Mr. Cates says you need to distill to those critical few areas that are going to deliver the biggest impact as you look to grow your business. It is also important to understand the company’s growth opportunities based on customer insights. Once the growth opportunities are identified, CEOs need to distill to those critical few areas that are going to deliver the biggest impact as they look to grow their business.
Arcus Innovation Leaders Series: How business leaders use innovative approaches to shape their strategies.
What does it take to innovate? Arcus Consulting Group has launched a major initiative to explore growth and innovation as key elements of corporate and business unit strategy. A majority of executives say it involves a pervasive corporate culture, deeper customer insight and a comprehensive strategy that will enable an organization to offer its customers important added value. They say such steps reduce costs, increase sales and achieve higher earnings. But how does one come up with new solutions, and can innovation really be part of a strategy plan? Arcus’ multi-industry survey of senior executives found that of all the challenges companies face in this area, the biggest challenge is finding ways to create a “culture of innovation”.
As Arcus research indicates, doing so means that you need to be surrounded by highly talented people. It also means finding a way to transmit your passion to them, so they will buy into your vision of the future, perform at the highest possible levels, and come up with innovative solutions to the challenges of achieving the vision. No surprise, then, that the topic of innovation has been gaining ground as CEOs seek to incorporate concepts like a “culture of innovation” into their assessments of a company’s long-term value.
Arcus: A question that C-level executives ask Arcus quite often is, “What will it take for a CEO to succeed in a new position?” What would be 3 pieces of advice you would have based on your experience arriving at Intuit after prominent positions with companies like HP and Apple?
Mr. Cates: First, one should certainly know the culture. That’s really important, coming from HP and then going to Apple and then coming to Intuit. All 3 companies have very different cultures, although I see a lot of similarity between HP and Intuit.
Second, you need to understand the company’s growth opportunities based on customer insights. That has been crucial in coming into this role where we have three core businesses: accounting, small business and consumer. Once you have your growth opportunities identified, you need to distill to those critical few areas that are going to deliver the biggest impact as you look to grow your business.
Third, I think, coming into a Canadian role, where you are a subsidiary, is to understand where the parent company is going and where they are making their overall investments. How can you tie that to the second core area around picking your critical few priorities based on your local country customer demands? For Intuit, we are on a strong path to expand globally. My organization in Canada serves two roles. One is supporting the growth in Canada of the three business units that we serve, but we also play a role in helping support the geographic expansion. A lot of the talent that’s enabling our expansion is based in Canada, such as product development, IT, and operations. That’s very exciting, having that opportunity to not only focus on the Canadian market and what Canadians need but also being able to play a role helping the company expand into other countries.
From my experience, you don’t really see a lot of large technology companies that still really focus on the local market customer needs, like Intuit is. Usually decisions are centralized, for example made out of California, and Canada is a loose part of an “Americas” region. Unlike Europe that tends to focus on supporting the countries in the region, Americas often means U.S. and all others. You are vying for the resources or the attention of the head office to get the support you need to be able to grow in your local market. So I think Intuit’s situation is very unique in that, first, they still make a heavy investment in developing products for Canadians. You don’t tend to see that unless they are a Canadian company. Second, you have an American company that is leading their global expansion with many of the resources sitting in Canada.
Arcus: That’s really interesting. What advice would you have for Canadian CEOs who report to U.S. headquarters? You are right; it’s always a challenge to draw on the global pool of resources in each individual market. And also around streamlining and aligning your strategic priorities with the global strategic priorities. One of the frustrations we hear from many CEOs is the lack of leeway around flexibility when deploying strategies.
Mr. Cates: I think Intuit provides more autonomy than many other multinational technology companies. Definitely at Apple, they had a very different approach to going global fast with new product offerings using a fairly regimented approach to how you go to each of the individual countries. That’s a great example of a company that has mastered the ability to scale quickly across the globe. At Intuit there is more opportunity to standardize and leverage best practices, which works well for me. I think the core to being successful, if you have that local autonomy, is to make sure that you are marrying the needs of your local market to the company strategy, specifically focusing on where those two intersect.
If you are trying to do something that isn’t aligned with the company strategy, often you are bound to find that you are not going to have sufficient resources to be successful. Instead find ways to leverage more, look for the commonality instead of looking for differences. Think of your website. If you can standardize to a common look and feel without sacrificing local needs or nuances, then there are a whole lot of little decisions that you no longer have to make. In addition, using the same language and presenting your data in a similar manner means that you are able to integrate well with the larger organization and are better able to gain their support.
Arcus: Can you talk to the advantages of the two ends of the spectrum around speed to market?
Mr. Cates: Sure. If you’ve got very few products with a focused go to market plan and consistency in marketing materials, then obviously you are able to turn around execution in a quick manner with a very consistent look and feel that helps build that global brand. So that’s obviously the benefit for that model. The downside to that is that there can be opportunities in the local country that you’re now forgoing in the interest of more of a global approach that doesn’t necessarily optimize for one particular market.
Arcus: So, a lowest common denominator?
Mr. Cates: Not necessarily, but that model does tend to focus on the global common as opposed to recognizing and making the most of local differences. You’re saying, “I am going to execute for this one set of needs or market and if this works in other geographies or other markets then great. But I’m not expanding my focus beyond this one group.”
Arcus: Can you talk about talent and what it takes to identify your talent based when coming into a new position. How do you reach in and attract new talent? What from your perspective really drives the process of nurturing, retaining and acquiring talent, or attracting talent?
Mr. Cates: Again, it starts with deeply understanding the company culture. Then it’s about taking stock of the team you have got, what their strengths and areas for development are and where your strategy is going. Strategy should drive structure. Understanding your strategy, the resources you need and mapping that back to your assessment of the talent pool is a key thing you need to do in your first 60 days. Intuit really takes employee engagement and being a great place to work very seriously. More so than I have ever seen. It’s one of the core differentiators for the company. We have an employee engagement survey that goes out every year to gauge employee satisfaction on a number of key factors. Each manager’s teams are reviewed for best practices and areas to improve. We look at how managers have done relative to their peers, how they have done relative to the company overall, and how they did in their previous term. That gives us really good insights on what we are doing well, and where we can do better for employees. Once we have the survey data, we have conversations with employees. Executives host town hall meetings and ask them, “What can we do better?” You can have some very frank conversations and get some qualitative feedback to go along with that quantitative survey. That was great for me because when I came in I had data right away to understand what the organization is proud of, and what they want the leadership team to work on.
We also use third party benchmarks. I put more stock behind the employee engagement survey, but it’s always nice to see how you are doing relative to your industry peers. We also track specific third party benchmarks to get a good read of how are we keeping up. Are we staying ahead of other peers in the industry? Where are the opportunities to learn from those that are held in high esteem?
Arcus: Could we talk about small business and unique customer segments, that don’t like working with big businesses. They want more flexibility and so on. What kind of unique characteristics have you seen and how have you aligned your strategy around small business?
Mr. Cates: Small business is arguably the hardest market to go after. Small businesses are so unique; it’s a little harder to compartmentalize them the same way that you might the consumer. I think it’s the most interesting segment. It’s also very rewarding because it’s the segment that drives growth in the economy. When there is a recession, small business is the segment that leads us out of the downturn.
At Intuit we have high market share in a country that already has high penetration of small businesses using financial management software, like QuickBooks. Over 40 percent of all businesses in Canada use financial management software. That’s a very good adoption rate. Our major challenge is convincing those that are still using spreadsheets, Word documents or even pen and paper to manage their business that they can save both time and money, while improving their customer management, by using a financial management solution.
In order to meaningfully convince these folks, we need to understand their needs and ensure them that our offerings address their specific concerns. We segment the small businesses into different clusters to look at the common insights, not in terms of verticals but by owner profiles. For example, one of the segments, the “Overwhelmed” is a hard working, smart and committed business owner who is primarily interested in doing whatever they went into business for; to run their store or perform their service for their customers. They know there is something better out there when it comes to managing their business and finances, and they know that technology can help them be more successful, but they are just too busy keeping up with their day-to-day tasks to make a change… much less research, shop, buy, install and learn a new system! Understanding this, we look at how can we use our support features to better service the needs of the “Overwhelmed.” We know they did not start out on their own to manage the books, so we want to help get them into a better solution without disrupting their business.
Arcus: So, more of a qualitative typographic segmentation around small businesses, with a mix of owners right? It’s a co-reflection of who the owner is.
Mr. Cates: Yes, we focus more on the owner profile than we do by vertical. If you had a vertical solution, such as real estate software, you are going to start there first. But with a horizontal offering, like QuickBooks, we find that it makes more sense to segment with an owner profile approach.
Arcus: You recently talked about new emerging vectors of growth like GoPayment, file access and cloud computing. In the context of the small business segment, could you talk to some of these new vectors of growth and the role of mobile? There is a lot of buzz around it right now.
Mr. Cates: Mobility’s certainly one of the big areas of growth and an area that we are investing in from a development perspective. Always on, always able to access your data on whatever devices you choose to use. That’s certainly changing the software industry overall. A large chunk of our customer base is still using desktop products, but many of them are saying, “I want to be able to use this not only on my desktop but I want to be able to use it on my iPad and I want to be able to access the data while I am on the go.” That is certainly the driver behind releasing our QuickBooks Online product which we launched in April as a SaaS offering. It’s a little skinnier as an application, a little easier to use overall and designed to be able to give small businesses access to the data anytime, anywhere. In addition to SaaS offerings, there is also an opportunity for us to add additional solutions or features to our products with our own development as well as by working with developers to create solutions that extend the range of our products. This will help us move faster as we look to solve more problems for more small businesses.
Arcus: So it’s like an SAAS revenue sharing model- like an innovation ecosystem.
Mr. Cates: You got it. Absolutely. That’s really where we see a huge opportunity; creating a platform to maximize the data that exists within a SAAS offering, like QuickBooks Online. The platform would unlock information that could be used in varied ways to help the customer solve core pain points, ranging from financial management and customer management to more specialized functionality unique to specific verticals. Of course, we’d have rules and processes in place to ensure that any third party platform partners are using the same security and data protection standards we adhere to in order to keep the customer data safe and protected.
Arcus: Let’s talk about the recent advisory trend across industries. For example, TELUS’s customer advisory knowledge management offering. I know you have launched a no-cost program targeted at the tax store. Could you talk to the role of advice and knowledge in the context of customer loyalty?
Mr. Cates: Well, there are a couple of different things that spin off of that topic. One is changing your service level to bring personalization services to software. That’s what we did with our free tax advice. Another spinoff of that is how do you develop a platform in your product for your customers to be able to support each other? That’s something we do with our Live Community tool that enables both consumer and small business users of our software to be able to answer questions that other customers have asked; customers helping customers. The third one in our particular space is developing a support network around an industry group to make your product better. We know that the number one reason a small business chooses specific financial management software is based on their accountant or bookkeeper’s recommendation. We have created a specific program called ProAdvisor that’s geared at helping support the accountants that in turn can help support our offerings.
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