Adobe MAX and a New View of the Software Paradox

Most industry conferences are intended to give a roadmap of things to come. While Adobe MAX successfully showcased some bright upcoming technology, one of my biggest takeaways from the show was a better understanding of the company’s history and the human side of the software paradox.

One of the values of attending a conference in person is getting a feel for the crowd. Understanding the audience helps contextualize the company’s messaging and intent for the event. Adobe MAX is Adobe’s conference centered around “creatives” or, less jargony-ly, the users of Adobe’s software.

Adobe did a good job keeping this crowd in mind with their messaging from stage. The first day’s keynote was focused on telling usability stories of Adobe’s product suite. Their second day was comprised of creative professionals telling inspirational stories about their career journeys. (Ron Howard is probably the most recognizable name here, but my favorite was Nicola Scott’s talk describing her path to drawing Wonder Woman for DC Comics.)

All of this is a round-about way of saying: Adobe’s focus for the event was on enabling and inspiring people who create for a living. And the conference was successful in appealing to this artistic and creative talent.

I’m not sure I’ve ever heard more audience reaction to a product demo than when Adobe announced the UX upgrades for Photoshop. Enhancements like double click to edit text, click away to auto-commit, Command-Z to undo color changes, and scaling proportionally without using the shift key – these may seem like relatively minor UX announcements to an outsider, but the audience reception was more enthusiastic than any I’ve seen in a product keynote.

There are a few takeaways from that reaction:

1. Photoshop users are passionate about the product.
2. Adobe knows their customer well. And they did a nice job building features that addressed the pain points of their user base.
3. Adobe can craft solid demos. Part of this is that visual tools are inherently easier to demo than some of their code-based counterparts, but part of this is also that Adobe did a great job explicitly storytelling how their new features would improve user workflows.

I don’t know if I’ve ever heard more audience “oooohs” during a keynote than I have during the #adobemax demos.

part of it is certainly because visual tools inherently demo well, but also the team has done a phenomenal job creating good before/after tooling demos. well done!

— Rachel Stephens (@rstephensme) October 15, 2018

I understand that relatively minor changes to a workflow can have a big impact on usability, but I continue to be struck by the force of the audience reaction compared to the magnitude of the features announced. Seeing the audience’s passion for the product firsthand provided some insight into one of the industry’s most notable case studies in shifting business models.

History Lesson: Licenses to SaaS

In 2013, Adobe eliminated their licensed software sales and moved exclusively to a subscription-based service. This opened their product to a wider user base, one who may not have needed a $650 software license but could afford $20/month. While the company didn’t dive into this change head first (they added half a million paid subscribers in the subscription’s first year when they offered both products concurrently), that doesn’t mean the move came without risks or pushback. As my colleague Steve O’Grady wrote in The Software Paradox:

By making the change to a subscription model, Adobe effectively abandoned its traditional model – the same traditional model of software sales that built it into a thirty billion dollar company – in favor of recurring revenue. This isn’t a change made lightly, nor one without costs: by transitioning to subscription revenue, Adobe is deliberately taking less money from its customer upfront. Which, in turn, tells us several things. First, that Adobe expects the profits on a customer’s lifetime value to exceed the return it could realize from the revenue up front. Second, that such a model has the potential to expand Adobe’s addressable market by creating an avenue for casual users to become paying customers, if only for a brief period. And third, and perhaps most importantly, the shift in the model is a signal that the days of shrink-wrapped, paid-up front software are nearing an end.

It’s easy for me to picture the financial pressures associated with changing a business model; recurring revenue streams are great, but the transition is not without pain. I can envision significant angst over changing the sales cycles (and sales compensation structures), the pressure associated with switching from a revenue model that is front-loaded to one that is ratable, and concerns over the accuracy of customer lifetime value calculations, amongst other things.

However, attending Adobe MAX gave me a better sense of the human factors that must also have been part of this decision.

1. In seeing the interaction between Adobe executives and the Adobe audience in person, I now have a much better appreciation for the executive courage that must have been required to make this change. Imagine knowing your users have a deep emotional response to announcements about when they use the shift key in their workflow. Then imagine telling them that you’ve decided to change the entire business and ownership model around that software.
2. Imagine being a user who uses a product so often and with such passion that it’s become part of your personal and professional identity. Imagine that the company that makes this software announces that you no longer get to own the software outright and instead must access it through a subscription. Imagine caring so deeply about owning this software that more than 50,000 of your fellow users signed a petition on change.org to protest the subscription model.

Witnessing the user reactions to the product announcements in 2018 gave me greater respect for the courage of conviction that must have been required to implement this business model change in 2013.

The heart of the Software Paradox is that software is increasingly important yet it is increasingly difficult to monetize. Per my colleague Steve:

The Software Paradox doesn’t discriminate between closed and open source software for the most part – but it may be more acutely felt [in the latter]. In either case, the most efficient and reliable commercial model moving forward is not likely to be on prem software that is either open or closed, but rather software offered as a managed service.

In 2013, Adobe saw this trend and reacted accordingly with a move to a SaaS model. This decision was not without angst in the user community. Ultimately, you can’t delight users without a sustainable business model; it takes strong leadership to stay the course when there is tension between pleasing your user base in the short-term and setting a long-term business strategy.

Disclaimer: Adobe is a RedMonk client and covered my T&E.