Geschke on corporate culture

Want to predict how Adobe will act? Look at its past. Groups develop different cultures, and knowing how a group “works” gives big clues on its future.

The following quotes from Adobe co-founder Charles Geschke appeared in a lengthy interview from Knowledge@Wharton. Here I’ve pulled together some of the information on corporate culture, as in the prior posts on standards and reinvention.

The earliest impulses behind Adobe were entrepreneurial, about the need to make a real difference in the world:

Knowledge@Wharton: What prompted you and Warnock to leave Xerox?

Geschke: Xerox loved [what we had done]. They said, “We’ll make it a corporate standard.” I said, “Great!” I went to Connecticut to [Xerox] headquarters and said, “I’m here to talk about the marketing plan for rolling this out.” They said, “Oh, wait a minute. At Xerox it takes seven years to develop a product — and we can’t talk about this because other people will get the idea and beat us to market.”

I said, “Seven years! [In the] industry you’re about to go into, that’s two to three generations. By the time you bring it out it will be worthless.” [They said,] “Sorry, [it takes] seven years at Xerox.”

John and I were frustrated. It turned out that his thesis adviser at the University of Utah was on the board of the investment bank Hambrecht & Quist. Bill Hambrecht was one of the first guys pushing venture investing in high-tech companies….

There were strong lessons, early on, about the need to continually re-check assumptions:

Knowledge@Wharton: When did you enter the Japanese market?

Geschke: We licensed type technology for the Japanese market in 1986 or 1987. [It was] almost the identical situation as with Compugraphic and Linotype.

Originally the Japanese typesetting industry had only one company before World War II. The two guys who ran it got into a disagreement over the Japanese conduct of going to war. One guy was a supporter [of the war effort] and the other was not. So they split the business. One guy stayed in Tokyo and his business took off, because he was at the seat of power. And the other guy took his part of the business to Osaka. He did okay, but he was struggling.

We first went to the Tokyo branch. At that point it was run by a woman, which was quite unusual in Japanese industry. She was the widow of the fellow who had stayed in Tokyo. I could never get to the second cup of tea with her. She just didn’t want to talk. She had 90% of the business and she didn’t need anything new-fangled.

So we went to Osaka and talked to the other company and, again, because they wanted to get into a stronger position and they intuitively knew the industry was going to change, we did a deal with them. We got the license to their type library and they now have 80% to 90% of the business.

Knowledge@Wharton: As was the case with Linotype, the incumbent wasn’t interested, but the underdog was. And it completely changed the fortunes of both companies.

Geschke: I think if you did a study of business deals, it’s almost always that way.

The companies that think they’re in control of their long-term destiny don’t want to talk to a young start-up company that’s going to change the rules of the business.

Part of the core philosophy is to strive to treat people fairly, and to also be perceived as treating people fairly. And when there’s a challenge, it needs to be surmounted:

Knowledge@Wharton: Okay. What was the response to the Apple-Microsoft announcement at that Seybold Conference?

Geschke: I think if you were to talk to Adobe customers in any era, one of the things they’ll tell you is that, while they may have a disagreement about this or that, by and large they were treated fairly. They could depend upon getting great technology licensed to them on a fair and equitable basis. Customers like that. If you treat them the way you like to be treated, they sense that. That was always part of our core philosophy as a company.

At that Seybold Conference, when the announcement was made between Apple and Microsoft, the Seybold people immediately changed the schedule to put a panel on the last day to discuss all of this. Before the panel began, the moderator got up and said, “I want to take a straw vote. I want everyone to raise their hand who thinks they would rather have Apple and Microsoft take over this segment of the business.” There were a few hands raised — I’ve always believed they were Microsoft and Apple people — but, basically, no one voted against us. They all wanted Adobe to continue to be their vendor.

We brought ATM out within about 60 days and sold hundreds of thousands of units in the first quarter, which was a lot in those days. It was three years before Apple and Microsoft shipped TrueType.

A business needs to cannibalize itself, otherwise it will be cannibalized by others:

If you’re lucky enough to get a “franchise” product like Photoshop, you can’t become complacent. For example, when we brought out PhotoDeluxe we were initially the strongest competitor for Photoshop. Rather than cede the low end of the market to someone else, we took it. And that allowed us to upgrade people. With hindsight it was the exactly the right thing to do — not give someone the ability to undercut you, come in and be “good enough.”

We learned that from the LaserJet. [Although a] PostScript [printer like] the LaserWriter was a much better product, eventually the [Hewlett-Packard] LaserJet was good enough. [Although PostScript is] still a profitable business.

Early experience in executive succession showed the necesssity of growing and trusting the “corporate culture”:

We kept a pretty lean organization with a pretty shallow management structure. We frankly hadn’t done work trying to groom anybody [as a successor], because we weren’t thinking about it.

So — this was not our brightest decision — we decided we could recruit replacement talent, spend a couple of years with them, get them up to speed, and their natural abilities would take over.

We hired three or four very bright people, [people who were] very successful in their previous businesses and had the right pedigree to run a business like Adobe. We figured we would meld them into a team.

Well, each one of them thought that he should be the future CEO of the company. Rather than melding as a team, they fought like cats. It became miserable. It was impossible to have a staff meeting without it breaking out into angry disputes. It was getting ugly. Because of people trying to build turf, spending was getting ahead of revenue. And in the summer of 1998, the Japanese market went off a cliff for six months. It just stopped. I’ve never fully understood why it happened. And we found ourselves having to preannounce a very bad quarter and dealing with these people who weren’t getting along.

John and I decided that we would fire all of them on the same day.

We identified the person — Bruce Chizen — we wanted to groom from the inside…

[Corporate succession] is hard. If you want to give real value to your shareholders and build a company that has a long life, you realize pretty quickly that that is a major problem and you’ve got to start working on it. We should have been brighter and known that we couldn’t go outside; you have to do it from the inside.

I have always believed that the principles and values of the company you build is an important ingredient in its success. You can’t get someone to come in from the outside and just pick that up in a six-month training period. It doesn’t work that way. Not everybody agrees with some of those principles — they think they have to do it a different way.

How to have a group endure and be successful over time, despite different personalities, different problems, different opportunities?

Knowledge@Wharton: It seems like you’ve tried to maintain the consistency of Adobe’s corporate culture even as the company’s technology focus has evolved.

Geschke: We really didn’t start emphasizing [corporate culture] until roughly 1989.

When we began, John and I wanted to build a company that we would like to work in. Why would you build a business you didn’t want to work in?

We both had enough experience that we knew there were a lot of things we felt we shouldn’t do and had some ideas about things that we thought were important to do. But we didn’t really start verbalizing it until it became clear that, as we got bigger and we had to confront tough things, we needed to make sure that everybody understood and could help us enunciate what those principles were, what that culture was about, and make this ingrained in how the business ran…

One of the things I talk a lot about is the necessity to juggle all of the constituencies that have an interest in the business: shareholders, customers, employees, vendors, and the communities in which we operate. Those constituencies are all mildly in conflict with one another in terms of what’s best for them. Your job as a leader in a company is to find an appropriate way to juggle those conflicting interests so everybody feels like they’re getting a fair deal, without letting any one dominate the others because they’ll drag your company down.

(I like that final quote an awful lot, so I BOLDed it.)

When you’re making bets on technology, it helps to predict what might happen in the future. Adobe may some day act unfairly, that’s true. It’s also true that Microsoft may some day act benevolently, or Apple some day may act openly… Google may some day act respectfully, or the W3C may act efficiently. All these things are possible, but each group of people grows a culture which affects their future decisions.

The future isn’t always predicted by the past, but the past always predicts the future.