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May 25, 2006
How Intuit fails toward success
Software company lntuit rewards failure. Literally.
The company's chief marketing officer, Mark Schar, told attendees today at the Brandworks University conference in Madison, Wisconsin, how Intuit recently recognized an employee with a "Swing for the Fence" award for a big idea, even though the idea didn't work out. The big idea? Partner with hip-hop mogul Russell Simmons, who would encourage 18-24-year-olds to file their tax returns early using TurboTax and win some prizes, like tickets to a show featuring rapper Jah Rule. Launched last year, the program flopped.
Bestowing a Swing for the Fence award on an employee isn't designed to make the employee feel bad for a failed program -- the employee who dreamed up this program was in tears at the ceremony, Schar said, and showed a picture of Intuit founder Scott Cook embracing the employee in a congratulatory hug -- but to create a supportive environment for ideas to change and improve the business.
"We're all about fostering a culture of experimentation," Schar said. For instance, the company tested 40 different homepage designs for the TurboTax website this year during the site's 100 busiest days -- the time leading up to personal tax filing. The various homepage designs were based on employees' hypotheses of what would cause more people to sign up for the online version of TurboTax.
For some branding purists, launching 40 different homepage designs during the busiest time of the year might seem like the worst idea imaginable, but Schar said it's crucial to getting things right. "Because we were able to gather lots of data and incrementally learn something new from each homepage design, our conversion rate during the period went up 30 percent."
Sounds like a good idea: experiment a little every few days rather than zig-zagging the company through big and complicated wholesale changes once or twice per year.
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Ben
Intuit's approach is a brave example of what is known as "Patching".
At any moment in time, there are many different areas in which improvements to a business like Intuit could be made, each helping it to become more effective (more profitable), or if things don't work out, to become less effective. The more competitive and dynamic the market, the more areas offering potential improvements. The challenge is in finding out which areas will offer the best improvements.
Patching breaks down the business into a quilt of smaller patches, each of which looks for improvements in its own area, and at the knock-on effects of improvements in neighbouring areas. As some of the areas find improvements that make the business more effective, neighbouring areas adjust to the changes. The next iteration of the business emerges improved and more effective through a process of many small, inter-linked improvements.
That doesn't mean that a business needs hundreds of patches at the same time. Companies like HP, Compaq, Dell and British Petroleum have all used patching to tackle business problems like divisional realignment, product development and restructuring, often with a relatively few patches. Intuit is a great new example of patching.
And what applies inside a business applies even more outside the business when co-creating with customers. The challenge here is in knowing which customers will offer the best improvements and in giving them the tools to make the improvements happen. It is highly unlikely that the "1%ers" will provide enough diversity to identify all the best improvements available. But as you quite rightly say, they are a great source of customer-driven innovation to get started with and to learn how to co-create the future with customers.
Take a look at Stuart Kaufmann's McKinsey Quarterly article "Escaping the Red Queen Effect" and Kathleen Eisenhardt's HBR article "Patching: Restitching Business Portfolios in Dynamic Markets" to learn more about how patching improves business performance.
I wonder why the program failed. Intuit must have believed in it enough to make it happen. Probably wasn't the idea generator's fault either.
The idea of fostering failure does sound a bit weird, but it probably does help encourage people to "swing for the fences". And some of those ideas have to pan out right?
Changing their home page that often during tax season is gutsy. Risky (for fear of breaking something technically), but gutsy. It does seem like a good way to experiment with things when you know you've got a captive audience. Changing the site when no one's there means you won't get the quick metrics and volume of data you need to make good decisions.
Good information on your blog. I’ve added it to my list at
http://barber-osophy.blogspot.com/
Ben
Reading through, it appears that Intuit TurboTax plus pre-paid Russel Simmons Visa bundled together could set the buyer back by about US$25 before they even start to do their tax. That may literally be small change to you or I, but maybe not to those whom the offer is targeted. And the suggestion that they should load any IRS refund straight onto the pre-paid card doesn't sound all that attractive to people with low income, where cash really is king.
All in all, it sounds like one of those daft, inside-out marketing ideas that studies show fail four times for every success. Incidentally, the studies show the best source of winning innovation is sensing & responding quickly to changing customer needs, with 13 successes for every failure. Intuit may have been better off, much better off, if they had based their new product on what potential customers wanted rather than what Intuit & Russell Simmons wanted.
One of the hardest things in open-innovation is to identify the future winners from the future losers as early on as possible. Kim and Mauborgne, two Profs at Insead, describe one workable approach to spotting winners in their "Knowing a Winning Business Idea When You See One" article in the October 2000 edition of HBR.
But you do have to doff your cap to Intuit for rewarding failed risk taking publically.
Continually updating the webpage design is essentially spiral development in an engineering sense. If it works for radios, radars and robots, it ought to work for homepages, too.
It's awesome to see a company that rewards "swinging for the fence"! Big thinkers typically get rewarded sooner or later. Thanks for the post!
What a great example of how to encourage people to look outside of the industry! I have heard Mark speak in San Diego- he is brilliant. I think not looking at "false positives" in any industry - the nonobvious opportunities that are overlooked - are a huge source of innovation.
