Who Really Determines the Success of Your Business
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First published in the United States of America by Portfolio Penguin, a member of Penguin Group (USA) Inc. 2011
First published in Great Britain by Portfolio Penguin 2011
Copyright © Aaron Shapiro, 2011
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ISBN: 978-0-67-092098-3
INTRODUCTION–Users First
If You’re Not Thinking About Users, You’ll Soon Be Out of Business
1
User-Centric Management
How to Build a User-First Mindset in Your Company
2
Concentric Organization
The Secret to Structuring a Business That Effi ciently and Effectively Meets User Needs
3
Disposable Technology
Bring the Strategy to Life by Constantly Changing, Revising, and Throwing Away Software
4
Higher-Calling Products
Create Digital Services That Make Your Products More Valuable Than Ever
5
Utility Marketing
Attract and Engage Users by Giving, Not Taking
6
TCPF Sales
Turn Users into Customers by Addressing Their Four Basic Needs: Trust, Convenience, Price, and Fun
7
Bilateral Customer Service
Combine Self-Service and Full-Service to Keep People Coming Back for More
CONCLUSION–Making the Shift
It’s Not Too Late to Become a User-First Organization
ACKNOWLEDGMENTS
APPENDIX: THE DIGITAL LEADERSHIP SET SURVEY
NOTES
Aaron Shapiro is the CEO of HUGE, a digital marketing agency that helps global companies reimagine how they interact with their customers and manage their business in the online economy. Prior to HUGE, Shapiro was a technology entrepreneur, venture capitalist and management consultant. He writes for Adweek and Fast Company. He received his MBA from Columbia University and his BA from Harvard. He lives in New York City.
For Carolyn
My wife loves seltzer water. I can’t stand it, but she will hardly drink water if bubbles aren’t in it. So I thought it’d be great to buy her a soda maker. One afternoon, I passed by a Williams-Sonoma store and decided to stop in. Lo and behold, they had one sitting on the shelf: a SodaStream Genesis drinks maker for $150. But it seemed expensive. I could buy her a pantry full of 150 bottles of premade seltzer for that price. So I decided to shop around.
I opened the RedLaser app on my iPhone and used it to scan the machine’s bar code to find out what other retailers charged. Bed Bath & Beyond carried the same thing for a hundred dollars. Success! Fifty dollars in savings. I waved down a sales clerk and showed her my findings. But she declined to match the price.
So right there, in the middle of a beautiful Williams-Sonoma store in a high-rent location on the Upper East Side of Manhattan, I bought the SodaStream Genesis drinks maker—from Bed Bath & Beyond by using my mobile browser.
Companies such as Williams-Sonoma are in for a rude awakening. One day everyone will shop this way, and companies will either change their ways or be out of business.
Twenty years ago, purchases were driven by television ads, the selection of stores in the local town center or nearby mall, the brands those stores carried and the prices they charged. “Shopping around” meant traveling from store to store or calling down a list of retailers in the Yellow Pages. This is the antiquated environment in which most companies are still built to thrive.
In one short generation, we’ve seen a dramatic shift in how we buy things as well as how we interact with companies, do our jobs, and communicate with each other. Digital technology has quickly become so pervasive that it’s rare for any personal or business interaction to begin anywhere else.
We are often introduced to new people through e-mail or an online community. After a phone call or in-person meeting, we maintain contact through digital channels, whether it’s e-mail, instant messaging, or Facebook. In three years, texting is expected to surpass voice usage on cell phones. The same goes for how we learn about companies. If we’re job hunting, we may find opportunities through a career site such as Monster or a jobs search engine such as Indeed. We maintain our résumés on LinkedIn, because that’s where recruiters go to initiate interactions with us. If we’re shopping, we may be introduced to the product by Googling, by noticing its newest promotion on a Groupon e-mail alert, or by seeing something listed on a product comparison site such as The-Find. Already 41 percent of all offline retail purchases in the U.S. begin with Internet research, and 7 percent of all retail commerce is now transacted online. In 2012, the total of these two figures is expected to reach 50 percent, which is equal to $1.2 trillion of digitally driven consumer spending. We’re entering an economic environment in which the majority of our transactions begin with digital. In this context, there is no such thing as an offline business; everything is a digital business.
Beyond our social lives, careers, and consumer behavior, digital services also power our information gathering: we learn the news from our e-mail accounts, Twitter, Web sites, and apps; we find out the weather by installing a widget on our desktop or by opening “The Weather Channel” app on our phones. Digital technology helps us figure out where we are on the globe and where we need to go; it’s how we count calories, read books, deposit checks, maintain grocery lists, and listen to the radio. In the always-on environment of the Internet and smart phones, we constantly rely on digital services and products to accomplish our everyday tasks. In a typical day, I use more than a hundred Web sites, apps, and digital services made by at least twenty-five different companies.
Businesses must keep up with these changes or else risk becoming the next Circuit City, Polaroid, or Blockbuster—companies that, thanks to digital technology, are either out of business or just a shadow of their former selves.
At HUGE, the interactive agency I run, we spend a lot of time thinking about these issues, and how companies should respond to this new business reality. When our clients first approach us they’re asking for many different things—a new Web site, a mobile app, a social media campaign—but they’re actually asking for the same thing: digital transformation. They need to renew their company to fully compete in this new economy, and are asking for our help in making the shift. Through my work at HUGE, my colleagues and I have had the privilege of studying the inner workings of many blue-chip companies across a diverse array of industries. We work with their leadership to help formulate the correct strategy, organizational structure, and business processes to compete in the digitally driven marketplace. When looking back at our years of inside access, what’s most striking is that the issues facing companies and the effective solutions are remarkably similar regardless of industry or organizational size. To validate and challenge the patterns we observe in the field, we embarked on a quantitative study to help answer the question: what drives success in today’s digital-centric business environment?
Our first step was to identify a large pool of companies and pick out the ones that used digital technology effectively, proactively, and progressively: what I call the “Digital Leadership Set.” We began our search for these companies with the Fortune 1,000—the thousand largest companies in America. Recognizing that it might not be all that fair or accurate to compare the digital progressiveness of, say, a petrochemical company with a pure technology play such as eBay, we broke up the group into nineteen industry sectors. Then, for each sector, we evaluated the twenty largest companies.
More than sixty aspects of each company’s digital footprint were systematically examined. We measured the degree to which digital is effectively used across all aspects of their businesses: sales, marketing, customer service, human resources, and the core products and services the companies offer. This information was then aggregated into an overall digital excellence ranking (1–100). The top performers were named members of the Digital Leadership Set—the group of companies that consistently performed better in the digital environment than their peers.
For 2011, these companies are:
| Amazon | Hewlett-Packard | Southwest Airlines |
| American Express | The Home Depot | Staples |
| Apple | IBM | Target |
| Best Buy | JetBlue Airways | Walmart |
| Dell | Macy’s | Washington Post Company |
| FedEx | Microsoft | Wells Fargo |
| Sears Holdings |
Next, we researched the organizational structures, management styles, and strategies shared by the leaders. We wanted to identify the qualities that determined stellar digital performance and differentiated the winners from the losers. Not only did we want to understand their approach to digital from an organizational and management standpoint; we wanted to see how digital integrated with different aspects of their business, from sales and customer service to product development and marketing.
The Digital Leadership Set survey added a much-needed level of nuance and rigor to what I already suspected from my consulting work: the companies that were most successful in this new economic order consistently prioritized the needs and interests of the people who interacted with them through digital channels—their users. True market leaders focus on meeting user needs above all else. Keep users happy, and customers follow; grow your user base and your customer base grows as well.
Users are the customers, employees, job candidates, business prospects and partners, brand fans, members of the media, and other influencers who interact with a company through digital media and technology. This may be through an intranet, a mobile app, an online job application form, a Web site, customer relationship management software, a Facebook page or Twitter account, or any other element of a company’s internal and external digital footprint. In short, users are defined as anyone who interacts with a company through digital media and technology.
2. Users vs. Customers
There are lots of different types of users, and while they each have their own distinct interests and objectives, they all want digital tools to easily and quickly give them a leg up. These tools might include a database management program that makes it easier to identify actionable insights, or a mobile app that helps you keep better track of when you last fed your newborn.
It’s the same for users who are also customers. They use digital media and technology to empower them to make the right purchases, and smarter purchases than if they were limited to the local mall. They research products online by reading user reviews and professional reviews, and by asking the advice of their social network; they compare prices across a universe of sellers no matter their geography and then don’t blink at purchasing an item with the click of a button, even if that button is on a phone. These digital customers are a whole different animal than what existed when adages such as “the customer is king” and “the customer is always right” were taught in Business 101. Today, a customer must be thought of in a new way: as one segment of users, one of the many types of people who interact with your company through the digital version of your organization. And they all want digital technologies to make their lives easier and better.
The key to success is focusing on this broader user base. Customers will naturally follow. Thanks to social media, bloggers and “friends” all combine to create a large swarm of public opinion that shapes brands and drives sales. Your employees, business partners, and pool of new job prospects are also influential users who help operational performance, and they shape brands and drive sales as well. Users can also be more intimate with and influential on a company than anyone who has completed a purchase. And if you need numbers to convince you, in terms of volume, a company’s user base often vastly outweighs its customer base. Focus just on pleasing the person who opens his wallet and you’re missing out on the real windfall.
How do you attract users, engage with them, and develop long-term relationships with them? Give users the one thing they all want: simplicity. That’s it. People use technology to do things, to accomplish tasks—whether to look up some sports scores, e-mail a friend, watch a video, or research which new shoes to buy. When a user interacts with a company through digital technologies, she wants it to be simple and effortless, because she just wants to accomplish what she set out to do. She doesn’t want to spend even a second wondering how a Web site works or what to click on next; she just wants it to happen. If it doesn’t, she’ll reject you.
I’ve seen it time and again through HUGE’s vast amount of research on user behavior. When people find something difficult or confusing to use, they don’t blame the company that made the digital product, they blame themselves. They get frustrated and think they’re too stupid to figure out how to use it. People don’t like feeling stupid, so they usually reject the entire experience. They’ll say how much they hate the app or Web site, shut it down, and refuse to look at it again.
Because it is difficult for a company to get a second chance, the stakes are very high. Companies must spend a lot of time thinking about usability—how easy it is for people to use a digital product, and how satisfied users are with their experiences. The best user experiences require no directions or learning curve; the technology just works the way in which people expect. So for all companies, usability—and an organization’s consistent ability to achieve a high level of usability excellence—is a critical driver to success.
The importance of users is so profound that a new model has emerged for business excellence: what I call the user-first company. Today’s most successful companies organize their business around users and building user satisfaction. Users are then the engine for growing a customer base and the overall organization. This new user-first way of doing business affects every part of the organization: how companies approach sales and marketing, their organizational structure—really, every aspect of their operation.
Through the Digital Leadership Set survey and HUGE’s work with clients, I’ve pinpointed an overall management framework that governs the way in which user-first companies operate.
The operations of any company can be split in two: internal drivers, which govern the overall operations of the company; and external touch points, which is how the company connects with the outside world. For user-first companies, the user is at the center of all external touch points; the focus of all attention. Internal drivers are oriented toward pushing the external touch points forward, propelling growth. Let’s take a quick look at each area to see how the framework operates.
3. The User-First Company
Internal Drivers:
Effective user-centric management, concentric organization, and an agile approach to technology position a company to more successfully execute the external touch points of the user-first strategy. External touch points consist of the four places people outside of the organization interact with any company: marketing, sales, customer services, and the actual product and service sold. We find unique patterns to how these external touch points operate in a user-first landscape:
4. The Software Layer
When the seven principles are executed in sync, a user-first company can almost be seen as a business sheathed in a layer of software through which nearly all user interactions occur.
This software “layer” requires consistent and intensive oversight, because user expectations will only increase. As businesses offer new and improved, more user-friendly solutions, users realize that they can expect more, placing increasing demands on your company and others. I call people who today are in their early twenties “post-digitals” because they never knew life without the conveniences brought by digital technology. By the time they become primary breadwinners and decision makers, a company that has ill-managed its software layer is at risk of becoming obsolete. When this generation becomes adults maintaining households and running companies—whether they’re shopping for a book or making a multimillion-dollar-enterprise purchasing decision—they will embrace the products and services of a firm with a top-of-the-line, friendly, easy-to-use software layer. And they will be quick to dismiss a firm with a software layer that’s out of date and inefficient.
Put more bluntly, the quality of a company’s digital presence will only become increasingly important. It will surpass the significance of a company’s physical sales force, presence at a university job fair, calendar-wielding secretaries, human receptionists, and traditional marketing and advertising. In some of these cases, digital technologies have already usurped brick-and-mortar tactics. The software layer is quickly becoming the beating heart of the company.
Managers of user-first companies therefore have two businesses to look after: the core business they’ve always overseen and the software layer that connects the core operation to its users. Ignore the software layer and you ignore your users; ignore your users and you risk losing your business.
In action, software layers are the amalgamation of various technologies all programmed to work in concert to streamline and automate operations. For example, HUGE has a top-notch internal software layer. Because of it, all I need to get my work done is a MacBook Air and iPhone. I don’t have filing cabinets, an assistant, or a landline phone. My calendar is maintained digitally and shared with the company. In fact, everyone in the office can access each other’s calendars, eliminating the time-consuming back-and-forth of scheduling meetings. The majority of communications between employees happen via instant message and e-mail. The conference rooms are regularly used for group phone calls, but almost no one uses his or her desk phones. Documents and other files are shared via Google Docs and similar services. Time sheets are filled out online, as are tech support and meeting room requests. There’s literally a tier of digital technologies running the whole agency, and it allows us to run ourselves nimbly, to collaborate, to save time, and to work effectively. External interaction is no different: client interaction, recruiting, and new client communications all happen digitally. And HUGE isn’t an ultramodern anomaly. The software layer is the norm; the challenge for companies is how to create it, maintain it, and evolve it at the pace of user expectations.
The concepts behind a user-first company and the software layer are starting to penetrate mainstream business, in industries and organizations where you’d least expect it.
On its face, Procter & Gamble is no Google. The 174-year-old company sells toothpaste, soap, deodorant, batteries, cleaning products, paper towels, and other traditional, utilitarian home products. Many of its brands—including Crest, Ivory, Tide, and Charmin—are so old that your great-grandmother bought them when she went shopping. It’s the largest advertiser in the world, and its advertising strategies have long represented, if not defined, the norm: thirty seconds of network television airtime used to tell memorable stories. Its primary customer is not you; it’s Walmart. But P&G and its brands are clearly on their way to becoming wholly user-first.
The company’s move to a more user-first focus started with the commitment to prioritize customers. Over the last decade, P&G recovered from a period of revenue decline by creating products that met or exceeded customer needs. A. G. Lafley, the top leader at P&G throughout most of the 2000s, led with the motto “The Consumer Is Boss.” Accordingly, P&G’s investment in market research is unmatched. The company interacts with more than five million people in nearly a hundred countries and spends more than $400 million per year, all to increase consumer understanding. But when Lafley left the helm, P&G was again struggling to keep up with competitors. Current chairman and CEO Bob McDonald looked to improve the company’s fortunes by aggressively pursuing an increased presence in digital media. In his 2010 letter to shareholders he pledged to make P&G “the most digitally enabled company in the world.” He wanted to heavily digitize the company and connect with consumers on a one-to-one basis. In other words, he was setting a directive for the company to prioritize users.
The company’s top digital executive from 2008 to May 2011, Lucas Watson, clearly championed a user-first mandate. At a 2009 conference of the Interactive Advertising Bureau, he told the crowd, “You need an ideal and an idea. An ideal is a sense of calling, a sense of purpose, a higher reason for being than just trying to sell the next case of diapers.” This is a direct call to identify and meet real user needs, rather than act self-servingly and push a hard sell. One example of this user-first mentality in action is Charmin’s partnership with SitOrSquat. The P&G brand sponsored an iPhone app where users can log in and review publicly accessible toilets, and where users who need a clean bathroom, say with baby changing facilities, can go to find out where the nearest adequate facility may be. With digital technology, Charmin is literally helping users go to the bathroom.
Perhaps the best-known instance of P&G’s user-first foray into digital media was the 2010 effort to advertise Old Spice body wash. What started out as a traditional Super Bowl commercial featuring the Old Spice man, “the man your man could smell like,” morphed into an outstanding social marketing campaign that inserted itself into the consciousness of users around the globe. It was so funny, users welcomed it into their lives, rather than treating it as an ad to be avoided. The campaign culminated with the production of hundreds of short videos responding to user questions that were produced in real time over just a few days. This effort generated more than two billion media impressions.
E-commerce is another way P&G is making striking moves toward prioritizing user interests above all else. Let’s say you’re on the Gillette Web site and you decide you really want a Fusion ProGlide Power Razor. You don’t have to log off and hope your local Walgreens has it in stock. There’s a buy-now button on the site that when clicked presents a list of all the e-retailers selling the item. This feature is available on many P&G brand sites. What’s more, one e-retailer on the list is one you might not expect: P&G itself. In May 2010, P&G launched its own e-store. In doing so, P&G is taking another step toward prioritizing the needs of users—many of whom want the convenience of buying direct—at the expense of retailers, who today represent P&G’s primary customer base.
That being said, P&G isn’t yet a full-fledged user-first company. It still has a way to go, particularly in its reliance on institutional, proprietary technology solutions rather than on nimble, disposable ones. But it’s definitely on its way. Industries undergo different stages of digital transformation at different times. Products such as books that are extremely standardized were the first industries to be transformed by e-commerce, for example. Consumer packaged goods (CPGs), on the other hand, are standardized, but also very convenient for most people to purchase locally, and usually people want to use the product immediately—not an option when buying online. This is one reason CPGs haven’t been the earliest adopters of e-commerce. Other industries, by virtue of product and service complexity—or the power of entrenched interests—have focused their user-first activities not on direct sales but on brand building. Change, however, is coming to everyone.
One of the most surprising things new employees find when they start at HUGE is that many big companies don’t know what to do online. From the outside, we all imagine that famous, billion-dollar businesses function like well-oiled machines and completely understand digital media. But when one looks inside, many of these firms are struggling to adjust to the new economy—in spite of the successful management and incredible revenue stream that got them to household-name status in the first place. These firms may all be great at what they do, but since digital isn’t a core competency, they can struggle with it.
If you feel as if your business is not effectively leveraging digital, you are not alone. A user-first strategy may seem like a faraway, idealistic goal, but you can probably say the same thing about your competitors or any other peer companies. Moving toward a user-first strategy is a big way for organizations to propel growth.
User-first is a management philosophy, not solely the province of engineers who build software. You don’t need to know a lot about technology to understand and learn from the chapters that follow. By putting the right management approach in place—which really boils down to accepting that the people who interact with your company online are the most important thing—your entire company can transform and succeed in our digitally driven economy.
If you’re an entrepreneur, this book can help you too. In today’s environment, a user-first approach is key to the success of literally any start-up. We talk about only a few start-up companies in this book—Diapers.com and Mint.com, for example—but candidly, I could have made every example a different start-up company. More often than not, start-ups are doing things the right way.
Entrepreneurs are the great agents of change in our society. They make user-first management a necessity to every business, because if the existing, big-name companies don’t do it themselves, entrepreneurs will come along and sweep them out of business. Some companies are motivated to change because of opportunity. But most change because of this fear.
Whether you’re part of a large company or the head of your own shop, the user-first company framework can help you create a high-performing organization that’s in tune with how people want to do business. Indeed, think about your own interaction with the user-first companies such as Best Buy, Zappos, or Digital Leadership Set organizations. They’re probably the companies you prefer to do business with yourself.
In the following chapters, we’ll explore how this user-first approach manifests across all aspects of a business, exploring in depth the seven internal and external principles of the user-first company framework. I hope that when you finish reading this book, you’ll have the knowledge you need to effect positive, user-first change in your organization.
Aaron Patzer was a cog in the Silicon Valley technology machine. An engineer by training, he had stints at IBM and a research firm specializing in network communications. And like many coders, he had the start-up bug.
Patzer, however, was different from the average techie dreamer. He had started nurturing his entrepreneurial ambitions as a teen in the 1990s, and he was a stickler about his personal finances. When most kids were baby-sitting and mowing lawns for spending cash, he was developing Web sites for local businesses in his hometown, Evansville, Illinois. He tracked the ebb and flow of his money with Microsoft’s Money program and Intuit’s personal finance software, Quicken. Throughout college and grad school, he continued to keep a close eye on his spending, updating his Quicken books every week.
But then after a couple of years in the workforce, for the first time in years, he fell behind on his bookkeeping. This break in routine served as his wake-up call.
On the Sunday in late 2005 that he decided to catch up, he synced Quicken with his accounts and downloaded about five hundred transactions. Quicken could only autocategorize 40 percent of them, leaving several hundred transactions he would have to address individually. Then he tried Microsoft Money, which could only autocategorize about 15 percent of them. This was going to take him a whole afternoon, and all he wanted to know was how much he was spending on gas and groceries. Then it hit him: Quicken is not quick. It’s slow, difficult to use, and saddled with too many unnecessary features that get in the way.
In spite of this weakness, Quicken had long dominated its industry. It could boast a 70 percent share of the personal finance software market starting in the early nineties and extending into the new millennium. In 2007, it still boasted fifteen million users who had spent thirty dollars to a hundred dollars on the product. But the bulk of financial software users—high net-worth men between the ages of forty and sixty—didn’t know any better. Quicken and its competitors were still simpler than balancing a checkbook and categorizing expenses by hand.
But Patzer, born in 1980, had likely never had to manage his finances by hand. Neither did many other young adults. In fact, much of the up-and-coming class of consumers had grown up with online banking, debit cards, and ATMs—for them Quicken would have been the laborious old-school way of working. Patzer imagined an entire swath of American consumers would welcome a streamlined personal finance program, a tool that would allow them to check in on their finances from anywhere they had an Internet connection. In Patzer’s view, managing your money shouldn’t be a chore. It should be a service. It should be “so easy to use, people will actually use it,” he said.
So he quit his job and got to work on what would become Mint.
In about a year and a half after leaving his job, Patzer was ready to present his product. His biggest breakthrough was developing an algorithm that accurately and reliably matched up 85 percent of all transactions with their appropriate spending categories, drastically reducing the painstaking task of entering data. Immediately Quicken and its ilk were antiquated.
For much of the other necessary technology, Patzer relied on existing tools. To access all of a user’s expenses, which often included transactions across several accounts at various financial services companies, he teamed up with Yodlee, a business-to-business company that already offered this type of account aggregation service to banks. For other software needs, he used publicly available open-source solutions whenever possible. This allowed Patzer to focus on the big-picture issues, such as Mint’s business model.
As part of his aim to make personal finance effortless, he decided to make the service available online and free of charge. So, as many other online businesses do, he turned to advertising as a source of revenue. But rather than simply deciding to sell space for flashy banner ads, he pushed the idea further. Mint’s advertising messages would be tailored to each user, and each message would provide information that could save that user money. For example, if a Mint user had money in a savings account at a low-interest rate, Patzer’s service would suggest another bank with a much higher interest rate and show a calculation for how much more the user could earn in interest. Or, say the system recognized that the user traveled a lot. The program might then recommend a credit card with a more generous frequent-flyer miles program. For each user that clicked through and opened an account with a sponsor, Patzer stood to make a twenty-dollar to sixty-dollar referral fee. He had devised a win-win situation: the service would literally, genuinely serve users and could still generate ample revenue.
The other major challenge was getting the first users. Because revenue from this innovative advertising plan would only be available with an existing audience, Patzer had to drum up a strategy for his own initial promotion on a shoestring budget. Rather than paying for traditional online advertising, Patzer started a blog on the Mint site. Every week, the blog posted a feature called “Train Wreck Tuesdays” that shared people’s personal finance disasters. Another recurring post asked tech celebrities and personal finance bloggers what was in their wallet. Rather than blatantly selling to users, this material engaged them and gave them a few minutes’ worth of entertainment, or in the case of Train Wreck Tuesdays, the comforting feeling that you’re not alone if you’re struggling with your finances. It also served to add more visibility in search engine results because there was now more Mint content for Google and its competitors to link to. But Patzer’s blog strategy didn’t end there. He also attracted guest posts from existing personal finance bloggers. These guest bloggers logically would bring their readers with them, readers who were already interested in personal finance and Internet savvy—Mint’s target audience. About nine months out, he started soliciting e-mail addresses for early Mint access. When the sign-up list exceeded the capacity the site was equipped to handle at launch, he asked bloggers if they’d put an “I Want Mint” badge on their blog in return for priority access. This built consumer awareness as a form of free advertising and still more visibility in search engines.
Patzer officially launched Mint in September 2007 at the TechCrunch 40—an annual demonstration of start-ups put on by the TechCrunch blog—and he won the award for best presenting company. It came with $50,000 and ample free publicity. Mint began an astounding trajectory. Within six months, it had more than 200,000 users and was adding 10,000 new ones every week. The typical click-through rate (the number of users who click on an ad divided by the number of times users had opportunities to see the ad) was an astoundingly high 12 percent on Mint—the more typical click-through rate for banner ads is 0.2 to 0.3 percent. This provided Patzer with a strong strategy for revenue generation and his users an average of $1,000 each in savings.
Intuit soon became his direct competition. In early 2008, the parent of Quicken branched out beyond boxed software and launched Quicken online. For use of this tool, Intuit charged consumers thirty-six dollars per year. This fee, Intuit argued, allowed the site to survive without advertising revenue and therefore guaranteed the service was free from any conflicts of interests. This strategy proved unpopular. So Intuit switched to a free model. But none of this reined in Mint’s momentum. After two years in business, Mint had attracted 1.7 million users, with seven hundred thousand of them active in any given month. They were young—the average age was around thirty—and about 40 percent were female. These were two demographics personal finance software products had formerly ignored. Patzer had essentially uncovered a whole new market and in turn began to steal future customers from Quicken and Microsoft Money.
The older players weakened from the competition. Microsoft Money quickly gave up. It announced in June 2009 that it would be discontinued. Quicken Online did put up a fight. It could boast 1.5 million users, but still it had only a hundred thousand active users on a monthly basis. Eventually Intuit did what any multibillion-dollar business does when it sees an extraordinarily successful newcomer on its territory. It bought Mint in September 2009 for $170 million. Patzer took a position with Intuit as vice president and general manager of the company’s personal finance group, overseeing the company’s Mint and Quicken products for desktop, online, and mobile. One of his first actions was to announce the end of Quicken Online; its customers would be transferred to Mint.
In less than three years, Patzer had gone from being just another Silicon Valley engineer to single-handedly battling a software giant with annual revenues of more than $3 billion—and winning his fight.
Mint’s win over Quicken reflects a profound change in technology over the last decade—the triumph of usability. The companies that have become the most successful online provide users with digital experiences they like and even love. It’s not just about a Web site being mindlessly easy to navigate or a product being intuitive to use (although that’s part of it); it’s about providing convenience, satisfaction, pleasure, or a serendipitous, valuable discovery for the user.
This is exactly what Patzer prioritized. He started with the goal of designing a program that he would want to use, and its success was driven by millions of individual users wanting to use it too. His achievement stemmed directly from his commitment to an easy, pleasurable user experience. Much of the technology powering his system had already existed. His multimillion-dollar step forward was combining those technologies into a user-friendly package.
The significance of this retooling is apparent in the fortunes of Yodlee—the company whose behind-the-scenes technology helped make Mint happen. Twelve years after its founding and $116 million in fund-raising later, the firm has yet to have an exit event. Infrastructure is not where the real value is captured in the digital space. Instead, it’s the company that focuses on the enjoyment of its users first and foremost. Companies such as Oracle, Cisco, EMC, and Akamai—which specialize in building complex, often hard-to-use technological infrastructures for businesses—have greatly benefited from the digital revolution. But even Oracle, the strongest performer in the group with a stock price increase of about 140 percent over the last five years, can’t match the growth and value creation of the companies that really prioritize the user. Amazon, one of the Digital Leadership Set companies, has seen its stock price more than quadruple over the same period of time.
Patzer is not the only one who recognized this marketplace reality. YouTube had a similar strategy, said TechCrunch founder Michael Arrington. YouTube didn’t invent online video or even user-generated video. Adobe’s flash technology did most of that heavy lifting. But YouTube put a pretty face on it, made it easy for everyone—from children to grandmothers—to use, and then sold out to Google for $1.65 billion. And there’s more. Twitter, TiVo, Nintendo Wii, Apple, and virtually every other big technology success in the last decade have been driven by usability. These companies made information gathering, communication, social life management, video recording and sharing, TV watching, video game playing, and movie watching much easier and more enjoyable than the existing solutions. This also extends to business services: think Salesforce.com for customer relationship management; Amazon Web Services for technology infrastructure; Google AdWords for advertising. In fact, in my observations of successful Internet companies, it’s clear that almost without exception, usability and strong user-centric experiences have been a key factor in their success.
Usability is so powerful that a strong Web presence can shine even if the original offline business is in shambles and the economy is in a severe recession. That’s what happened to Gap Inc.