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December - 2007 - issue > Market Positioning
Customer Engagement, the Secret behind Adobe’s Success
Pradeep Shankar
Saturday, December 8, 2007
The constantly churning cauldron of IT business worldwide is witnessing every passing day newer developments and has been throwing up unkind challenges at those who are at the forefront of the ever expanding technology frontiers. The software products company Adobe Systems is celebrating its 25th anniversary this month and is on the verge of crossing $3 billion in revenues. The company’s ambition is to be at the forefront on providing tools for building the next generation of rich internet applications and there is a flurry of activity aimed at realizing this. The responsibility of helping the company achieve its next phase of growth falls on the new CEO and President Shantanu Narayen who, till recently, was Adobe’s President and Chief Operating Officer. Narayen, the younger of two brothers, grew up in Hyderabad and moved to the U.S. in 1984 to pursue a Master’s degree in computer science at Bowling Green State University in Ohio, where he met his future wife.

After graduation, Narayen and his wife moved to Silicon Valley where he landed a position at Apple. Studying at nights while working at Apple, Narayen earned an MBA from the Haas School of Business, UC, Berkeley, in 1993. After Apple, Narayen had a stint at Silicon Graphics before founding Pictra, an early entrant into the field of online digital photo sharing. Narayen joined Adobe Systems in 1998 and was appointed President and Chief Operating Officer in January, 2005.

On an India visit few weeks back, Narayen spoke to Pradeep Shankar on the company’s global growth strategy.

Do you worry about Microsoft at all? What if they gobble you up into their fold?
As long as heterogeneity exists in the marketplace we need not worry about Microsoft. However, if you are in the software space and somebody says they don’t worry about Microsoft, they are trying to find solace in denial. Microsoft is a monopolist and they can use their power in different ways. We have competed with them in the past in many areas such as fonts and imaging. We have proven that we can deliver great products. Microsoft is a $54 billion company (in revenues) with tremendous reach, staying power, and a very deep pocket. I do worry about their capability to utilize their reach to give away software. Keeping this paranoia apart, we have to focus on our customers, and as long as we can understand our customers’ needs and continue to innovate, I am confident that we can do well in the marketplace. There is a tremendous opportunity available to us in the marketplace and we think pursing it on our own is the right strategy for Adobe at this point.

How is Adobe Flash’s competition with Microsoft’s Silverlight panning out?
First question we need to ask is: ‘What is Silverlight’s penetration right now versus the penetration of Flash?’ The last time I checked on MSN.com, I saw them using Flash videos. There is no need for a better proof for our having achieved ubiquity. It may be pointed out that Apple continues to do well and there is no need whatever to forget the Mac users. Heterogeneity in the marketplace has only grown in importance in this age of globalization. Creative developers across the world who create those interesting rich internet applications love Adobe products and have been loyal Adobe customers. We are celebrating 25 years this year. It is a big milestone for us. There is a lot going for us in terms of installed base. The kind of market we have is the result of years of hard work and cannot be captured overnight by any one. However, we also have to be vigilant.

How do you constantly make Adobe business model more differentiable?
Today, we are a much more diversified software company than we have ever been. The acquisition of Macromedia has really shot the worth of our technology assets skyward. If you look at what we are doing in the enterprise side, we are helping businesses automate their manual processes. That’s a brand new business for us like Mobile which is also a new business and a good opportunity for us. Video is yet another tremendous growth area. We have to continue to focus on our growth themes. In the software space, there is nothing called as permanent defensibility. If you look at Microsoft they have been challenged by Google across the board. Defensibility is achieved by continuously focusing on innovation and working with one’s customers, and of course, one of the central components is hiring great people. We are in the intellectual property business. The 6677 people who work at Adobe are our very important pride assets. They go home every night and we provide an environment where they want to come back next morning.

Adobe introduced Creative Suite 3 earlier this year. It is reportedly the largest software launch in Adobe’s history. What are some lessons learnt compared to other product launches?
Interoperability is going to become a more important issue. If you are an IT person, you do not want to bear the burden of integrating disparate enterprise systems. But it is our strategy to provide an integrated offering. There was a constant demand from a section of our customers for an integrated suite that contained best of the breed Adobe products. We delivered exactly that with CS1 to their satisfaction. With CS3, we were able to integrate Macromedia products also in the same fold for the first time. It involved a great amount of innovation to integrate them, and we deliver the same user experience for Flash, Photoshop, and Illustrator as well. From a designer’s point of view, it is by far the most productive and creative application a designer can hope for. Satisfactory user experience is very vital because it is essential for us to make sure that the creative guy uses these products eight hours a day.

CS3 was all about making sure that we understand our customers’ needs. We did a lot of research on segmentation, aggressively released the beta versions, and got reviews, before the final product was launched. Reviews are important and they are valuable business tools in the marketplace. We have always been doing betas ever since I joined Adobe, but we used to launch them for select groups and not for the public as we have done this time. We were able to attract a much larger community to play with the software, give feedback and advice, and recommend features as well as do testing. We have been able to get tremendous customer feedback before we ship the product, especially when we did the transition to MacTel. Public beta is clearly a strategy going forward and we will see more of it in the coming days. But strategies differ from company to company as can be seen from Apple that relies on secrecy for most of the part, which is the opposite of our strategy. One of the key tenets of Web 2.0 is that the more you can involve the community, I think, the better off you are. It’s indeed a big win. It is both a marketing tact and development dexterity because you are taking the customers’ expertise to build better products. We do the best job of proclaiming to the market the benefits of our products.

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