When you think of a company with revenues of more than $4 billion dollars, employing more than 10,000 people and is 30 years old, last words you might associate with the organization is lean and innovative. However, Intuit, a software behemoth, has over past few years has reinvented itself, in the words of its co-founder, Scott Cook, into a “30-year old startup”.
In 2008, Intuit was struggling with its business, as its main source of revenue, QuickBooks’ growth had stagnated and the new features didn’t help in acquisition of new customers. Scott Cook sensed he needed to shake things up as the status quo would make them a relic of past in a fast moving industry such as Software Products and Services. He knew QuickBooks needed an overhaul fast and also Intuit needed new products in its repertoire to generate more sources of revenue. One day, he happened to stumble upon a unique video where a person named Eric Ries spoke about “The Lean Startup” method, this stirred Cook’s curiosity. He decided to invite Ries to Intuit HQ to talk to leaders at Intuit.
Eric Ries, a graduate from Yale University, was your average tech nerd who loved building new products and wanted to be an entrepreneur. His first company there.com failed in 2003. He co-founded IMVU in 2004, which turned out to be a huge success. Bitten by his previous failure, he knew IMVU could fail as well but he sought to find out a way to mitigate the risk of failure. This led to the origination of the Lean Startup philosophy, for which Ries became an evangelist.
Lean Startup functions on the following model:
The idea is to come up with a hypothesis for a product or feature build a minimal viable version of it, ship it to your customer, analyse the data from customer usage and then validate your learning through the next iteration of product.
Intuit and most of the other software companies used the Waterfall method of software development process to build their products. The waterfall model is a sequential design process, in which progress is seen as flowing steadily downwards through the phases of conception, initiation, analysis, design, construction, testing, production/implementation and maintenance.
The process was very time-consuming and used to take a lot of resources without any assurance of success. This was a very high risk strategy to have and was not serving Intuit well.
Agile, as opposed to Waterfall, is an iterative method of managing the engineering process which allows the product and service being developed remain highly flexible. Lean Startup method is nothing but an extension of Agile development process.
Eric Ries spoke to various leaders at Intuit who all had great ideas regarding QuickBooks and other new products. However, what they lacked were the resources required to test out these ideas. Due to Waterfall method, Intuit had large teams working on a product and there was no room for side projects for the developers to work on.
First thing, Ries suggested was to break the large teams and split them up into smaller teams and each of them should work on a small product or feature for which turnaround time is really low. Secondly, once they have built it, it can be pushed to certain consumers to see how they react to it while maintaining a control group to see the true difference the feature made. Lastly, based on the results, the team can build on it or move onto the next idea.
Scott Cook was thoroughly impressed by these ideas and structured the changes to move away from Waterfall to Agile. And results were pretty staggering, the share price of Intuit rose from $29 in December 2009 to $47 in December 2010 (55% increase). Today, 20% of US GDP flows through QuickBooks.
Moreover, to unleash the innovative potential of its workforce, Intuit formalized Innovation Time policy, which dictates that employees have to spend 10% of their time on development of new ideas on their own. This enabled Intuit to come up with a whole new suite of product offerings.
The Lean Startup method not only helped Intuit to turn around itself but also helped them attract and retain top notch technical talent in the predatory environment of Silicon Valley. Working on innovative idea in a safe cocoon of a large company is a great incentive for innovation hungry engineers.
- The Lean Startup by Eric Ries