In fact, when we decided to enter the adjacent
market of digital marketing in 2009, we did so
by acquiring a cloud computing company,
Omniture Inc. While no cloud company had
successfully challenged Adobe in creative software, our largest business area, we believed it
was only a matter of time before that model
would prevail in our market, too. We also noticed that software companies in adjacent
markets were moving to subscription models.
Changes to Growth Profile Adobe had
started to observe changes to its growth
profile several years before we made the transition to a cloud-based offering. Our growth
had slowed, and more concerning, an increasing proportion of our growth was
coming from price increases and upselling
to existing customers rather than from new
customers. We feared that the high initial
price for our software was a barrier to millennials entering the workplace.
We also had concerns about our ability to
continue to sell upgrades to existing custom-
ers. We had high customer satisfaction, but
our research found that many of our custom-
ers were so satisfied with our current products
that they weren’t sure they would have a rea-
son to upgrade in the future. We needed new
innovation approaches to rekindle excite-
ment among our existing customers, and we
needed to bring in more customers.
In 2008, we began a small pilot in Australia and New Zealand, testing a subscription
model that allowed customers to obtain our
product with a relatively low monthly fee as
an alternative to outright purchase of the
software. We found that the new offering
brought new customers into the market and
encouraged existing customers to buy who
would not have chosen to upgrade. In fact, we
realized that cloud computing with a subscription model could be a solution both to
subscriber growth and to having new types of
innovation to offer to existing customers.
After many discussions and extensive
modeling and scenario testing, in 2011 we
announced plans for the rollout of a cloud-
based subscription offering called Creative
Cloud. We quickly learned that making a
change of this magnitude would affect prac-
tically every job in the company. While our
initial strategy was to run our traditional
model and a new subscription model in par-
allel, we came to adopt a “burn the boats”
strategy to accelerate our transition to the
new model; we needed our employees to un-
derstand there was no going back to the old
way of doing business. The result was, we
believe, one of the fastest transitions to a sub-
scription model in the software industry.
There is a lesson here for others, especially
those who would wait until they started to
see an impact on their own business and only
then begin to experiment. There is an experience curve, and even with an all-in focus, it
can take years to make the transformation.
Companies taking a more cautious approach could fall so far behind a disruptive
competitor that they never recover.
Actually, Adobe Did Wait
BY JOSHUA S. GANS
The idea that companies face a dilemma between acting quickly and being cautious when it comes
to disruption lies at the heart of why disruption is such a
difficult managerial issue. Daniel Cohen’s account of
Adobe’s transformation reflects that dilemma.
Benchmarked against its established software
counterparts, Adobe’s choice to move exclusively
to cloud-based services was bold. But it also
reflected years of studying industry trends. By
the time Adobe made its move, it had had about
a decade to observe first the emergence and then
the growth of cloud computing and a subscription
model in other parts of the software industry. Newer
entrants in the industry were almost exclusively cloud
based — especially those offering productivity tools, such
as Google Inc.’s office suite. They were the reason a younger
generation was amenable to cloud-based products.
One reason companies have some time to wait
and see is that when a new entrant gains traction, the
incumbent often has the option of acquiring the
entrant. This is precisely what Adobe did in 2009
when it decided to enter the adjacent market of
digital marketing by acquiring the cloud-based com-
Adobe has weathered a technological storm to
preserve its strengths and build a more sustainable future. But it didn’t do these things by
shifting to a cloud-based subscription model as
soon as that model began emerging in the software industry. Instead, Adobe applied caution
and calculation to successfully manage what was
likely a difficult transition. Cohen’s account of
Adobe’s transformation should be read as a call to alertness and then intelligent action — and many executives would do
well to keep its teachings in mind.
Comment on this article at http://sloanreview.mit.edu/x/58229, or contact either of the authors at email@example.com.
Reprint 58229. For ordering information, see page 4. Copyright © Massachusetts Institute of Technology, 2017. All rights reserved.
Joshua S. Gans
holds the Jeffrey S. Skoll
Chair in Technical
Innovation and Entrepreneurship
at the University of Toronto’s
Rotman School of Management,
in Canada, and is the
author of the book
The Disruption Dilemma
(MIT Press, 2016).
Warding Off the Threat of Disruption (Continued from page 96)