0:00

So Mike, I want you to close your eyes and

0:02

think back to November of 2014. What

0:05

were you doing? November of 2014. I

0:08

don't know. That was a long time ago. Come

0:10

on, come on, just try. All right. Let me think

0:12

about this. So 2014. Okay.

0:15

Actually, I can remember

0:18

what I was doing. Probably I was in

0:20

a weird place. Honestly, Michael, this was, this

0:22

was the time where I was trying to

0:25

finalize an acquirer for e-funeral.

0:28

Um, but it was probably right at

0:30

the time where I was starting my first product role

0:32

too, um, because I had already,

0:34

you know, kind of mentally moved on and we

0:36

were trying to find that acquirer and, um, but

0:40

it probably was also the time

0:42

where I had lunch with Paul

0:44

Macavincie, who's now my partner for

0:46

product collective and that lunch was

0:48

sort of what set the stage

0:50

for product collective and industry to

0:52

all eventually happen. So yeah, I

0:54

guess I do know what I

0:56

was doing. Okay. So good. Good.

0:58

So you were probably worried about

1:00

your upcoming taxes, given you were shutting

1:02

down a business, starting a new one,

1:04

starting a new job. Uh, okay. I'll

1:06

play along here. Let's say that I

1:09

was, let's say that I was. Thank

1:11

you. Thank you. Okay. So April was

1:13

just around the corner and luckily product

1:16

manager Brian Crofts was hard at work

1:18

pitching a new business line for Intuit,

1:20

one that he'd been working on for

1:22

the last three years. Intuit as in

1:25

the makers of TurboTax. Uh,

1:27

right. Okay. And Brian,

1:29

Brian Crofts, he's currently the chief product

1:31

officer at Pendo. Yes, exactly. So

1:33

this business line would eventually go

1:35

on to become a huge success

1:37

for TurboTax, but not before it

1:40

failed. Yes, exactly. So I was going

1:42

to say completely shut down, but you

1:44

know, failed's more on brand for us

1:46

at the moment. Yeah, it is. Okay.

1:48

So what does this have to do with

1:50

me in 2014? Well,

1:52

nothing. I just, I just wanted to

1:54

set the mood for today's episode. Okay. Um,

1:56

well, we're going to go behind the

1:58

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on your next domain. Welcome

4:08

to rocket ship. Rok

4:11

chip FM is produced in partnership

4:13

with product. We are

4:15

your host Michael soccer and I'm like the L

4:17

C. So

4:20

it was November of 2014 and Brian

4:23

cross was preparing for a meeting with

4:25

two senior executives that into it. One

4:27

was his boss CC Morgan who ran

4:29

into its professional tax business line and

4:31

that was a 422 million

4:34

dollar business that sold tax preparation software

4:36

to personal. The other was assassin. Good

4:40

RZ who ran into its 1.8 billion

4:43

dollar TurboTax business right. This is

4:45

the classic TurboTax that sells software

4:47

to consumers cross had devoted

4:49

the last three years to a new

4:51

business line TurboTax personal pro. And

4:54

this was a stepping stone between these

4:56

two business lines the accounting business line

4:58

and the consumer business line. And the

5:00

company's leadership had decided it was an

5:02

appropriate time to do a major rollout

5:04

of the product and the purpose of

5:06

this November meeting was to discuss kind

5:08

of a go to market plan for

5:10

personal pro. Okay, so what was personal

5:13

pro in the first place like what

5:15

was the difference right? So it was

5:17

in between the TurboTax software for consumers

5:19

and then just hiring a CPA to do

5:21

your taxes right or even like H&R block. The

5:24

goal was to capture more of the let

5:26

me see 21 billion dollar tax market. In

5:29

fact, here was one of the commercials they ran to explain it.

5:53

Then sit back and relax while your pro

5:55

gets you your biggest refund guaranteed

5:58

new TurboTax personal. Pro. Go online

6:00

and choose your Tax Pro today.

6:02

So this sounds like a logical direction.

6:05

I mean, that's a major, major market.

6:07

They're kind of finding the in-between of

6:09

those two places within the market. It

6:12

sounds like something that people would use.

6:14

Yeah, absolutely. There were two key customer

6:16

bases that had the potential, right? They

6:19

had the H&R Block customer who would

6:21

go into H&R Block and have H&R

6:23

Block do their taxes. And then there's

6:25

these churned TurboTax customers. And if I

6:28

do remember back to that time, like

6:30

H&R Block was kind of getting a

6:32

little testy about this. They

6:35

definitely were. They ran a pretty aggressive

6:37

ad against TurboTax at this

6:39

time. Here it is.

6:41

I pulled it up. I'm a tax professional.

6:44

That's all I know. Prior to joining H&R

6:46

Block, I was a CFO for 25 years. We

6:50

know and we understand tax laws, tax

6:53

theories, and history dreams. This

6:55

is my favorite thing in the world to do. I've

6:58

done 25,000 tax returns. You

7:01

might say I've had some experience. I

7:04

will back you up. So

7:08

right here it says, we sign

7:10

every return prepared in our offices.

7:12

TurboTax signs none. And

7:14

then it ends with... Bring it

7:16

on. Shots

7:19

fired, wouldn't you say? Yeah, I'd say so.

7:21

I mean, they could definitely feel TurboTax on

7:24

their heels here. Yes. So

7:26

okay, back to Brian. He and his

7:28

team have been working hard at bringing

7:31

this product together. And they're seeing some

7:33

really exciting early traction. So first, how

7:35

did he end up in this position?

7:38

Oh, yeah, that's interesting. So Personal

7:40

Pro was an early example of

7:42

an effort to make Intuit more

7:44

entrepreneurial and innovative. Intuit's founder and

7:46

CEO, Scott Cook, he spearheaded this

7:48

effort. And he would work individually

7:51

with each of these entrepreneurs, if

7:53

you will, including Cross. And

7:55

that was how Personal Pro kind

7:57

of came to life. Cook explained...

7:59

We know that large businesses are

8:01

good at killing new business initiatives like

8:04

this. I mean, he wasn't wrong. That's

8:06

right. He was quite the visionary as

8:08

we'll find out. But

8:10

he went on to say, we tried

8:12

to let experimentation trump hierarchy, run

8:15

a lot of experiments, and let the

8:17

market decide rather than pulling all the

8:19

decision-making power in the hands of the

8:21

bosses who often make decisions based on

8:23

PowerPoints and memos rather than direct observation

8:26

of customer behavior. Okay, so this has

8:28

support all the way from the very

8:30

top, in this case, of the organization. Yeah,

8:32

and they were seeing some really great early

8:34

results. So we were really excited. We had,

8:36

we really approached it in terms of right.

8:39

It was right when lean startup came out.

8:41

So we were really bullish

8:43

on this idea of

8:45

highlighting our, our riskiest assumptions

8:47

and building and

8:49

experimenting and validating our

8:52

hypotheses. And so it was a really fun

8:54

time. And you

8:56

kind of fast forward and we had this product

8:58

that we built and we were

9:01

getting a lot of happy customers and

9:03

we were getting good financial results. And

9:07

the whole premise of the product that we were

9:09

building was this online

9:11

experience working with an

9:13

accountant. So what

9:15

we had learned is that there were people

9:17

at TurboTax that they felt

9:19

like at some point their, their

9:22

return was too complicated and they

9:25

needed an accountant. And so they would leave TurboTax

9:27

and go to like H&R Block or some

9:29

other accountant. And so what we created was,

9:31

oh, wait a minute, you,

9:34

if you're online, don't leave online, we

9:36

will just connect you with a professional. And

9:39

we happened to have a large network of professionals

9:43

because we also built tax software for professional

9:45

tax providers. So they were getting those

9:47

early signals. I'm guessing from that group of

9:49

people who had turned and moved on from

9:52

TurboTax because they couldn't figure out how to

9:54

make it do what they wanted it to

9:56

do. That's right. And how they got

9:58

the data was actually pretty interesting. interesting. Okay, well, do

10:01

go on and tell. So they took

10:03

a page from Dropbox. Their first MVP

10:05

was just a video showing people how

10:07

the product worked. They showed that video

10:09

to 250 people who

10:11

fit into that churned TurboTax customer

10:13

demographic and one third of them

10:15

actually signed up after seeing the

10:18

video. And then seven out of

10:20

ten said TurboTax is a brand

10:22

that I trust. I'm

10:24

surprised to hear that this big

10:26

established company used a very sort

10:28

of startup technique. Yeah, but there

10:31

was a problem. We had

10:33

this big kind of innovator

10:35

dilemma Clayton Christensen problem where

10:38

it really

10:40

conflicted with a core business of

10:42

TurboTax. So TurboTax, even today, a

10:45

lot of the brand is around,

10:47

it's amazing what you are capable

10:49

of. You are capable of doing

10:52

your return. Even if it's

10:54

complex, you can do it because we built

10:56

the experience and how to

10:58

do it. And

11:00

we've really optimized that experience for you

11:03

to be able to have that confidence.

11:05

And we were saying, oh, but

11:08

if you're not confident, here's a

11:10

professional. And so it kind

11:12

of conflicted. And so the

11:14

way the big company looked at us,

11:16

small startup, new technology,

11:19

they looked at us as like cannibalization

11:22

versus disruptive. So we're starting to get

11:24

to the heart of the issue here

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13:17

the executives that he was meeting with

13:19

weren't so hot about this idea. One

13:21

that they saw could potentially cannibalize their

13:23

core business line TurboTax. And

13:25

so here's where things got interesting. So remember

13:27

that November 2014 meeting

13:30

you were just referring to with the

13:32

two key executives from Intuit? Yes. How

13:34

could I forget? Right. So they

13:37

said, well, I know you're, you know, and they didn't

13:39

say it this way, but it's basically like, I know

13:41

your data says this, but that is not good for

13:43

us. Why don't we go for

13:45

this customer and everybody wins?

13:50

And as simple as that sounds, it was a lot

13:52

more complex. There were politics. But

13:54

what it allowed us to do was they

13:56

gave us a lot of funding, a lot

13:59

of branding. and support to basically

14:01

go after a customer that

14:05

was not the customer we were going after.

14:07

So he's talking about the H&R Block customer.

14:10

Right. Intuit wanted him to use this service

14:12

to go after new customers for TurboTax rather

14:14

than focusing on these churned customers. Bigger market,

14:16

I get it, but what did the research

14:19

say? Just like you said before, right? Croft

14:21

found that the churned customers responded really well

14:23

to this new service. But it wasn't a

14:25

great fit for those that had never used

14:27

TurboTax before. He really didn't feel like it

14:30

was going to be a good fit or

14:32

that they were going to be these early

14:34

adopters. But Intuit really wanted to push

14:36

us direction. Well, these two executives did,

14:38

yeah, because that meant that

14:40

this initiative was less likely to

14:42

hurt their respective focuses. We compromised

14:45

solving a problem for a specific

14:47

user by making

14:49

sure, and traded that

14:51

for alignment. And

14:55

we had been fighting so much that finally

14:57

being aligned on a go-to market

14:59

and a product, even

15:01

if it served a different customer that we

15:03

weren't looking at, we felt really

15:06

good about because we finally felt aligned and

15:08

we were working as one team. And

15:12

we then went and spent maybe $5

15:14

million in marketing that

15:17

year and acquired maybe seven

15:19

customers. So they compromised because

15:21

the alignment was easier. Internally, it felt

15:24

good to have the support of the

15:26

organization, but the product failed. When

15:28

we first started out as a team and we

15:30

were having so much success, we were focused on

15:33

the pain. We were focused on

15:35

the customer problem. We were

15:37

focused on building a product that aligned well.

15:39

But once there became politics, once we

15:42

had this innovator dilemma with bigger business,

15:45

we started solving for

15:47

stakeholders and internal politics.

15:50

And products suffered, the go-to market

15:52

suffered. We wasted a lot of money.

15:55

And ultimately for a time, that whole

15:57

business then shut down that we built. because

16:00

of the business results, which were

16:03

obviously going to be bad. We

16:05

had no insight. We didn't build the product for

16:07

the person we went after. And so that

16:10

was one, that was one of the

16:12

biggest compromises. And what was interesting about

16:14

it is during the time I

16:16

remember, and I've done a lot

16:18

of reflections since there, when we wrote the case study

16:21

with HBS, it was very cathartic because I could kind

16:23

of like look back and see

16:25

where the big mistakes were made. But, you

16:28

know, I remember when

16:30

we were working together and we finally

16:33

hit this, like, where we

16:35

all were aligned and we had this budget and

16:37

we were going to do it together. It felt

16:39

so good that it kind

16:41

of we all forgot about what

16:44

we had really learned and what we really

16:46

wanted to do. Now, what happens next? Well,

16:48

we'll get into it right after a quick break to

16:50

hear from our sponsors. So

16:58

this failure wasn't a complete

17:00

failure. Yes, thank you. It

17:03

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17:05

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17:08

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17:10

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17:12

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17:36

what changed to make this new

17:39

product TurboTax Live a success? According

17:41

to Brian, the mission and internal

17:43

positioning. So in other words, they

17:45

fix the politics internally. And

17:48

it was taken over by a team that really

17:50

was focused on this turn reduction problem. And

17:52

they use this as their solution. So it

17:55

was no longer overseen by departments with contrasting

17:57

goals or perceived contrasting

18:00

So did you ask Brian what he could

18:02

have done differently? Oh, yeah, definitely. Yeah, in

18:04

retrospect, as the, you

18:07

know, it was an interesting role for me because, you

18:10

know, typically within product management, we're driving,

18:12

you know, Scrum teams,

18:15

engineering design. But in

18:17

this case, it because it was its own

18:19

business entity, you know, I was

18:21

running the whole thing. So it was almost

18:23

like this general management role, which was so

18:26

fun for me. But also,

18:29

you know, I'm responsible for making

18:31

the mistakes and thinking and reflecting,

18:33

you know, the one thing that

18:35

I would have done differently would

18:37

be to

18:39

have stayed and stuck with the data

18:42

that the same question you were asking,

18:44

what were those early indicators? What

18:47

were the types of customers? You know, who

18:49

are the ideal customers? What was the ideal

18:51

experience? And

18:54

really, I guess maybe had the courage

18:56

to say, look, I know we're getting

18:58

along for the first time, but

19:01

this is not this

19:03

is not the data that we have. This

19:05

is this is different. In fact, if

19:08

we're so bent on doing and going this other

19:10

way, I think we need to run

19:12

a whole bunch of different experiments before we can

19:14

then go waste a bunch of money and time.

19:16

And so we, you know, we

19:18

had done so good up at that point, but then

19:20

skip the step because we were so interested

19:23

in and engaging and collaborating

19:27

because that we thought that was so key. I

19:29

think the second thing is I was so aggressive

19:31

in pushing

19:33

my agenda for

19:36

building this business because I had

19:38

seen the data and I'd seen it helping

19:41

customers. I don't think I ever really

19:43

walked in the shoes of

19:45

the leaders that were leading the bigger

19:47

business. And

19:50

so I think if I would have just been a little

19:52

more patient, not necessarily compromised,

19:54

but been a little bit more

19:56

patient in terms of my

19:59

agenda. and kind of putting

20:01

the bigger, call it, into it hat on

20:03

versus, you know,

20:05

my business that I was so passionate

20:07

about. So I do think in big

20:09

businesses you have to

20:12

have empathy for different stakeholders. I think

20:14

you have to communicate more and I

20:17

think you have to be careful about what

20:20

you're willing to die on the hill for or

20:23

things that you're able to compromise

20:25

on versus the

20:27

compromises like we made that can

20:29

ultimately kill the business or

20:32

at least, you know, put it on pause.

20:34

These are such great insights. I'm sure Brian's

20:36

brought these lessons now into his role at

20:38

Pendo. Yeah, and as we were wrapping up,

20:40

I discussed this with him a bit. The

20:43

thing at Pendo that we try to do

20:45

is to accelerate

20:47

cycles of innovation or of experimentation

20:50

and innovation to

20:52

be able to make better decisions. And so,

20:54

like, to counter a

20:57

lot of the compromises would be to do

20:59

kind of these faster revolutions

21:01

or turns on things so

21:03

that, you know, you can make

21:06

a lot of decisions with confidence and

21:08

not have to compromise. Alright, this was

21:11

a great one but next week we

21:13

have a really good one. We're going

21:15

to go behind the scenes of the

21:17

infamous eBay Amazon rivalry in the late

21:20

90s, early off the aughts. Yeah, well, I

21:22

mean, we just got featured by Apple, right?

21:24

It's time to step up our vocabulary a

21:27

little bit. Alright,

21:30

well, I guess I got a brush up on

21:32

mine but I am looking forward to it. So, we

21:34

will see everybody right back here on

21:37

Thursday for a brand new episode of

21:39

rocketchip.fm. Thank

21:42

you so much for listening to rocketchip.fm.

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It's your support that keeps the show

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going. rocketchip.fm is now part

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go to thepodglamorant.com. Produced

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