companies, including Sierra, Technology Venture Investors, and Kleiner Perkins Cau-field and Byers, were willing to back Intuit’s efforts to expand its retail distribution. Thus, during the late 1980s and early 1990s Quicken became one of the top-selling software applications in the world, surpassed only by industry staples like WordPerfect and Lotus 1-2-3. Sales climbed to $55 million in 1991 from just $20 million three years earlier, and Intuit’s work force more than doubled in 1991 to about 425 employees.

Intuit broadened its scope in 1991 when it introduced QuickPay, a software program designed to help small businesses process their payroll. The $60 program, which was designed to work in conjunction with Quicken, was readily accepted by many users of Quicken. Intuit followed that introduction in 1992 with QuickBooks, a full-featured small-business bookkeeping program that provided an easier and less-expensive alternative to traditional accounting software. It was priced at about $140 and was also designed to work in cooperation with both Quicken and QuickPay. By 1992, Quicken (at a retail price of $70) was dominating the market with a powerful 70 percent share of the personal financial software market. Much of that success was attributable to the company’s emphasis on customer satisfaction: one 1992 survey showed that 85 percent of all Quicken users had recommended the program to at least one other person.

Having established its dominance in the market for stand-alone personal and small-business financial software, Quicken started looking at the much bigger picture. Indeed, Cook and his associates believed that Intuit’s future was in providing a means of electronically linking customers with banks, brokers, and other businesses, and in providing various electronic financial services to the public. To that end, Intuit struck a deal with Visa that allowed Quicken users to download credit card statements directly onto their computers and into Quicken. In 1993 Intuit spent $243 million to purchase ChipSoft, which allowed customers to file tax returns electronically. Intuit scored again later that year when it bought out the National Payment Clearinghouse Inc., a processor of electronic transactions, for $7.6 million.

Cook realized in 1993 that Intuit was evolving from an entrepreneurial start-up company to an established corporation. The company had even gone public by that time on the OTC market, and was rapidly adding employees and facilities in the wake of ongoing acquisitions and surging sales. Early in 1994 Cook selected 53-year-old William V. Campbell to serve in the newly created post of president and chief executive officer. Campbell, a former Apple executive, was skilled in building organizations. In addition to his background in the computer industry, he had also served as the head football coach at his alma mater, Columbia University. Campbell would oversee the day-to-day operations at Intuit while Cook, as chairman of the board, would continue to spearhead the company’s strategic plans.

By the mid-1990s Intuit was drawing attention from a much larger suitor, with software giant Microsoft eyeing Intuit as a possible takeover target. To Microsoft, Intuit represented an entry into the only major software category in which it did not have a significant presence. Microsoft was competing successfully with its own personal financial program, Microsoft Money. By 1994, though, that application was serving only 22 percent of the market, compared to Quicken’s walloping 70 percent. Furthermore, Intuit owned other programs of interest to Microsoft, such as TurboTax, MacInTax, and ProSeries, all of which were geared for the personal and small-business tax-return-preparation market. Finally, Intuit had valuable experience related to conducting computerized transactions over telephone lines.

Microsoft, with Cook’s cooperation, attempted a buyout of Intuit in 1995. Critics and Microsoft competitors balked, claiming that the merger was anti-competitive and would give Microsoft too much power in the software industry. To Cook’s dismay, the Justice Department tried to block the deal, which would have been the largest merger in the history of the software industry. Both Microsoft and Intuit fought the Department’s efforts, and Microsoft even offered to sell off its Money program. Nevertheless, the $2 billion deal eventually collapsed. With that, Microsoft CEO Bill Gates renewed his efforts to make Microsoft Money a contender. Microsoft hired away a top Intuit salesman and launched a revamped version of Money to be used with Microsoft’s long-awaited new operating system, Windows 95.

Like Microsoft, Intuit turned its attention back to its growing array of products following the failed merger. The company was still trying to digest the flurry of product and company acquisitions completed during the early 1990s. To that end, Intuit was working to consolidate and streamline its information systems and operational and financial controls. Even though the company’s fiscal year was shortened by two months in 1994, revenues surged to about $194 million. In the long term, Intuit was positioning itself to become a leader in the burgeoning electronic banking and financial services industries.