Alex Chriss, Intuit’s SVP & Chief Product Officer, Small Business, commented that he felt the next 18 months would see more innovation than the previous 2 decades at intuit!
So, I am sorry #StephSocial (who made the point to tell me my conference reviews aren’t designed for her short-attention span #snap), but with this year’s review of Intuit’s annual conference, I have so much to write about, it is actually going to be longer than my previous articles!
That said, I don’t want to lose those which Intuit identified as the largest population segment (millennials), I’ll compromise, by chunking it down into multiple articles! So here goes:
Part 1: Introduction
Chris Pan from myintent.org was the final, non-Intuit employee, to speak at this year’s Intuit QuickBooks Connect 2017. Chris’s keynote included the Parable of the Chinese Farmer:
Once there was a Chinese farmer who worked his poor farm together with his son and their horse. When the horse ran off one day, neighbours came to say, “How unfortunate for you!” The farmer replied, “ Perhaps .”
When the horse returned, followed by a herd of wild horses, the neighbours gathered around and exclaimed, “What good luck for you!” The farmer stayed calm and replied, “ Perhaps .”
While trying to tame one of wild horses, the farmer’s son fell, and broke his leg. He had to rest up and couldn’t help with the farm chores. “How sad for you,” the neighbours cried. “Perhaps ” said the farmer.
Shortly thereafter, a neighbouring army threatened the farmer’s village. All the young men in the village were drafted to fight the invaders. Many died. But the farmer’s son had been left out of the fighting because of his broken leg. People said to the farmer, “What a good thing your son couldn’t fight!” “ Perhaps” was all the farmer said.
This idea of “Perhaps” really stuck with me as I reflected upon my week, a guest of Intuit, at their annual world showcase in San Jose California. Perhaps there is more than one way to view the key announcements…? Perhaps there will be consequential effects of some of the developments that wowed…? Perhaps only time will let us appreciate the changing world and Intuit’s place in it…? Perhaps I have a new appreciation for Tyra Banks…? No on that one, I actually do. There’s no other way to look at it, she is more than just a pretty face, as they say!
So herein lies part 1 of my third annual review of QB Connect, San Jose. As always, I attempt to be honest, independent, reasoned and as much as possible, succinct.
QB Connect San Jose 2017
The three “big rocks” that make up the media kit from this year’s event are:
- Smart Money;
- Smart Connections; and
- Smart Decisions;
These make a great starting point.
Smart Money: QB Capital
Holy the future of business banking batman, the convergence of accounting and fintech has arrived. In February 2016 I published an article “Why accounting tech is taking over the world”. In it I focused on the massive opportunity for the likes of Intuit and Xero to grow revenue beyond subscriptions. I particularly identified SME loans as I saw (and still see) accounting tech as having three massive advantages over traditional lenders in this space:
- Situationally Relevant, Complimentary Offering
- Leveraging Existing Trust Relationship
- Competitive Pricing through Risk Management
Whilst Intuit have made a couple starts in this direction, firstly with a relationship with Ondeck with QuickBooks Financing, then invoice financing with AMEX(demonstrated at QBConnect 2016), the 2017 edition of SME loans, QB Capital is both a sight to see, and an awe inspiring opportunity.
Intuit have developed their own credit rating algorithms
Based on “billions of data points” and unfettered access to their client’s data, they can tell:
- Who is likely to be in a cash flow position to need/want a loan;
- Who can afford to repay a loan;
- How much they could repay; and therefore
- The size of a loan they could offer
Ads are then served to the clients most likely to need/want a loan (with a credit rating to repay);
As evangelists of User eXperience design, they have built an amazingly easy to use, pre-filled, 3 step process for application and approval
Boom! Check out Sholto’s video:
Trials are being rolled out state by state in the US (to meet statutory obligations), funded by Intuit’s own cash reserves. And the numbers being discussed are VERY impressive:
- 70 percent of businesses younger than five years need funding to grow; but
- only 23 percent of them get the funds they need;
- a lack of funding is a top reason that about 50 percent of them fail within the first five years
- The existing US Small business loans market was US$599b as at June 2015
- Intuit were talking up the opportunity to grow this market MASSIVELY, with “60% of QB Capital customers to date, unlikely to get a loan elsewhere”; and
- 46% of customers taking up the offer in the trial, never having applied for a loan before!
In summary, this is a MASSIVE opportunity for Intuit and MUST be very very exciting for investors. Firstly for revenue growth but also for decreasing small business failure rates that thus impacts positively on Intuit’s customer churn rates and LTV.
- Perhaps… this starts to erode partnership confidence…what happened to Ondeck and AMEX? Both these partnerships now seem redundant… (just me?)
- Perhaps… if you’re a bank right now, you are worried about the consequence of providing bank feeds to your future competitor? Surely bank accounts are a small hop, skip and a jump from a loan?! Who better than Intuit to leverage block chains to manage money transfers…?
- Perhaps… this points to a dangerous trend for partnerships with Intuit? Perhaps anyone thinking of partnering needs to consider the risk of IP seepage and Intuit bypassing you when the opportunity heats up… Sure, its an open platform, but watch out if Intuit’s product team like what you’re doing… Just ask Ondeck at this point…
- Perhaps… for users, particularly those non-millennial entrepreneurs, how comfortable are you with your accounting tech vendors knowing everything about you?
- Perhaps… this may remain a limited offering in limited US states for a while to come. I’m not sure legislation in markets like Australia will make it so easy.
This new offering is way too logical and lucrative. Intuit have to do it, they would be silly not to and their shareholders will be salivating at the growth opportunity. Intuit just need to manage the side-affects, which at this point I can only judge they are. And credit to them for executing a seriously user friendly offering.
Intuit are the market leaders in world small business accounting tech, primarily off the back of unrivalled market dominance in the US (in fact, with their Q1 reporting this week, they effectively announced 2m subscribers on the QBo platform in the US alone).
Based on market announcements for Intuit as at October 31 & Xero as at September 30, 2017.
No other company has as many clients or partners. Perhaps only Xero, the clear #2 player, has more apps in its small business ecosystem.
Intuit’s Smart Connections is all about leveraging the power of these numbers. Connecting:
- Clients to Accountants and Bookkeepers;
- Clients (and Accountants and Bookkeepers) to integrated Apps;
- Small businesses to freelancers and new staff…
Pro Advisor Portal
As Sasan Goodarzi, Intuit EVP & GM Small Business Group; so eloquently explain it to me, it makes sense for Intuit to fish with a net, rather than a fishing line. That is, find clients in manys, not ones. Working with aggregators makes sense, and Accountants and Bookkeepers are THE key aggregator, for two key reasons for Intuit:
- They have the most trusted and aligned relationship with Intuit’s target audience;
- Small businesses who work with an accountant or bookkeeper have lower failure rates, thus this key aggregator also impacts key metrics by improving retention and reducing churn for Intuit.
Enhancing and promoting the Pro Advisor portal is a smart play for Intuit. “Generating leads” for partners. Better serving their clients needs. Since overhauling the Pro Advisor Portal at the start of 2017, enquiry flow has apparently more than tripled through the platform. And the split pretty much aligns to the geographic split of clients 78/22 US/Rest Of World.
Further enhancements are coming with CRM style lead management being built into QBoA and tax specific searching coming online for the upcoming peak season.
- Perhaps… there’s some work to do on the star rating system to bring confidence into the results. I’ve tested this “social proofing” element on the platform and found there is little by way of validation of the reviewer being a real life client of the Pro Advisor or even a QB user…
- Perhaps… the directory leads to competing interests and a race to the bottom on price among partners… Perhaps not with the average number of Pro Advisors each customer searching the platform contacts being only 1.25, this doesn’t really even cause much competition between partners…
- Perhaps… there needs to be room for Intuit to understand that there are more than just accountants and bookkeepers (the only categories currently available) who are Pro Advisors. There are technology consultants, business coaches and “cloud integrators” to name a few more…
- Perhaps… Intuit need to understand not all partners are “one-man-bands”, and build the platform to better accommodate multi-staff, professional service firms as well as individuals more clearly…
Yeah, that’s pretty good. It will get better over time.
Connecting clients & Pro Advisors to Apps
Intuit are now up to version 4 of their QBo API. Rewinding only a few years, they were forced to play catch-up (to Xero to be frank) by retro-fitting an API to the decade old product. By no means an easy feat in engineering terms. But catch up they have and build out an apps ecosystem, they have also.
No longer does Intuit see QBo or QBSE (Self-Employed) as products. They are part of a genuine PLATFORM play (along with QBoA). One senior staff described it to me as an “open platform that takes data from wide and varied data sources and uses AI and ML to help customers and their advisors, build better businesses/power prosperity”.
Whilst others in this space to this point have resisted (my) calls for embedding Apps in a true platform play (vis a vi Salesforce, NetSuite, Acumatica and others), opting for external API integrations, Intuit appear more embracing of the single-sign on, single UI, embedded definition of Platform. The clear message I received across the conference was Intuit want the data… from any source. They are backing their ability to aggregate and analyse to make Smart decisions as their moat.
The NEW big things we saw at QB Connect were:
- provisioning of “curated”, embedded apps, for clients, by Pro Advisors, from within the QBoA environment.
— Trent Mclaren (@trent_mclaren) November 16, 2017
- WITH aggregated billing!
- and some messaging/alerts/tasks instigated from some unspecified apps, to QBoA Work area.
- Perhaps… the QBoA integrated apps/messaging were just wireframes and had only been thought of after the equivalent was a big announcement at Xerocon a month earlier…
- Perhaps… app vendors looking to embed should take consider that the relationship maybe be short-term…Intuit have announced a world-wide Payroll platform, which is in testing in the UK and will ultimately unseat the first app to be embedded in this way, KeyPay in Australia.
- Perhaps… Rod and the Xero team are smiling. They went down a path to try and negotiate apps to pay them for API access and got significant resistance. Intuit are effectively doing this by offering up QBoA deployment and billing. My mail has it 30% to Intuit for the privilege.
I think Intuit are leading the way on platform in this (SMB) space. If I’m an app vendor, a 50/30/20 split for myself/Intuit/Pro Advisor sounds like a sweet deal for access to >2.5m potential customers and no worries about debt collection.
Connecting Small businesses and staffing
No real detail on this other than an announcement that Intuit will be connecting small businesses and staff.
- Perhaps… taking on LinkedIn and Job sites like Indeed and Seek is a good idea…?
- Perhaps… taking on the freelancer marketplaces (like Freelancer.com and Airtasker) is a good idea…?
Perhaps… this is one idea I don’t really love…
So ends Part 1 of my QB Connect San Jose 2017.
Follow me the socials for Part 2 next week…
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