Scott Cook Wants To Control Your Checkbook

Scott D. Cook is too polite to change the subject, but if you ask him about his competition, don't expect a straight answer either. First he will tell you what you already know--that Intuit Inc., the $228 million personal-finance-software company he started from scratch in 1983, faces a host of rivals. Then, he'll launch into his favorite evasionary tactic. "There is one competitor we have in all our businesses," he'll say. "We've faced them for years, and they're really rough."

With that, Cook will produce a mechanical pencil from his pants pocket, which you expect he'll use to spell out Microsoft Corp. on the piece of paper in front of him. Instead, he holds it up like some sort of talisman. "This is our main competitor," he says, grinning. "This guy is low-cost, easy to use, and it won't crash and eat your data. Virtually every one of our customers switches from this when we get 'em."

MELEE. Cook, of course, is aware that Microsoft is gunning hard for Quicken, Intuit's vastly successful personal-finance program. He also knows that he has outsold the world's largest software company at least 6 to 1 in the personal-finance market by focusing intently on the habits of potential customers, not those of rival software companies. If he was unnerved when Newsweek magazine recently portrayed Microsoft's powerful chairman, William H. Gates III, as seething over Quicken's big lead, Cook isn't letting on. His wife, Signe Ostby, however, is more demonstrative: "When I saw that, I just wanted to throw up," she says.

Who could blame her? Scott and Signe know well the vagaries of the computer industry. Although Intuit came close to pulling them into bankruptcy court (and unraveling their marriage) when it ran out of cash in 1985, it has blossomed into a hot-growth company with a market value of $804 million, 23.4% of which is owned by Cook. Until recently, Intuit had expanded quietly as word spread that Quicken offered even the worst computerphobe an easy way to pay bills, track a checking account, and budget finances. Then, its near 70% market share drifted onto Gates's radar scope and caught the Boy Wonder's


Now, the 42-year-old Cook finds himself in the middle of a high-tech melee to automate the way people manage their home finances. Not only has Gates doubled the size of the team that's pushing Quicken rival Microsoft Money, but he is also "personally committed to giving us whatever resources we need" to catch Intuit, says product unit manager Leslie Koch. The Microsoft Money team, she explains, has one goal: to grab the lead in on-line financial services, the market's next logical extension.

Giving customers the ability to pay bills, receive statements, and enjoy other financial services electronically is quickly becoming banking's holy grail. It may be a small market now. But the rush is on to establish links into the home. In the past few months, MasterCard International Inc. and Visa International--both of which are bank associations--have set up units dedicated to developing and marketing the tools necessary for banks to offer such services widely. Both plan to offer a variety of so-called customer interfaces: PC software, simple Touch-Tone phones, and computerized phones with small screens so users can view information (chart).

Koch won't comment, but sources say Microsoft is negotiating to align its Money program with MasterCard's MasterBanking unit in order to gain access to MasterCard's affiliated banks. And Visa's Visa Interactive division has linked up with another Quicken rival--H&R Block Inc.'s Managing Your Money.

While Intuit is going on-line, too, it is apparently doing so without the benefit of a broad-based strategic alliance with one of the bank-card giants. It already has a relationship with Visa to market the Quicken Visa card, which lets users download statement information onto their PCs automatically. A user can also pay bills electronically through Quicken by tapping into a transaction processor named Checkfree Corp. But earlier this year, sources say, talks broke down between Intuit, Visa, and several banks to create much broader electronic links. And since Checkfree will be part of MasterCard and Microsoft's alliance, that relationship could be short-lived.

In July, Cook spent $7.6 million to buy National Payment Clearinghouse Inc. (NPCI), a Checkfree competitor that had been processing electronic transactions for Microsoft Money (which is why Microsoft plans to embrace MasterCard). He will use it to connect Quicken directly to banks for a variety of interactive services. Whether he can do so quickly without help from one of the bank-card companies is an open question.

Cook's view is that a credit-card company is an unnecessary middleman. Banks will want to work with Intuit because Quicken is far and away the favorite choice in the market. "Banks can see that consumers have voted with their feet," he says. It might be easy to look at Microsoft's $4.7 billion in sales and rich cash flow and conclude that ultimately Cook doesn't have a chance. But Intuit's history would suggest that Cook may have designed a better mousetrap.

The mousetrap is the organization Cook has built, not the Quicken program itself. Intuit's QuickBooks program is just as dominant in its market--small-business accounting software. And a version of Quicken rewritten almost entirely for the German market has blown away the competition in that country, including Microsoft Money. What Cook has done is figure out how to run a company that can identify market needs and consistently develop easy-to-use computer software to meet them.

While most software programs are about as simple to use as a spaceship, Quicken draws raves for guiding users through its many features one easy step at a time. Right off the bat, the program lets you organize your accounts almost effortlessly. As you gain experience, you can speed up the process and tap into more complicated tasks.

The one problem with Quicken and similar programs is that entering data is a hassle. Once you get used to the power of automation, it begins to feel natural that you should be able to pay your bills electronically and download information from your bank accounts at the push of a button. Cook calls it "mainframe Perestroika": the liberation of account information from the gulag of banking's clunky mainframe-computer system. He has dedicated Intuit to seeing that it happens.

Cook is also out to find as many ways to manipulate the data as possible. Last year, Intuit doubled its size with the $306 million purchase of San Diego's ChipSoft Inc., the publisher of the popular TurboTax programs for preparing income-tax returns. It also has announced its intention to buy Parsons Technology Inc., which has programs that help with buying a car or getting a mortgage.

NOT CRISCO. Although the acquisitions will plunder reported earnings over the next few quarters because of several noncash charges, they are key to Cook's strategy. He wants to bundle all the information together to create a reservoir of personal-finance knowledge that's as deep as you want to go. Some products might be delivered via CD-ROM, some over a modem. One thing is certain, however: The more Intuit has to sell, the better. The company draws 30% of its revenue from selling Quicken checks and forms that fit in your printer. In the on-line future, Intuit wants a slice of each electronic transaction.

The company's ability to deliver what customers want is often attributed to Cook's early-career experience at Procter & Gamble Co. (That's where he met and fell in love with Signe, who was also a marketer there.) This seems unfair. Although he learned the ins and outs of consumer marketing at P&G, developing something as complicated as software bears little resemblance to the selling of Crisco, the account he spent the most time on.

In fact, associates say, Cook's brilliance lies in his uncanny ability to seize on a problem, hear from all sides, and synthesize a coherent solution. He has taught his company to do the same. Cook's ego is absent from most decisions; the weight of the evidence carries the day. Personal Finance Group General Manager Eric Dunn, one of the chairman's early hires, says he most admires Cook for his intellectual honesty. "He is a very fair person and very analytical," Dunn says. "And the reason he's fair is because he is analytical."

Cook's passion for analysis borders on the compulsive. L. John Doerr, the veteran venture capitalist from Kleiner Perkins Caufield & Byers who sits on Intuit's board, still marvels at the process Cook put him through before Doerr was invited to join the company. Cook was seeking a select few venture partners to buy out some shares owned by the founders and provide advice on how to manage the company's growth.

The process took nine months and several rounds of interviews, and, finally, each finalist was required to write a detailed case study to demonstrate his ability to think strategically. The topic: how to respond if Microsoft entered the market. "I couldn't believe how long it took," Doerr says. "But I just liked Scott. He has more passion for stakeholders than any founder I've worked with." (Doerr ultimately introduced Cook to Intuit's new CEO--Apple Computer Inc. veteran William V. Campbell--who, after countless interviews of his own, was tapped to help streamline operations and speed up decision-making.)

Cook, who is all the time quoting from technological history, has a touch of Ben Franklin about him. He is unfailingly friendly and outgoing, but he's not one to make chitchat. Before his yearly backpacking trip with high school buddies last summer, he asked each of them to read an article on East-West relations in The Atlantic Monthly so they could discuss it around the campfire. Signey says her husband is just as focused at home. Landscaping the yard can be a science project: "He'll want to move two bushes three feet because he has analyzed all the views and they look better from the particular chair on the porch he wants to sit in," she says.

Friends say Cook has been that way his whole life. Growing up in the middle-class Los Angeles suburb of La Caada, Scott was a nerd in school, but a popular one. He was salutatorian of his high school class and student body president. He also was voted most likely to succeed. John Selling, an old friend who is now a gastroenterologist in Menlo Park, Calif., says Cook spent his spare time racing an old Fiat at a local track. He also liked to play cards and spent many hours at the school's computer analyzing whether a card-counting strategy could beat the odds in baccarat. Signe says if his father hadn't pushed him into business he would have been an engineer.

Cook's resume is top-notch: a double major in mathematics and economics from the University of Southern California, an MBA from Harvard University in 1976, four years in Cincinnati with P&G, and an additional three years as a Bain & Co. consultant in Menlo Park. It wasn't until 1983 that he got the itch to go it alone. His epiphany came as he watched Signe pay the bills. The tedious work begged for automation, yet there wasn't a good computer program available.

So Cook decided to design one. His first step was to hire a Stanford University programmer named Tom Proulx (who this year took a leave of absence from the company). Together, they developed a piece of code that could easily write checks and store personal financial data. From the start, Cook placed emphasis on dogged customer research. He enlisted the Junior League to test the product and sat next to each subject with a clipboard, watching as she attempted to write a check.

INTENSITY. The emphasis today is no different. Intuit is maniacal when it comes to customer research and feedback. The "usability lab" runs full-bore throughout the design of each product. An ombudsman funnels suggestions from telephone help lines into a central database, where they are categorized and analyzed. Engineers are sent out to customers' homes to watch them grapple with the software. "The value is in watching the customer flail," says Jacqueline Maartense, group project manager for Quicken.

Since launching its home-product line, Microsoft is doing many of the same things. The difference is a matter of degree. Intuit is so focused on personal finance that its engineers have become experts on the customer's needs and behavior. "You start to build that into your fabric," says Maartense. "Once the engineers are sensitized, they've already figured out what the customer is going to have trouble with. It's kind of a self-sustaining thing."

Unfortunately, Cook's intensity of focus can sometimes be a little off-putting. During a speech at a big home-banking conference in May, several participants say, Cook's open disdain for screen phones and other less ambitious home-banking applications turned off some of the conservative bankers in the crowd. "We want to offer all the applications," explains Susan Terry, a vice-president at First Tennessee Bank in Memphis. "Some people don't want to do all the things these programs can do. They just want to pay bills."

That's where programs with a choice like Visa's and MasterCard's could provide an edge. Cook will have to wrestle with that as his team sets out to sign up banks on its own. He can take comfort, however, in the opinion of Joseph S. Pendleton III, senior vice-president of Meridian Bancorp. in Redding, Pa.: "We want to open up as many doors and conduits as possible," Pendelton says. "Market share will ultimately guide my decision [which to keep]." For the time being, anyway, that's a game Intuit wins hands down.

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