This is a story about digital transformation and reinventing your business to capture new markets and staying relevant rather than being disrupted. The company I chose for this article is Adobe because its digital journey showcases the willingness to embrace digital in corporate culture and DNA, which persevered in spite of hurdles and roadblocks the company faced.
Founded in 1982, Adobe is on track to reach 13 billion dollars in 2020 based on its successful implementation of digital strategy, embracing new business models and uncovering new growth markets.
The Adobe success story is also a story that proliferates industries where leading software companies are being disrupted by more nimble players forcing them to look at new ways to go to market, acquire new capabilities in acquisitions and take calculated risk as a pre-emptive strike to disrupt rather than being disrupted resulting in loss of revenue and market share. However, this is also a story that underpins the need for constant innovation in an era of rapid change driven by changing customer preferences and by leveraging technology that enables new business models. With Adobe’s roots in the desktop publishing space, the leadership team around the newly appointed CEO Shantanu Narayen had to make a tough call.
In 2008 Adobe was in a sustaining growth mode dominating the content publishing and creative software space, but at the same time, revenue growth was flat. There is a case to be made that there was no reason to look beyond and keep pushing the same business model that was the foundation for its success so far. However, this was also a time when some of the underlying conditions for business success were changing, fueling new entrants to the market seeking to disrupt that space.
With a history of product innovation, Naranyen pulled his team into blue-sky brainstorming sessions asking his team to broaden the lens on how they were looking at opportunities, markets, and solutions.That included looking at new market trends, changing customer needs, and adjacent markets that the company was not currently serving. This was also the time how content was created changing, how content was consumed was changing, and where the content was going to be monetized was changing.
Customer preferences were changing rapidly, and the internet-enabled subscription models propelling the growth of companies like Salesforce and Dropbox.
In light of these forces of change, Adobe’s leadership took a leap of faith to connect their solutions to the cloud and driving towards a subscription-based model, ultimately completely withdrawing from a perpetual licensing model.
"The Adobe success story is also a story that proliferates industries where leading software companies are being disrupted by more nimble players forcing them to look at new ways to go to market"
This was a bold move that was not well received initially by the market, and Adobe customers came with additional restructuring cost and resulted in initiallyAdobe’s stock prices to fall significantly.
When Adobe’s leadership announced their own MAX convention in 2013 to withdraw from their package pricing model and move to a cloud subscription model they faced a backlash from their customers running petitions to re-introduce package pricing.
Ultimately, that is when the corporate digital DNA culture amid all of these challenges helped the Adobe team prevail and stay focused on the big picture since they understood that it was too expensive to support desktop and cloud subscription capability at the same time. The subscription model helped their team to broaden Adobe’s reach into new markets.
Of course, we know now that this model worked for Adobe and other traditional software companies switching to subscription models.
Adobe’s Creative Cloud and Experience Cloud, as a result, are well-positioned to meet chief marketing officer needs clocking in 19 billion dollars in revenue in 2019. As the innovation expert, Harvard Professor Clay Christensen pointed out companies need to constantly ask themselves what is the “job to be done” and look beyond their companies scope to uncover new opportunities.
The story of Adobe’s digital success fits his teachings well since Adobe avoided being disrupted by disrupting themselves and taking a leap of faith educated by data insight.
The key lesson from Adobe’s success:
When Adobe acquired Omniture, Marketo, and Magento they understood that rather than doing things the Adobe way they had to use a different profit formula and approach, basically letting the businesses run business as usual, but providing support as needed resulting in explosive growth
Rather than staying in the premium space of sustaining innovation they enabled new clients to experience Adobe’s solutions at a lower price point while shifting to a subscriptiononly model.
With a focus on data Adobe created a new markets by being able to tie in customer data to deliver seamless experiences along customer journeys and through multiple channels based on data insight, personalization, customer journey management and advertising cost optimization
In light of the advances in advanced analytics and artificial intelligence, it makes sense to further invest in machine learning-driven automation, connected anything technology, data privacy protection, and integration with big enterprise software to continue to build a networked data fabric across Adobe solutions and partners.