Posts in Category "Adobe"

Guinness si, records meh

Ben Worthen asks at Wall Street Journal about Guinness Records and downloads. Lots of us raised the issue at the time — see Ryan, Ben, and I know I commented on the irony in some places I can’t search up at the moment — but the overall feeling at Adobe, as Adrian says more delicately at the WSJ, was “whatever”. The goal is to get smart communication tools more available to more people, and other debates aren’t as important.

Adobe Earning Call, F4Q08

Adobe announced quarterly financial results today, and there was the regular financial analyst call this afternoon. Seeking Alpha has the transcript (thanks!), and I’ve pulled out some technology-oriented points below.

To get an overall feeling of the piece, start with Shantanu’s conclusion:

“So thank you all again for joining us today. I mean, in summary, when we look at 2008, we think that in a tough economic environment, we achieved both our revenue as well as our profitability goals and more important, we put the company in a very strong position as it relates to the focus on Flash platform, the Creative Suite and Acrobat business. And as we said, we think 2009 will be a tough market. We’ve already taken the actions in place to help us through this tough economic climate and we continue to be really positive about the long-term prospects for the company and we are confident that as we emerge from this economic climate, that Adobe will be in a stronger position than ever before. And we look forward to sharing more at our next earnings call.”

A line about Creative Suite:

“Industry and press response to CS4 has been excellent… We believe CS4 is a stellar release, with new product innovations, time-saving features, and workflow enhancements that will improve productivity… While customer feedback has been positive, given the current economic climate, we believe CS4 adoption in the short-term will be muted when compared to prior cycles.”

Dynamic Media, which builds atop Flash Platform:

“Dynamic media continues to be a key growth focus for Adobe… Recent high profile wins include, the number one ranked kids entertainment and family community destination on the web [which] has experienced record online traffic levels, as viewers logged on to watch full-length movies delivered via the Adobe Flash platform… Telecom Italia [with] live television channels and on-demand content through its web portal… And [is using] Flash Platform to deliver all of its live and on-demand video offerings for two years [and] will provide a downloadable rich Internet application built using Adobe Air.”

Shantanu closes his prepared remarks:

“In closing, as we enter fiscal 2009, we will continue to make strategic investments that will position us well for the future while managing our business to ensure consistent profitability. Our strategic priorities are advancing the Adobe Flash platform as the preferred solution for how the world engages with ideas and information; investing in our core businesses, including Creative Suite and Acrobat, to maintain our leadership position through innovation and continue our expansion into new customer segments and geographical markets; and focusing on our growth businesses, which include LiveCycle, Connect Pro, Scene 7, and Dynamic Media as areas we believe have significant potential for future growth.

“While 2009 will be a challenging year because of the macroeconomic environment, we believe the key market trends driving our business remain intact. By continuing to innovate and deliver through solid execution, we believe Adobe is well-positioned for future growth.”

Question and answer session… I’ll paraphrase some parts, so look for quotemarks to signify direct quotations from the text:

(Q) Why did mobile revenue drop?
(A) “The reason for the drop is, like we’ve been talking about for quite some time, the move to the Open Screen Project will ultimately make the royalty revenue that we have for mobile go away, and you are starting to see that in 2009 as we anticipated.”

(Q) Future guidance?
(A) “We’re not providing ’09 guidance, primarily because of the limited visibility that most companies have right now.”

(Q) What about CS4 sales?
(A) “I have gone out and talked to a bunch of customers and frankly the response to CS4 in terms of the innovation that we’ve done and productivity features that we have added in addition to the workflow actually remains as strong as it’s ever been. CS4, as I said earlier, was our strongest product ever. There’s just a tremendous amount of innovation but there’s no question that the economic uncertainty is playing into the adoption rate we’ve seen and that’s why we thought it would be muted in the short-run… We just saw some research that Omni had produced which stated that CS4 actually can save over 18% of the productivity versus CS3… But we are definitely seeing some impact due to the financial situation.”

(I’ll echo that one. I’ve never seen as positive a reception to a release, and I know the timesaving stuff in there makes it a sound economic value. I think CS4 will have a slow start and a long tail. And the wild thing is that there’s more stuff brewing in the labs for CS5. There’s a whole lot of new things yet to accomplish. But many businesses are, sensibly, being cautious right now.)

(Q) “You’ve made a swift move here with an 8% headcount reduction. How much through the year will you continue to look to keep costs very tight and preserve the margins, even if the demand continues to track, you know, maybe even worse than what we are seeing right now?”
(A) “Based on what we saw in the economic climate, as you point out, we took fairly quick action. We’ve already restructured and that was actually done on the day that we announced it, so I think rather than have that linger or there be uncertainty within the organization, we were able to get that all behind us… And it’s not just the restructuring that we’ve done. We’ve also taken a number of other internal measures to make sure that there’s a very significant scrutiny on expenses, whether it’s travel where we are not doing really any travel that’s not related to customers. We use Acrobat Connect and so that’s a good use of travel. Every single external expense as it relates to contractors is being scrutinized by Mark. We’ve also made some decisions as it relates to the salary structure for employees, so we will continue to monitor all of that and balance investing in our strategic directions versus returning to shareholders.”

(Q) How come you’re still reporting mobile revenue? Wasn’t the Open Screen Project announced awhile ago?
(A) “As it relates to mobile, you’re right — we did anticipate it starting to drop a little sooner. What happened is a lot of the OEMs burned through some of their prepaids faster than we thought. Flash Lite has done extremely well and they just couldn’t wait for the OSP version of Flash to come out later in 2009, so we did some renewals with them earlier and larger than we thought we would do.”

(Q) Wow, LiveCycle and enterprise is growing fast, at 46%!
(A) Yes, but we want to grow the business appropriately, “rather than investing too much ahead of the curve… I think moving people from inefficient, paper-based processes to automated processes is resonating with our customers.”

(Q) Yadda yadda Silverlight?
(A) Look at the entire ecosystem around Flash. It gives you access to every computer, and already nearly a billion devices. Every creative tool now offers a Flash workflow. Every manufacturer wants to offer it. And there’s an entire server system, as well as CDN support, hosting support, third-party tools. That ecosystem — including the millions of creative professionals already earning their living through Flash — is what makes Flash Platform work. And: “We will be very aggressive about making sure that we continue to innovate in the entire media space to keep our lead.”

(I didn’t really paraphrase the above text from the transcript, but made the case as I would make it, based on the ideas in the text.)

(Q) What about magazine and newspaper publishers, the print market?
(A) “The way I would characterize that entire business, frankly, is that as you look at employment, if employment exists in those publishing markets and they are spending, the Creative Suite tends to be the top of the list. I’ve met a number of customers who say if they are going to buy a piece of software, to increase their productivity, it’s going to be Creative Suite 4. But I think the economic impact certainly weighs on them as well. So from our perspective, we’ve been focused on making sure that as they migrate from print to web to video to wireless, that Creative Suite is ahead of where they want to be. ”

(Q) Flex Builder?
(A) “We are continuing to see a fairly good demand for Flex Builder and in addition to the Flex Builder, we are actually also pretty excited about the possibilities associated with Flash Catalyst, Steve, that as you know, we showed at our recent MAX conference. So clearly the number of people who have been downloading the Air SDK and who have been looking at Flex Builder and our other development tools to create these engaging applications, is going up.”

(Q) And hey, what about that iPhone I keep hearing about?
(A) “Sure. So smartphones continues to be a category that we are focused on. We have clearly streamlined our strategic intent to make sure that we have both web browsing as well as Air support on these smartphones. We actually already deliver Flash for smartphones, such as those powered by either the series 60 from Nokia, running the [Symbian] operating system and/or running Windows Mobile, as well as in Japan we certainly have a lot of support. So I would say that already today we have a lot of smartphone category phones that are supported with Flash. That’s why we’ve shipped over 800 million and we say we expect to reach our one billion mark sooner than anticipated… At MAX recently, we also showed a prototype of Flash running on the Android operating system that’s powered by Google, and now we have also said that we are only going to focus on Flash 10 rather than Flash Lite, which is why it’s taking a little time. But we fully expect to see versions running for smartphones in the middle of next year.”

(Yes, I know he didn’t even mention the name this time… twice burned and all that, I guess…. ;-)

My takeaways: Adobe is committed to making this Flash Platform thing work. It’s a core part of the business — the next publishing platform that the entire company can build atop. It’s not a tangent or a me-too effort… establishing predictable interactive screen publishing atop any device is what Adobe must provide over the next few years. And there’s an entire ecosystem — including millions of creative professionals already earning their living through Flash every day — working alongside Adobe to bring this capability to fruition.

Do you have thoughts, opinions, follow-ups or bounce-offs to the above…?

Twitter on Adobe

Adobe changed its economic guidance and restructured today. The press release has info.

I ran a Twitter search on “adobe” and pulled out relevant comments, oldest-first, starting from about 9am Pacific today. It misses some of the earliest ones, and any which didn’t include the word “adobe”.

These are all in the public record already, just aggregated and reformatted for readability, but please drop a comment here if you’d like any removed, and I’ll delete both it and the comment, thanks.

Continue reading…

MAX08 Themes

I was away-from-keyboard most of the past week, in the Community Lounge throughout the event. Other people have been reporting from individual sessions, and I’m still catching up with what they saw. But I’ve been thinking about some of the big, high-level topics from the conference.

Scale and relevance

Five thousand people… that’s a lot of people. Particularly when they all commit to a four-figure ticket, with a pricey hotel in a pricey town, and often with lengthy flights to get there. A few years ago, during the boom, only two thousand could make that level of commitment. Something has clearly changed.

But the industry level of commitment has changed too. Looking down the partner list at the keynotes… lots of major, mainstream companies are now delivering rich interfaces to their vast audiences.

This year’s event drew far more press attention too.

What caused the change, the increase in general importance?

  • “Experience matters” has been ratified by the industry. Apple’s iPhone helped the West accept rich experiences across device form-factors. Microsoft’s Silverlight and Google’s Gears helped the acceptance of predictable cross-browser functionality. Mozilla’s Prism acknowledged the need for network applications beyond a promiscuous document browser. Ajax helped the public accept the idea of processing both server-side and client-side, in tandem. The Open Screen Project brought all the players together for mobile delivery. Macromedia proclaimed some revolutionary things, and in 2008 everyone agrees.

  • We’ve actually achieved the goals of standard tooling, high-functionality servers, and predictable universal runtimes. Virtually every visual artifact we see these days has passed through the Creative Suite pipeline at some point. ColdFusion, FMS and CoCoMo span deployment models. And there’s now little remaining disagreement that Player is the de facto standard for advanced clientside work. This acknowledgment has really firmed up over the past twelve months. Production and distribution are solid.
  • The economic constriction has cut down on some of the frothy competition for attention. This year there’s more of an emphasis on solid, reliable performers. Adobe is conservative and diversified, but focuses squarely on enabling publishing, communication.

There are certainly other reasons for the increased size and importance of this event. Whatever the causes, this year’s MAX conference did clearly carry more meaning, to more people, than ever before.

Macromedia Flash Platform, vs Adobe Flash Platform

A few years ago Macromedia used the term “Flash Platform” to talk about the general ecosystem growing around the new Flex, Flash Media Server, Breeze initiatives. This year, “Adobe Flash Platform” was used to describe the quickly-growing ecosystem. I see a big difference.

The Macromedia Flash Platform talked about a promise, the way things could be, the way things might better fit together. The Adobe Flash Platform talks about the way things already are, how people are using capabilities right now, as a guide for new areas to explore in the future.

Flex is out there in the world today, creating public interfaces. Flash video has become the standard. Conferencing has gone mainstream in Acrobat. Desktop tooling is going to the web. Flash is used to re-organize the interface of desktop tools. ColdFusion is very Flash-savvy. There are almost a billion devices shipped with Flash. It’s different today.

The older Macromedia Flash Platform was more of a promise, a vision, a gamble, a bet. Today’s Adobe Flash Platform describes the world’s reality, and how this can grow in the future.

Same “Flash Platform” phrase, but for me, two different sets of context, of meaning.

Future changes

There’s a lot of work we’ve all still got to do.

Start with the little screen, then progressively-enhance to the big screen.

The laptop will still be important. It just won’t be the only thing that’s important. We need to shift our design awareness from the workstation to the pocket.

Adobe used to make the desktop browser plugin, and then try to shrink it down to the handheld. The computer was the standard, and then we refactored down to less-capable devices. You know how hard it was to develop against that.

Now, with more handhelds using open operating systems, there will be one “Adobe Flash Player” powering all display screens. No more “Lite” versions. Mobile will be as-near-to-parity with desktops as possible. There will be one codebase across all interactive screens, but with additional abilities available on more capable devices.

And… in open operating systems (like Symbian, Linux, Windows Mobile, Android) you can install or update a Player yourself, like in desktop browsers.

Developmental profiling will be based on the hardware — the pixel size of the display, offline capability, whether location-aware — rather than by which runtime version was baked into it at time of manufacture.

Upshot? The reach of your project will be greater including the mobile audience, than excluding it. And progressive-enhancement beats graceful-degradation. We need to start considering the mobile experience first, then adding to it.

Client and Cloud, Connected.

The RIA talk over the past half-decade has been about the technology, about how we achieve a mix of cloud and client computing. Now that the technology is well-distributed and predictable, we need to figure out how to best use it.

We need to design for multiple screens. All workstations are on The Internet now. Mobile is finally catching up in North America. And home television is slowly coming along as well. Our applications and data are increasingly moving to “The Cloud”, to remote machines. We’re going to want a coherent experience across those different display screens.

We’ll be in different social settings when using those screens. You’re on-the-go with mobile, and can’t drill down as deeply as at your desktop. Both are different from checking your finances on the couch across from the video wall. Right now we tend to “design an interface”. It’s going to have to move to “design a set of experiences”, which are sensitive to the varying user-situations.

And we really don’t understand social networks yet either. Web2.0 stumbled upon a few good models, but even the best services still have spam and gaming. Yet we need to make it easy to get good advice from friends, and filter out the rest of the noise. Social networks are in their infancy.

We’ve got the technology to have all your devices work together. Now we’ve got to design those experiences.

Those are some of the most important things I learned at MAX this year. But I’m still reading what others experienced, trying to understand it better. I’ll do a follow-up post with some additional items.

Relying upon the existing

Two items hit the newswires today, from Joost and the BBC. These items seem to reinforce each other.

Joost, a video delivery service, changed its delivery from an installed desktop client to browser delivery via Flash. The requirement to install a plugin download manager also went away.

Result? Joost is now easier to view, and for more people too.

That’s what Adobe does… it provides neutral publishing technology, that anyone is free to use. Adobe’s business model is based on selling optional efficiencies into these new publishing platforms. Has been for years.

People resist downloading and installing things. It’s a hassle, it might not work, it might turn out to be a risk. How do you enable a wide audience for what you publish? Remove the barriers to viewing it. It’s easiest to rely upon what everyone has already installed. Flash makes sense.

(Aside: There’s peer-to-peer support in Adobe Flash Player 10 (“Astro”), but not for constant disk activity like video.)

Joost took advantage of lower viewing costs for their audience. That was probably a bigger driver than their own reduced development costs.

And also today, Erik Huggers broke the news that the BBC is using AIR:

Today, we are announcing that in partnership with Adobe we are building a platform-neutral download client.

Using Adobe Integrated Runtime (AIR), we intend to make BBC iPlayer download functionality available on Mac, Linux and Windows for the first time later this year. Whatever platform you use, you’ll now be able to download TV programmes from the BBC to watch later – on the train, in the garden, or wherever you like.

I don’t know details yet… the BBC’s Internet Blog aggregator has had a lot of good articles in the past, and is the best place to watch for future news. Achieving platform-neutral distribution is a tough task, but that’s what Adobe already specializes in. People have anticipated services like the BBC going beyond the browser, and here it is. Makes sense.

A predictable publishing platform for the world’s interactive display surfaces… tooling and runtimes already de facto standards. That publishing platform already exists. Makes sense to use it, true?

CS4 painpoints

Macromedia joined Adobe in December 2005. Creative Suite 3 picked low-hanging fruit: the most important stuff which could be developed, tested, and released by Spring 2007.

Now Creative Suite 4 tackles some of the harder problems — significant workflow efficiency gets a major investment, Photoshop innovates like crazy, Dreamweaver’s “Related Files” and “Code Navigator” and “Live View” change everything. And then, there’s Flash. And wait, Alan will get angry at me if I don’t mention Fireworks. And…. ;-)

CS4 is the first full development cycle available from the Adobe/Macromedia merging. It’s a great release. Economical. And fun too. I think it’ll make a big splash.

But some things are going to hurt. Here’s where I suspect the biggest painpoints will be:

  1. Global pricing. Why is it cheaper to fly to buy it? I don’t know, but I’ve pressed a lot on this too. My best guess is that pricing decisions are decentralized to different legal regions, so it’s hard for anyone to take ownership for an answer. This was already an issue after announcement, and will continue to be an issue after delivery. I’m sorry, I don’t have a good answer here.
  2. Installers. They’re big. They’re objectionable. And then there’s the Updater. I know that there’s been a large amount of improvement done here, but more is needed. We saw “global pricing” as a big issue after launch, but I think installer complaints will get bigger after delivery. I hope the whole installation/update experience will go well for you personally, but I have to apologize in advance if they don’t. We need to do better at taking the pain out of keeping current.
  3. Trial availability. The big shipping versions get released first. Then the full set of languages and trial versions and other derivatives enter the production pipeline. The FAQ says that CS4 trials are expected online in mid-November. I know it’s maddening to see new software available, and not be able to try it — I expect the pain to be intense. Adobe provides the varied creative tools for everyone in the world, and it takes us a few weeks to crank everything through the pipeline. It’ll hurt, I’m sorry, but the trials will be up in about 30 days, and then this problem will go away.

    (And please don’t be tempted by blackmarket software, ’cause you don’t know where it’s been. Malware scammers will definitely find this gap attractive.)

Anyway, CS4 is great. The people who put it together are amazing, and this time they had the extra months to do some really fun things, some really deep things. I think CS4 will be remembered as a landmark release.

But the above are some areas where we risk not meeting customer expectations. It’s not through unawareness, and internally we’re already trying to do better. We just didn’t get far enough soon enough to ease the above painpoints this time. I can only hope my apology helps take the sting out a bit.

Hope you love the rest of the stuff, though. ;-)

Where’s Adobe blocked?

At PBS Mediashift, Jessica Dheere wrote on “Google Blocks Chrome Browser Use in Syria, Iran”. This made me curious about Adobe, so I searched on “ ‘north korea’”. This turned up the Adobe website’s Terms of Use, which describes it this way:

The export and re-export of Adobe Software are controlled by the United States Export Administration Regulations, and such Software may not be exported or re-exported to Cuba, Iran, Libya, North Korea, Sudan, Syria, or any country to which the United States embargoes goods. In addition, the Software may not be distributed to persons on the Table of Denial Orders, the Entity List, or the List of Specially Designated Nationals.

By downloading Software, you are certifying that you are not a national of Cuba, Iran, Libya, North Korea, Sudan, Syria or any country to which the United States embargoes goods, and that you are not a person on the Table of Denial Orders, the Entity List, or the List of Specially Designated Nationals.

From this, I’m assuming both companies are legally bound by the US regulations on cryptographic export, which were logical enough after cryptography won World War II, but which are in a different environment today. Browsers use cryptography for secure communications with servers. No digital lock is uncrackable, but they do add to the cost of unwanted eavesdropping.

Anyway, if you were wondering too, then that’s the link…. ;-)

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.

Geschke on corporate reinvention, betting the business

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. This Knowledge@Wharton interview with Adobe co-founder Charles Geschke can give you deep background on how the people of Adobe look at things.

Yesterday I pulled out a section on core history with standards… the “open” model with PostScript, PDF and SWF is very similar to the model with HTML, JavaScript and CSS. Here’s a section on how the company has reinvented itself a few times, from turnkey systems provider to PostScript licensing to shrinkwrap software for a consumer channel, then enterprise, and now the various web models.

The early company was based on the idea of providing complete digital printing systems to the types of large companies which were then investing in early computers for database and processing:

Bill Hambrecht was one of the first guys pushing venture investing in high-tech companies. We told him our plan, which was to build a complete turnkey publishing system — the computers, the printers, the typesetting equipment, everything — and sell it to the Fortune 500 so they could bring a lot of their production work in house. He liked the idea because he hated financial printers. Every time he did a prospectus he felt that he was being robbed. He agreed to invest $2.5 million over two years in two equal payments and told us we would have to quit our jobs….

But once they started meeting with potential customers and partners, a need arose which was greater than that for printing systems integration. Both Digital Equipment and Apple had computers themselves, and had printer deals, but were stuck at getting the two to work together — to be able to create and edit a document with a computer at screen resolution, and have it be understood by a printer at high resolution.

Knowledge@Wharton: This is how Adobe began as a printer software company?

Geschke: Yes. We developed the [PostScript] language after we left PARC. What really caught people’s attention was what we were doing in terms of rendering type on-the-fly from outlines [the curves used to define the characters of a typeface at any size or angle].

Popular mythology at the time said that couldn’t be done; you have to hire a bunch of monks to build bitmaps. We knew that wouldn’t fly because we really wanted [to do] arbitrary expansion and contraction [of the typefaces]. You could never have enough bitmaps or enough typefaces to satisfy the printing world. It was just infeasible. You had to do it from outlines. We eventually developed software that did that and continue to use it today.

(It’s funny… what PostScript did with curves-to-dots across early computers and printers, Flash did with vector rendering in the early web-browsers. It’s hard to remember today, but the big reason people first started noticing Flash was that it used “scalable vector graphics” for smooth drawings regardless of resolution, offering very small filesizes for large drawings of low detail.)

PostScript was cloned and resold by competitors, but the Adobe implementation finally ended up as the most important in the printing ecology it spawned. But at this point a new need emerged: the need to be able to actually design with the new publishing technology. A new type of business needed to be invested in and developed, that of software which could be sold to individuals. This was not easy:

Knowledge@Wharton: How was it to go from being a company that sold printer software to OEMs [original equipment manufacturers] to being a shrink-wrapped desktop software company with products like Illustrator and Photoshop?

Geschke: It was a “come to Jesus” moment inside the company, because all the profits were being made by PostScript. As we began to invest in not only development, which was relatively inexpensive — just a few people — but more importantly in building a sales and marketing presence in the retail channel, we were chewing up resources. It was difficult in the early days to demonstrate profitability in that business. Every time we would have a budget debate, you can imagine how that went: “I’m bringing in most of the money. I should be getting these resources.”

Knowledge@Wharton: What motivated you to stick with this second line of business?

Geschke: One of the obvious lessons in business is that you can’t continue to be a one product company and survive. We also felt we couldn’t be a one channel company and survive. We were captive of those OEMs [of PostScript printers]. If they ever decided to drop us, we [would have been] toast. We had no channel.

John’s wife was — and is — a graphic designer. John had a second job [when he went] home at night writing PostScript code to do what she wanted to do on the LaserWriter. He got a couple of engineers to come up with Illustrator. We launched Illustrator and it did very well.

We realized then that we spent a lot of money to build a retail channel and a sales force and we had to feed it. There had to be more products….

Turnkey provider, to printer software developer, to digital creative tools sold at retail. The next jump was to dealing with entire documents across all types of machines, rather than just isolated files. The Portable Document Format and Adobe Acrobat were the next round of investment, development, and ultimately worldly innovation:

Knowledge@Wharton: For a long time it cost Adobe more to develop and market Acrobat than the revenue it returned.

Geschke: Oh yeah, the antibodies inside the company were just all over it.

Knowledge@Wharton: People wanted to kill the product?

Geschke: Of course, because they said, “Look, we’re selling all this Photoshop. We’re selling all these printers. Why the hell are we investing in this thing, and giving it away?”

Knowledge@Wharton: Why did you continue to invest in Acrobat for so long? What gave you the confidence to continue to pour money into it?

Geschke: Your own instincts. You can’t analyze a market that has never existed.

This theme, of radically changing the company to fulfill what the future requires, continues today:

We instinctively knew that was where things were going. The only business book that John and I ever read, and the only chapter that I remember from it was a chapter entitled “Market Gap Analysis.” The one idea I remember was that it is easier to build a business if you find a new solution to an already perceived problem that no one has come out with before — because you instantly are [at] 100% market share.

We did that with PostScript, we did that with Illustrator, and we were going to do it with Photoshop even though we knew we were going in early. And it has worked out very well.

We did the same thing with Acrobat. We brought Acrobat out about three years before the Internet really took off, thinking that local area networking would be enough to support it, but it wasn’t.

And we’re trying to do the same thing with AIR [the Adobe Integrated Runtime development platform for cross-operating system software]: Bring it out before anyone else has the idea of the concept, get the platform established, and then shame on us if we can’t make money off it.

Knowledge@Wharton: While the technology has changed greatly over the past two decades, there appears to be a certain consistency in Adobe’s business strategy.

True. And where does this lead?

Knowledge@Wharton: What do you think is the biggest challenge Adobe is facing going forward?

Geschke: Inventing the future. We’ll never succeed unless we continue to open up new vistas.

I honestly believe that our technology and what’s happening in the market — where essentially all visual communication is going to the web — is the sweetheart point in our whole envelope of products and technologies. Shame on us if we can’t figure out a way to take advantage of that shift in the way the world is moving with the distribution of information.

A lot of what are there today — the limitations of browsers and of the web imaging standards — are things that we think we have a solution for.

There’s indeed “a certain consistency” in all this. It’s “inventing the future.”

From seeing the need for general digital publishing, to changing the business to focus on a gap in the ecology, to expanding outwards to the creation of standalone software and a retail channel, to the building of a document business, and now to the building of a universal media-application platform… each “molting” of the business required a clear commitment to the next generation of growth… betting big on that inevitability which cannot yet be proven. You can see the newest stage of this evolution today.

Adobe invents new things. Its natural disposition is to generate solutions for new problems, to anticipate needs for which there is yet no solution. Adobe then opens up the results, and makes them universally accessible, as the very key to its success. When one generation of problem is addressed, the company bets hard on solutions for the next important problem.

If you want to know how Adobe will act in its future, then look at how consistently it has acted in its past.

Geschke on practical standards, the necessities and risks

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.

I’ve been reading and re-reading this interview with Charles Geschke since it appeared last week. There’s a lot that’s pertinent to today’s issues.

Here they discuss how PostScript… well, read it yourself first, and I’ll add some of my own reactions at the bottom….

Knowledge@Wharton: From the beginning, you documented the specification for the PostScript language.

Geschke: Yes. We published the spec about three or four months before the first LaserWriter shipped.

Knowledge@Wharton: These days this is fairly common practice to help establish a standard platform, but it was much less common back then. Was this merely a practical necessity because people needed to write software to drive PostScript printers or was this a strategic move to establish PostScript as a standard?

Geschke: It wasn’t strategic in the sense that we understood this would become a standard way of doing business. It was the only way we could figure out to get the hardware manufacturers and the software developers and the platform vendors to collaborate. You couldn’t do independent deals with each of them because there would always be somebody left out.

If you really wanted to make it a standard — and our goal from the beginning was to have it be a universal standard — you have to publish. You just have no choice. You’re taking the risk that someone will do a better job of implementing it. We had the self confidence that we would always have the best implementation, and that has turned out to be true.

Knowledge@Wharton: A lot of PostScript clones did come along eventually.

Geschke: At one time there were over 75 of them.

Knowledge@Wharton: Did it ever worry you that they would start to chip away at your market share?

Geschke: No. But it turned out that Microsoft acquired one of them.

Knowledge@Wharton: From Bauer Enterprises.

Geschke: Right. TrueImage, they called it. Microsoft did a deal to license TrueImage [to Apple] and Apple would license TrueType to Microsoft. That was pretty scary for us.

Knowledge@Wharton: When did you first hear about the Microsoft-Apple partnership for TrueImage and TrueType?

Geschke: A few days before it was announced….

(More on the TrueImage/TrueType story: [1], [2].)

The “PostScript Red Book” was the language specification, and the “Blue Book” was a language tutorial and cookbook. Adobe decided how PostScript evolved, true — it was corporate governance, not consortium governance (and you could argue that a company listens to its customers better than a consortium does) — but PostScript was free, open, documented, and internally competitive back in the 1980s.

PDF did the same thing in the early 90s — Adobe was open with “how PDFs act”, even though it didn’t give away its recipe for “how to make it act that way”. In the late 90s Macromedia did the same thing with SWF, saying “here’s how a SWF file should act”.

Like HTML, the spec told you how a file should behave, and didn’t need to include sourcecode to a particular application.

If you really wanted to make it a standard — and our goal from the beginning was to have it be a universal standard — you have to publish. You just have no choice. You’re taking the risk that someone will do a better job of implementing it. We had the self confidence that we would always have the best implementation, and that has turned out to be true.

The SWF file format was first published in 1998, and has been updated with every release. In the early days it also included runtime sourcecode and SDKs, and this was the basis for Oliver Debon’s wonderful early work, which was later recycled into SWFDec, Gnash, and a number of other clones (I’d cite links, but The Web suffers linkrot.) HTML, JavaScript, CSS, none of those file formats include rendering engine sourcecode. PostScript and PDF predated these, and Flash followed the same approach later. All focused on published file formats, with the big difference between governance by a consortium, or governance by a company.

That’s history. The important thing for today? This mindset permeates Adobe. This is the corporate memory. This is what drove the evolution of the group, its beliefs, its understandings.

To achieve something new and useful, you have to have allies. You have to be clear in what you’re trying to do, and commit to it with a public specification, a promise of how functionality “should” behave. There’s the risk another group will undercut you, but it’s a risk which must be accepted if you hope to achieve progress.

From what I’ve seen since the Macromedia acquisition, this awareness on open formats to encourage consensus upon innovative technology runs throughout the company even today. And, from what Adobe’s founder tells above, it was there from the start, before The Web, even before The Internet publicly opened up.

Read the interview again. To bring about a new technology ecology, Adobe continually commits to a public specification, drawing in both partners and competitors, and trusts to innovate quickly within that new, growing area.

If you want to understand Adobe, it’s essential to understand this cultural memory of opening up, becoming vulnerable, yet innovating quickly.