Death to Hippos: Innovation the Intuit way

To grow faster than your market, you need to create more value than your competitors do…
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Death to Hippos: Innovation the Intuit way

To grow faster than your market, you need to create more value than your competitors do. It’s the fundamental challenge of business: to continually create better products, less costly solutions, or more effective internal processes that results in better, faster or cheaper service.

Sounds easy, doesn’t it? But when you call that “innovation,” many organizations freeze up. “Innovation” is a process that sounds complex, expensive and hard to master. Essentially, however, innovation is just a type of culture: learning to listen to customers and solving their problems.

One company that excels at listening is Intuit Inc. the accounting-software giant of Silicon Valley. The $5-billion-a-year maker of QuickBooks and TurboTax has built its growth on grassroots innovation.

I’ve had the chance to discus innovation with Intuit’s founder, Scott Cook, and with its current CEO, Brad Smith. Here’s how they’ve made innovation look easy by developing processes around listening and learning.

When Scott Cook was developing the personal-finance program that became known as Quicken, his sister-in-law phoned hundreds of consumers to find out what they liked and disliked about managing their personal finances. Cook learned 80% of consumers resented the time and paperwork required, so he vowed to save his customers time. Quicken took off because it was simpler and easier to use than its competitors. Cook dubbed that “the 47th-mover advantage”.

Cook also started a practice of following customers home; he and his staff would sit at consumers’ kitchen tables and watch them pay their bills. This passion for field research still thrives at Intuit; even the CEO still schedules time for in-person customer research.

When Brad Smith became Intuit’s CEO in 2008, he realized his job was to institutionalize Cook’s innovation style, to make it a permanent feature of the culture. After all, innovation is more important than ever. “It used to be that platforms [desktop computers, laptops, mobile devices] changed every six years. Now, it’s every six months,” Smith says.

To identify solutions to customer problems, Intuit gives its staff 10% “unstructured time” to work in teams on independent projects. Your group shouldn’t be too big, says Smith: “We use four- to six-person teams. No more than two pizzas can feed.” Team members include a range of skills, such as engineers, designers and marketers, so they can approach problems from multiple points of view. “They go broad to go narrow,” says Smith.

Intuit’s “Design for Delight” teams are expected to come up with at least seven different ideas. Then they choose three to explore more deeply before choosing the single best idea to work on. Rough and unfinished prototypes are presented to actual customers for testing and feedback. “Your team can work on anything,” says Smith, “if you can show us tangible proof the customer likes it.”

The goal, he says, is for Intuit to get out of its own way to discover what works. Smith calls it “Death to the Hippos.” The “Hippos” being the “Highly Paid Person’s Opinion.”

Teams get six weeks to work ideas into working concepts. “Innovation is born of constraint,” says Smith. Intuit teams don’t worry about getting a perfect solution before they test it; Intuit has learned that the more finished a prototype looks or feels, the more reluctant customers will be to critique it. “If it’s still wrapped in duct tape, they will help you fix it.”

Since most innovators need more than spare time to complete projects, Smith controls a “CEO Innovation Fund” that may hand out $20,000 to $30,000 to support new product development. “We’ll fund it for 90 days to see if it’s then worth investing in.”

Intuit divides its innovation efforts into three “horizons.” Supporting existing products, the mainstream of the business, gets 60% of total R&D funding; “adolescent” growth sectors, such as online services and mobile apps, get 30%; and 10% of funding must go to new ideas.

In innovation, as in so much of business, you get what you pay for. To ensure rapid development, Intuit ties executive compensation (at least in part) to revenue from products less than three years old.

Smith admits that Intuit doesn’t have all the answers around innovation. But he says he’s learned that innovation training isn’t enough. “We’ve tried classroom learning,” he says. “We learned the fast way to develop skills is to learn by doing.”

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