How Adobe become Silicon Valley’s quiet reinventor

NSY Silicon Valley By default, Adobe is a boring company. Nudge 40 is middle-aged. It doesn’t make headlines with Megamerger or have CEO of Swashback Ring. “It’s very comfortable not to be throbbing,” confesses in a rare interview with her boss, Shantanu Naraien. Meanwhile, Adobe has quietly adapted to the era of cloud computing. It probably did a better job of reinventing itself than Microsoft, the most famous comeback kid in the tech industry.Microsoft CEO, Satya Nadella is said to have scrutinized Mr. Nadella’s handicrafts. Not because he attended the same junior high school as Adobe’s leader in India, but it’s been down for a few years. Since 2007, when Narayen took command, Adobe’s market capitalization has risen from $ 24 billion to $ 276 billion. Over the last decade, it has outperformed both Nadella’s Microsoft and rival business software maker Salesforce.

For most people, Adobe is synonymous with desktop publishing. Founded in 1982, it set up a major standard, especially PostScript, which tells the printer where to create dots. PDF, A “portable document format” that allows printed documents to be distributed online. We have also developed a program for editing digital content. One is Photoshop, which has become a verb. Adobe’s expensive software was installed on desktop computers and updated with new versions every year or so. By the late 2000s, it seemed that the model itself needed to be updated. Smartphones have unleashed the creativity of people far from their desks, and cloud computing has made it possible to deliver software as a service over the Internet.

Instead of sticking to a lucrative legacy business, Narayen embraced the opportunity to “rethink himself.” Incorporating Photoshop and other common and complex applications such as Illustrator completely into the cloud was a technically challenging task. However, Adobe still found a way to improve its product using the cloud. Today, Adobe’s two original software businesses have transformed into two subscription-based “clouds.” A small “document” cloud offers a variety of services, from the mundane to the mundane ( PDF For mission-critical (managing government digital documents) (in word processing files). During the transition to remote work caused by the pandemic, everyone experienced a boom. Another much larger “Creative” cloud allows users to edit all kinds of digital content, from websites to videos. This content is no longer on your hard drive, but in your data center, so you can work with multiple people at once from different devices.

But Adobe’s transformation wouldn’t be half as successful without other innovations. One is what the company calls a “data-driven operating model” (DDOM), A jargon for using data generated by digital services to improve them and developing new data in a persistent feedback loop. Adobe learned this in-house by developing a third cloud that would allow other companies to optimize their digital products. This “experience” cloud allows subscribers to track, among other things, the behavior of online buyers and the best way to guide them to make a purchase.

Another innovation was its management structure. Some tech companies, such as Apple, favor top-down micromanagement. Google’s parent company Alphabet is bottom-up and almost chaotic. Adobe is a healthy combination. Naraien sets the destination and the three cloud managers give the exact course.make DDOM For example, working in the Experience Cloud has set accurate and rigorous goals. Adobe’s data platform must be able to deliver content in less than a tenth of a second. It was up to the engineer how that goal was achieved.

Adobe’s three clouds, operating models, and management styles, in the words of broker Bernstein’s Mark Moerdler, are “a combination of extraordinary investments in software,” which is why they offer high margins and good growth. Helps explain. Its latest quarterly financial results are symbolic. According to Bernstein, revenue increased 22% year-on-year to $ 3.9 billion and operating margin rose to 46%.

There are many potentials for more data-driven growth. On October 7, Adobe completed the $ 1.3 billion acquisition of its video editing service, Artificial intelligence that extracts patterns from digital information supports many new services (such as Adobe’s recent services). PDFGoing s to a web page makes it easier to navigate on your smartphone). Similar algorithms help professional content creators be more productive and make Photoshop easier for beginners to use. The “Creator Economy” is still in its infancy. And then there’s the “metaverse” of the fuss of the interconnected virtual world. It will be filled with digital objects that Adobe tools will help you build.

Place your head in the clouds and step into the ground

As Narayen first admits, the software business is risky. “Software follows a kind of S-curve,” he observes. If you don’t invest in the right opportunities, performance will eventually level off. Creative Cloud and Document Cloud, which together generate 73% of Adobe’s revenue and 80% of gross profit, are mature targets for competitors. Start-ups such as Figma, a website for designers of completely cloud-based online services, are betting even more on online collaboration than Adobe. For 14 years under his belt as a boss, the story of inheritance is in the air. Investment bank Jeffreys Brent Chill said the transition would be as big as the takeover from Steve Jobs to Apple’s Tim Cook. It is everyone’s guess if it can be just as successful.

Investors have certainly cooled Adobe a bit lately. Its market value has fallen by $ 40 billion since its peak in September, down sharply compared to most other major tech companies. Still, the company has repeatedly proven that it can prosper by accepting change rather than fighting it. As a result, Nadellayan is the beloved investor and analyst, and is also the role model for technology bosses such as Nadella. There’s nothing boring about it. ■■

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This article was published in the Printed Business section under the heading “The Quiet Reinventor of Silicon Valley.”

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