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2020 MIT Platform Strategy Summit
July 8, 2020, Cambridge, USA
2020 MIT Platform Strategy Summit
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2020 MIT Platform Strategy Summit - Fireside Chat: Scott Cook
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  • Description
  • Transcript
  • Discussion

About the talk

02:00 Introducing Scott Cook

05:15 Tips and war stories on getting a platform

12:17 Many of the most important businesses look like fools missions at the beginning

13:51 Challenges, competitors in ecosystem

16:40 How to solve the problem of maintaining quality control in the open ecosystem?

20:41 What would you change in launching the platform?

24:08 Story about platforms moving in direction of social good and social consciousness

28:16 P&G and platform, advice to other leaders

About speakers

Marshall Alstyne
Questrom Professor of Management at Boston University Questrom School of Business
Scott Cook
Chief Innovator at Intuit

Marshall Van Alstyne is coauthor of the international bestseller Platform Revolution. He is one of the world's experts on network business models and is a Questrom Chair Professor at Boston University. He is a frequent speaker, board level advisor, and consultant to startups and global firms. His research has received half a dozen academic awards and appeared in journals such as Science, Nature and Harvard Business Review. Interviews appear regularly across Bloomberg, The Economist, The New York Times, The Wall Street Journal and National Public Radio. He studied computer science at Yale and information technology at MIT. He holds multiple patents; was among the first to measure the dollar value of social networks, and his theories of network businesses are taught worldwide. He is a husband and dad, who loves dogs, exercise, travel, and questions of governance.

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Scott Cook is the cofounder of financial software giant Intuit, known for products like QuickBooks, TurboTax and Mint. The Harvard Business School grad worked for Procter & Gamble and Bain before launching Intuit in 1983. He stepped down as CEO in 1994, but remains chairman of the $6 billion (sales) company and has an over 3% stake. Cook and his wife are big supporters of education and have donated millions to universities and are impact investors in several ed-tech funds. Cook was planning to get a Ph.D. in economics but decided to pursue business after successfully turning his defunct college ski club to the biggest in the state.

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So was that I'd like to introduce our next panelist? Next speaker. We have the extraordinary honour of actually, having a video of you there. I don't know why my videos not showing up, but I am here. So you, your voice is Melo and wonderful as terrific. Must be near a good speaker. Have you turned video on? Or, I don't know if you've been promoted to Pamela's want to make sure that we get to see you as well. You're, you're right. Animated be wonderful to have you join us. Then he was well, they FaceTime the display is checked. The green

light is on, for my camera. Is there a start video when the lower left? Consume? Yes, and it says stop video cuz I already started it. Cutting back and forth on that and don't know what's going on for technology there. Otherwise, I would have to make facial expressions for the two of us. I'm not sure I'll be able to do that seems to be Still puts me in the dark. I'm off. I don't know if the technology team can help work without in the in the background will maybe I can work on that. While I'm doing it more

extended introduction or something of that sort. As we try to bring him in up more fully and more formula. Please be brief and merciful. Founder and CEO of Intuit 7 billion dollar Corporation, almost 10,000 employees, TurboTax, QuickBooks. What are things, I should point out about this is that he founded into it helped, solve his wife challenges, managing the finances. So this is a message for all your husband out there. See if you take care of your wife and

you can start 7 billion dollar Corporation. So this is a good message for all of us. Scott message wife at Procter & Gamble's before him before. He's currently on the boards Procter, & Gamble Harvard, Business School into its foundation. Actually, graduated Harvard Business School. As well. Also is an active cyclist and he likes the scale mountains on that and he claimed that their member of the over-the-hill group, but he's clearly got to active. Like to be the case this, your

little bit more on that we've been trying to get Scott to this event for years. And it took a global pandemic to finally slowed him down enough so we could actually get him a great pleasure in great. Even if we can't see you at, we can hear. You might need to dance a little bit longer because I believe Scott is restarting his Zoom. Okay. All right, so I'm going to see if I can get a little more background on. That music is still on. At least I see the red icon. I think it's new to resume on that

so far. Just got you. There. I am. I just a suggestion? Your team. I exited in came back and seems we have the same situation. Well, I can go, I can continue to give you a choice because when you have computer problems, that's often the solution, but that's a 4 minute delay. So you can have me in the dark or have me. Try to reboot your choice. Will keep you with us again, I'll see if I can make it freshens for the two of us. I've got very Wiggly eyebrows, on your introduction. I say that my wife was first intrigued by me when I called her and she had done

radio in college. And she said, oh, he has a great radio voice. So your opinions may vary, but we'll get to try the radio voice now, you okay? So that that was one of the things that really helped all of this. Begin to its foundation and education. Medical research microbiome. One of the things I know you are familiar and intimate with the founding stories for Facebook, eBay Airbnb. Wikipedia. Share some of your learning. Don't know how to get these things off. The ground. Bees are hard businesses to launch. What's some? What are

your chips? And what are your War Stories? I'm getting these platforms off the ground. Yeah, there are some common patterns that I deserved as I've spent time with the founders of the number of the successful multi-sided markets. And that work facts that we are so amazed at today are being be story has a number of the interesting elements. Well, I'm just getting a message from your team. Okay. They have a Siri. Let's try a Siri here. Siri have an application such as Facebook and face

time, which is off, so that does messenger. Say if another program is hijacking, the video feed another, maybe another. All I worry, if the others that you might then still have to relaunch them if that were the case. Cuz I really would have to rehire Jack that maybe The. The Facebook, excuse me. The story has a number of similar to others day. They actually didn't code anything to start with. In fact, they tested their leap of faith assumptions sequentially and using non code methods. So,

if you think of a leap of faith assumptions, you have to believe to believe. The people would sleep on air beds. In other people's homes or apartments know, it's two sides. One would people actually volunteer to sleep on their bed in somebody's home or apartment. And also, would anyone with Supply volunteer to have somebody come and sleep on their floor on an airbed? They tested that one? Weatherby Supply themselves by providing that half of the market themselves. They prefer website at a conference announcing that they are the hotels are

sold out to the conference that they had space on their floor in their own apartment. The founders own apartment to see if anyone would actually come and rent that space and by God, somebody did and they tell us that more than once. In fact, one of our employees that into it was one of the ones who rented that are bed in the original apartment. The founders collection know that wrinkled. I had never heard that literally on the ground floor. Joined us yet. So he was a free agent at that time. Been having shown that people would that if there's a

supply that people would rent out their bed space, they then wanted to see with their bee supply. So they went to South by Southwest and in advance of that. They tried to sign up people with apartments and homes to see if they rent out space on an air bed in their apartment home. And that were interesting to hear so far. There's no code involved. They had it all this by putting up a little simple website and hand matching. When they, they got involved with Paul Graham at Y combinator and he talked to them about their business and said you have

many customers and they said all just a few usable. Where are they more than are in New York City than anywhere else. And Paul Graham said, well, what are you doing here in Silicon Valley? Go to your customer. Go spend time with your customer, go observe them steak. Getconnected your your customer. So they got on the airplane and went back to New York and started going to the few supplies. The few people who are offering their places and visited them. And one thing they saw right away, was that while the places when you physically visited were good to stay. It's

appealing to look at the photographs, that the owners had put up on Airbnb, made the spaces, look, dingy. Oh my God, people aren't going to rent this place. It's much better in reality than it is in this dingy photo. So there they came up with the idea of why don't we hire a pro and take really good photos and which they did initially themselves. They themselves took got a good camera and took really good photos and then they saw the liquidity in the market, just take off, and they look back to that move to professional photographs

for the owners as the turning point in the growth of Airbnb. So, whatever kinds of lesson said that you see in the pattern 1 Test things, if possible fast and without needing to build any Code, test your leap of faith assumptions that way or another is provide one half of the one side yourself. If possible as they rented out their own space. Another is go to the customer. Spend time with your customer understand what's happening. And you may see big insights that you've missed so far.

And I think the last lesson is remember, they started with just air beds and it's the name you had to have the renter on her bed. And its grounds far, far, far beyond fabulous experiences. I think that's the last platforms done, right? And maybe with a good bit of luck. Can you turn into something far more vast than anyone? Could believe the beginning, and I think that's the truth Facebook. Uber operating systems, like, Dawson than Windows, at Weston's, what I've observed

Facebook engagement happening. Pretty much from the get-go for from Harvard to Ivy League schools to school corporation visual treat high from beginning. Airbnb's example. Was it took them a couple of years before they really got fat? I guess it did when I was a stranger. All kinds of mayhem. Well, this is the this is what entrepreneur is bring the gift or maybe The Madness of great entrepreneurs. So many of the most important businesses. We admire and respect today look like fools Missions

at the beginning. I didn't do it. We were told our original concept of Quicken was crazy. Lots of companies are already done that and they had in our particles in Superior to those pots. And it was measured by teachers. We had very few features and our competitors were on the market, had lots of features, the guys a Google were told their business idea, was stupid. You want to be a portal like Yahoo! Users. What are you going to do? Is search been done? And when a customer comes to your search, as soon as you help them, they go somewhere else or how do you make money

doing that? Uber Lyft. So many, even the original and people at Apple investors said, most people said, why does anyone need a computer or a person computer? So it in hindsight that seems incredible but at the time so many of the biggest invent, the big inventions to change our lives. Often seem crazy and fools missions, so I had to really interesting challenges as you made the platform shift adding to it. One of the questions that we get all the time in discussions, with firms is what should we let competitors into the ecosystem.

Struggle with that question. And you had an answer. What was that answer? And how did you get there? I think there's lots of struggles that the successful in Cummins have who's made their success in public nuisances. There's a number of challenges when you then want to become a success in platform and we we definitely had to wait till QuickBooks is a tremendous product. And we have the vision of turning into a platform that we had a huge opposition from within our company. Because in addition to

selling QuickBooks the, the business bookkeeping and accounting system. We also sell payroll and payroll and it's the most popular in the country, but still, it has competitors, in our payroll group didn't want us to open QuickBooks up to the likes of a teepee or paychecks. and our payments group didn't really want us to open up QuickBooks to the likes of square or PayPal and we finally just had to declare. We want to make sure our customer gets their choice of the best stuff they can get. And if that's not ours, we

don't want to deny them getting the best stuff. And if our own in-house businesses, can't compete, effectively to capture the business from our customers, given the advantage of being in the house with us. They don't deserve the business. So that's why we're going to open up two companies who make business has that. In some fashion might be viewed his arrival. So that was only one of the challenges when it comes to becoming a Apple iPhone company, a lot of one reality is, the corporations have anybody's and anybody's

topical subject? Nowadays, come up when a company tries to do something radically different natural antibodies from the tradition with Corby and come and part of the business day out. Don't do that. That's little that stupid that works. Give us the resources. So we found you have to ring-fence then either hide or rigorously defend new things to keep the natural corporate antibodies from consuming it. Both of those are great strategies for getting gold, why? I know it's, it's a real challenge for existing businesses to make those transitions,

often described platforms as inverted, firm for the values, created on the outside as well, and incredible power. Sometimes you worry about third parties, not producing Valium. So I know in your case, you created a Marketplace for financial advice. These are professional financial advisors a problem with maintaining quality control, when you're opening ecosystem, like that and having secured parties at the Value. Place for the antibodies were particularly strong and clearly would have decimated, the internal start up the way to give me to engineers. And they were in our trip attacks group

and they observed that at the time. This is 10 years, 12 years ago. That we answered technical questions from taxpayers like, how to get the printer to work, but we didn't at the time, answer tax questions. Now we now do and that's a separate two-sided business called TurboTax live there, back then we didn't do that. So the engineers Why don't we build a, a kind of an open contribution system? So that users can ask questions of any kind as they're doing their taxes. And then any consumer, any taxpayer can answer those questions.

And that way we can get answers to our users, who have questions about taxes themselves, which we, as a company. We're not a good time at answering. Well, this was fought tooth-and-nail by the tax experts at TurboTax because they said well you only attack expert. Only a licensed and certified person can answer. All the questions on the subtleties of taxes. This. Those answers will be wrong. Those answers will ruin our reputation, to ruin our brand, and the Rune consumers trust in our business. and so, they had effectively the tax experts within our company,

who are Honest, hard-working, tremendous people but come from their background. That only an expert can do this. They had effectively block this from happening. Fortunately, we had something in a sandbox and hide it away. So people can't find in your company or you have to have executive swing. Unfortunately, the division GM and I swing in to defend the right of the team to run the test. So they they were allowed to test this concept in our lowest volume SKU of TurboTax about 1% of

Total Wine, and I'll admit I was pretty convinced it would fail cuz I didn't think we'd get liquidity with only 1% of the customer base. We wouldn't get enough people answering the questions, the questions would go unanswered. Oh my God, it actually work volunteers from our customers started answering about half the questions and we had our own people answering the other half, but they get half of them answered out of the gate in a super small, test was remarkable and even more the answers were generally good and if

there was an answer that wasn't right, it got corrected by other users, kind of. A Wikipedia fact, we didn't know if we could pull it off. It's such a small volume. So it actually worked and questions were asked and answered that we had never been able to answer before. So then it would actually stuff that got expanded into the rest of the TurboTax. This is a wrong answer. It gets corrected so that you can actually even in some sense, clarify confusion place.

These are such an extraordinary success story, but they're a lot of pain from failures. It's often quite challenging to get them off the ground. So it is always a danger of seeming, too much like a cheerleader for platform. Something. I wanted to ask you for this audience. What's an open? Honest and other things that you were surprised unhealthy way about the the launching platform? Well, I think we have one currently which. Hasn't succeeded the way we fought. And yet we're still

trying. This is it has succeeded in a different way. We started as a platform. And then after multiple failures, we've reconstituted as a product. What will the dream of having has become a platform but we haven't proven the dream now. So this is an area of small business. So quick books has deep data on 5 million businesses in the US for data than any lender has ever had powerful later. Cuz we have a fun little books of the business. And so we tried three times to open up a lending marketplace, with small business lenders, on one side and QuickBooks users on the other side.

And we tried we use other intermediaries who are in the business. We try it ourselves a big problem. We encounter was that the lenders. So these are typically banks, are alternative lenders had already built their own to use the data that they already had available and we can have But they didn't use it and it turned out they had underwriting models. They've already developed invalidated using not our data and they were very reluctant to go to the long process to validate new data. So they kept landing on the old data. And basically

just wanted us to be Legion, not actively part of improving their underwriting. I was just so frustrated. It just minimize the pain and I understand where they're coming from. They had a proven way of working and they didn't want to invest in developing a new way of War. So we decided we needed to prove that Landing in our data work. So we got, we went into the business lending, business ourselves, which is not whatever plan. We got the board to approve of fun, so we could have losses and, and

started letting ourselves and started really building out. So, now we moved into our example, PPT Landing, just cuz it's relevant to the Times rent and our system now is pure digital and and takes the customer about 6, to 8 minutes to apply for the loan for the business loan. We approve in 10 minutes for 83% of the applications and then we fun that night. So you have the money in your bank account the next day. That's what we needed to do digitally, but only because we had to provide one side ourselves. Now we're hoping with this model working. We can now use

it to encourage others to do the kind of lending. We might we we're not going to be able to do all kinds of business lending. That's what therefore so that's there are some things. We're at least for us. We found the reply from approach failed. And we had to do something else. At least as an interim, step on our journey to apply for Wow. Business model to take advantage of that. Actually quite an interesting story about moving in the direction of social, good and social causes

and go as an example. What's, what's happening? Yes. A group of Five Guys in Denmark, maybe ten years ago, wanted to attack the problem of food waste of food, waste from the food service industry and consumers, buffet restaurant or cafeteria. At the end of the night. You got a lot of leftover food and it gets thrown out your bakery end of the day. You've got stuff that is no longer by tomorrow won't be fresh. It gets thrown out. Restaurant asking me, grocery stores with Deli, depart same thing. What are the 30% of food is wasted

thrown out. So they said, we're supposed to have the excess food on one side and consumers, who want to buy food at 70% off on the other side and then mediated by a mobile app, and that's called too good to go, interesting Ali-A. Proven entrepreneur Danish woman, learned about it on a bus ride, from a passenger sitting next to her in Copenhagen. And she said, wow, that's phenomenal. She went to the company and came in said, I'll invest, and I'll be CEO. And the founders said, okay, so she's been running it for the last

seven eight years and it's now in 15 countries in Europe, heavy on app downloads and it gets heavily-used and it basically turns trash to cash for the restaurant Bakery Deli and now grocery stores and they've got some of the biggest in Europe car for Starbucks. And and it's a profit-making business on on that 30% actually increasing the efficiency resource utilization transactions cost in boost how much Social good might be able to do my tab, spell resources, next to Greenville News economy. In a useful, way to work around

here is another one that I just learned of his last 2 weeks called out school. And they allow teachers to form their own classes charged for it and deliver classes online. And they now have teachers who make hundreds of thousands of dollars. In pay by having such popular classes and this is Middle School and High School classes. And one thing I've always dreamed of in my social Enterprise side of life is, why aren't there millionaire teachers teachers that are so phenomenal that they can serve a large audience and make vastly more than, you know, other the

public school teacher who's kind of a cog in the system. And its Teachers Pay Teachers is one of these, two sided Network, send out school is another. So I think we're finally seeing great teachers, being able to reach large audiences and and be paid in accordance with their the benefits. They produce speaking to Professor, to have academic some teachers, actually burn more for know what they doing to be nice. Even see the high school and middle school. I think I ever be really interesting. We're

actually peppered with questions by audience. Let me give you three quick ones and you can take what's good. What you like one of them is with Procter & Gamble. You bend over for you on the board? Why hasn't Procter & Gamble done more with the products rather than would be? What advice would you give to other leaders? Who is they? Launched, new Ventures and do something like a vise. Would you give them would be? How does Intuit to handle collaboration

among the third parties, and partners of quick questions before rub for the top of the hour? Yes, I let me start with the middle one cuz I think it's the most generalizable advice to leaders and let me give advice to liters in a successful income. And firm that's traditionally been a product or service firm. I think if you were going to become a player in platform other than up and not as vassal to a platform. You're going to become a platform owner.

That's going to require leadership from the CEO, or from a major division president for GM without having. A champion of protector of the the the the the corporate system will grind down your and eliminate your ability to do something as as different as being a platform company. And you're have to personally I mean we do this to it will have a team meeting and will be a barrier somewhere and get on the phone. So he Louis you got to help this team. They

need it. I want you to do it and Louis was putting up some barrier, some well-meaning corporate policy that was perfectly meaningful for a product business, but didn't work for a 5-1 business. So it's going to take that intensive Championship on proactive Championship as long as possible. That way you don't arouse corporate anybody's. And many of these things can be done. If there is started. It very small-scale very rapidly. Mean we talked about starting up without any

code Catalan, not just tested, but went live with no code on. This is a two-sided Marketplace between NBA's and Consulting projects trying to essentially disintermediate the mackenzies of the world and they started as a student project that HBS and they went live with a WordPress web page and a behind-the-scenes. The founding guys who are all NBA students would make all the matches by hand. So, you can get some of these started with no code or low code. No. Keep in mind that the Puremedy are coded the code for the launch of eBay

in a three-day weekend and Mark Zuckerberg, coded the code to start Facebook over spring break, though. There may be some debate about freezing art. In that case. The code requirements are quite low for many of these. Because, as you said, so much of the activity happens off the platform or outside the platform so and then make sure you staff it with people who are truly entrepreneurial. And that's a, a breed, you have to look for in your corporation of people who can have that kind of want real vision and

stick-to-itiveness, and, and see a vision different than what the corporation has traditionally seen quick tips on PNG. As you can see from their business, results in the truck, in the early part of the teams there, they fell behind their rivals in in doing the core business that they're in and under David Taylor, the CEOs been in place for about almost 5 years. He's been a spectacular job at getting PNG back into being the leader in their businesses that they were the leader in Innovation and customer understanding. So I think that

was job one for them and you can't go in a new business. If your card business is failing or is struggling, you just won't have the gumption to do something radically new. And I think that's been there Challenge and now, their success with David and now they're looking at some things that That could turn into something we talked about in five years. So that's a big deal. Thank you for this again. The conversations are always genuinely interesting to explore and go follow up on and what else could we actually go do to change the world?

Know? You're hoping to leave that?

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