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Masters of ScaleHow Adobe is leveraging AI (with CEO & Chair Shantanu Narayen) | Masters of Scale
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25 min read · 5,416 words- 0:00 – 1:56
Introducing Shantanu Narayen
- SNShantanu Narayen
I, I wish I could look at you and say, "Yeah, yeah, we knew all of that up front." We didn't.
- RHReid Hoffman
AI models are upending the market for tools that help people make things like illustrations and animations. But this isn't the first time Adobe CEO Shantanu Narayen has had to lead the iconic software company through a moment of monumental change. He spearheaded Adobe's transition to a cloud-based subscription model more than a decade ago.
- SNShantanu Narayen
There was a lot of opposition from existing customers as well because they were a little, uh, skeptical and/or cynical about why Adobe was doing it. But there was a lot of excitement.
- RHReid Hoffman
This transformation wasn't just about the sales model for Adobe. It also revealed a more powerful way to respond to customers' needs.
- SNShantanu Narayen
People would sit around a room. You'd say, "Hey, I think these three features are most important." I would say, "No, I think these three features are most important." Perhaps the person who had the loudest voice won, you know, that particular battle, right? Today, it's just the opposite.
- RHReid Hoffman
Shantanu is as passionate as ever about helping customers unleash their creativity. This week, we'll hear how he stays nimble, curious, and competitive while leading a global team of more than thirty thousand people. This is Masters of Scale. I'm Reid Hoffman, your host. Adobe makes essential software for creative professionals. There's Photoshop for editing images, Illustrator for creating designs, and now even its own generative AI imaging tool, Firefly. Altogether, Adobe's offerings brought in more than twenty-one billion dollars in revenue last year. I wanted to talk to CEO Shantanu Narayen about how he ensures that his long-established brand stays innovative. Shantanu, good to see you. Uh, welcome to Masters of Scale.
- SNShantanu Narayen
Thanks for having me, Reid. Excited.
- RHReid Hoffman
I've been looking forward
- 1:56 – 4:26
The journey to becoming Adobe's CEO
- RHReid Hoffman
to this a while. And one of the things that even with people I know that I love about doing this show, this interview, is to be able to ask some questions that we actually haven't covered in our various dinners and other things. So what was Adobe and the current state of software like when you first joined the company back in nineteen ninety-eight?
- SNShantanu Narayen
When I joined, uh, Adobe in ninety-eight, um, we were hard at work on, you know, InDesign. At that point, Quark was one of the leaders in desktop publishing, and Adobe had this vision for, you know, how do we create a brand-new, uh, platform from scratch that allows people to, you know, do professional layout. And that was one of my first products that I worked on at, uh, Adobe.
- RHReid Hoffman
Less than a decade after you do- you joined Adobe, you became its CEO. Was it a goal of yours? What was the process in which that happened? You know, was it, was it, was it a surprise?
- SNShantanu Narayen
It was a surprise. And, you know, even now when I look back upon it, Reid, you sort of have to pinch yourself and, you know, because it was magical. I, I think the company went through a couple of big transformations. In-- I joined in January ninety-eight. In June of ninety-eight, um, you know, there was, uh, an economic issue in Japan. The company hit the wall, and, you know, we had to have a very significant layoff. And the company sort of said, "Hey, we know we hired you as a, as a quote-unquote GM, but, you know, we want you to head up all layout technology." Hopefully, the company saw something in me which said, "Okay, I'm a product guy at heart, and we're a product company at heart, and I will do whatever the company wants," uh, you know, which was important. And so, um, I-- and I think it was that flexibility. Y- I would also say, you know, you have to be right person, right time. Bruce, uh, Chizen, who was the CEO before me and in many ways gave me a lot of these opportunities, he was more on the sales and marketing side. And so I was lucky in that I complemented him with a lot of the business side. Uh, and then when he decided he wanted to, uh, retire... So I, I can honestly say it wasn't like, okay, I was plotting the how do I get from point A to point B. I think I always showed initiative. I, I loved what I did. Uh, but when that final tap on the shoulder came and said, you know, "We'd like you to be the next CEO," you know, one of the most, uh, professional moments of my life.
- 4:26 – 8:42
The leadership lessons that Shantanu has learned as CEO
- RHReid Hoffman
Well, obviously, and you've-- it's been nearly twenty years, um, so it's been an awesome run. Let's start a little bit with your leadership approach. So when you, when you came into the job, what was your kind of theory of being, um, kind of a CEO leading a organization like Adobe, you know, a scale public company? How has your approach changed? What would you say is kind of the key things that, you know, kind of scale public CEOs should do in their leadership of the organization?
- SNShantanu Narayen
I was fortunate in that I grew up within the company, as I said, and I was COO, and I was, you know, head of products. And so I would say I, I made the mistake of thinking that, you know, even in this new role, I should just continue to do, you know, the kinds of things that I was doing. And I think, you know, all executives have to really sort of take a step back. I, I try and do that now every year and say, you know, there's so much sort of table stakes of what you do, but there's where can you really have impact and where can you really make a difference? Because when you have as vibrant an organization as Adobe has or the other companies, a lot of that, you have incredible employees who can take that on. And so I, I, I think initially I was like, "Okay, let me just continue to do the things that I was doing." And in retrospect, that was a mistake because you always have to think about how you're disrupting yourself. You always have to think about where are you uniquely Either qualified or expected to impact change. And impacting change, the larger the company gets, you know, the more difficult it potentially is. And so I would say the management style has changed a lot more as it relates to, you know, thinking about every year, okay, are there one or two areas that I should particularly focus on? I mean, AI, for example, and trying to understand AI over the last year has taken up a disproportionate amount of our time because we as, as leaders, our most valuable commodity is time. So I, I would say that's one learning. The second learning I would say is that when I first took over, I was like, "Wow, these are all my peers, and, you know, let's just go keep doing what we did." But I, I think as a leader, you have to be way more comfortable with ambiguity and way more comfortable with providing direction. I've been surprised to some degree how much people, you know, want you, uh, to opine, and I, I, I'm very comfortable with it. But initially, I think I would say, "Wow, this is where, you know, uh, a good group of people." And so I, I think that way also, uh, you know, my management style has changed a little bit.
- RHReid Hoffman
And how do you kind of balance between that setting of strategic direction, you know, the coordination of the exec staff, the, the deliberate creation of culture? Like, you know, what are the kind of the elements that are, you know, your style, and what are the things that you would, you know, kind of recommend other leaders pay attention to as you put those together?
- SNShantanu Narayen
Yeah, I, I think most leaders, and it doesn't matter at what level you're providing leadership, uh, you know, you have three things that you have to do. You have to create a vision, you know. And if you're a first-line manager, you're creating a vision for the group. If you're CEO, you're hopefully creating a vision for the company. Um, you have to have the team in place and, you know, uh, who is the right team? Are you, uh, leveraging the superpowers of the team that exists? So I, I mean, again, whether it's a small group or a large company. And third, I would say you have to have a, you know, cadence for execution because having the strategy without the associated execution is not going to be effective. And so I think with scale, uh, how you do it and where you do it changes. But at the end of the day, I still have, you know, eight or ten people reporting to me, right? And I have to, you know, make sure that I'm empowering them to do the right thing. So there is more commonality than I think people sometimes, uh,
- 8:42 – 10:45
Adobe's big pivot to the cloud
- SNShantanu Narayen
appreciate.
- RHReid Hoffman
One of the kind of the biggest pivots the company has made under your leadership, which is the shift to the Creative Cloud subscription model. How is this-- how was it thought about? How were the risks managed? What, what made you conclude that this was an important thing to do?
- SNShantanu Narayen
If you go back to, you know, where we were, I mean, the reality was the company was doing really quite well. But when the recession of two thousand and nine hit, um, we were a considered purchase. And so given we were a considered purchase and potentially a discretionary purchase, um, the revenue dropped quite precipitously. And when the revenue drops, um, in a company that is software, which [chuckles] as you know, uh, the biggest expense that you have is people-related expense. And so that really impacted me when we had to let people go because we were doing that not because of anything that they hadn't done, but because of the external environment. And so, uh, trying to achieve financial stability and financial, uh, you know, sort of growth was a key priority. On the other side, the product teams would say, "Hey, we have this twelve or eighteen-month product cycle." Innovation doesn't happen in twelve or eighteen months. It's happening at a far more rapid pace. Look at what's happening with the cloud. Look at what's happening with mobile. You know, I think people look at it and say, "Wow, Adobe was the first to pivot." Maybe we did just a better job of listening to, you know, what the incredible employees at the company were saying, "Hey, why aren't you allowing us to innovate faster?" You, y-you mentioned the word risk, and sometimes I say, Reid, I, I didn't view it as risk. For some reason, risk seems irresponsible to me. Um, I would say we made an investment and, you know, sometimes those investments work. And I-- of all people, I mean, you're the leader in thinking about venture and how you do investments. And so we made that investment. If it didn't work, we would have had to adapt and, and transform.
- 10:45 – 12:58
Importance of being transparent with customers
- RHReid Hoffman
This kind of transformation must have also been met with some uncertainty, concern, um, reaction from, you know, your, your, your customers, the creatives. You know, how, how did you kind of navigate through that?
- SNShantanu Narayen
It's a great question, and I-- as I think about it, and I think that's true even now with AI, you know, um, you have always two sets of customers, one of whom who are gonna embrace that immediately and see the benefit of it, and there are others who are probably gonna be a little bit more, uh, inertia as it relates to change. Candidly, there was a lot of opposition from existing customers as well because they were a little, uh, skeptical and or cynical about why Adobe was doing it. But there was a lot of excitement. The strategic decision to move to the cloud and the financial model in retrospect, that may have actually been the easy one. Executing on it, because in parallel, we actually allowed people to buy the perpetual version or the subscription business. We had to transform how the company thought about, you know, delivering software that was expected to be always on. Uh, we had to make sure that we had compatibility between each of the versions of Photoshop that were out there. The heavy lifting On executing this flawlessly. In many ways, I think that's the underappreciated aspect of what the Adobe employees did. But I think, you know, that also stuck with me, which is let's be thoughtful, let's be deliberate, let's communicate with our customers. That was the other, you know, unintended benefit. Everything that we were working on, we had no reason to hide from our customers, right, Reid? I mean, we could basically, even today, we can say, "We're working on these ten features. If you wanna vote on which ones are the most important, great. Give us that feedback." When you had this secret of, "I'm working on this twelve or eighteen months, and I can't talk to you because if I talk to you, you may not buy my current version." So you know, it was self-reinforced by all these incredible, you know, benefits that we got that weren't completely obvious. I, I wish I could look at you and say, "Yeah, yeah, we knew all of that up front." We didn't.
- 12:58 – 14:12
Adobe's 'data-driven operating model'
- RHReid Hoffman
When Adobe switched to cloud-based subscriptions for their software, Shantanu's teams not only had to sell the product in new ways but also measure success differently.
- SNShantanu Narayen
So at the same time that we created this new model, we actually instituted within the company what we call a data-driven operating model. And the data-driven operating model talks about discover, buy-- discover, trial, buy, use, and renew. And it, it speaks to the customer life cycle. So we said, "Hey, in this new model, how are customers going to discover us? How are they going to try out the software? What do they buy? What's the right version? What's the usage?" And you know, then hopefully they renew. People would sit around a room. You'd say, "Hey, I think these three features are most important." I would say, "No, I think these three features are most important." Perhaps the person who had the loudest voice won, you know, that particular battle, right? Today, it's just the opposite. People are like, "Hey, here are some ideas." Either engage with your community or even better, put it into the software, market it, and see what gets used. So we're gonna continue to invest in that. And you know, those-- Ironically, you have less debates when that's what the usage reflects.
- 14:12 – 16:55
How Adobe is approaching AI
- RHReid Hoffman
Next, I wanted to talk to Shantanu about Adobe's approach to AI.
- SNShantanu Narayen
One of the things I think we do reasonably well at the company, Reid, is when you have such a profound, uh, you know, technology, uh, sort of shift that's happening, we really try to take a step back and sort of say, "What are some core hypotheses, you know, that we believe in that will guide the next few years of development, uh, you know, i-in this particular area?" And I'll give you an example of some of the things that we said in AI. I mean, we represent the creative community, so we said, if we create models, one of the things that we have to do is create a model where every piece of data that went into the creation of that model, we can testify to the fact that, you know, we have license to do that. Um, we created a hypothesis where we said, "What do people fear the most when you're trying to do creative expression?" The blank page. So if AI can enable you to take the idea that's in your head and express it in forms that are different from just using a menu, but you can have a conversational interface with it, why wouldn't that further make our products more affordable, more accessible, more fun to use? And so, you know, we have to embrace AI despite, you know, people saying potentially that there's opposition to it because it may replace humans. That was the third assertion we made. We said, people who use AI, this is an augmentation tool, and it will potentially replace people who don't use AI. Uh, and then if we don't do it as Adobe, somebody else is gonna do it, and we will find ourselves disrupted. And so I think as we started to think about it, we said on the ideation of creativity, on the prototyping, at the front end of the entire process, this is gonna be the biggest boon to creativity because people can use other modalities to talk about what they wanna do. Within the applications, we said, and within the creation of the models, let's be clear. Let's be clear on how we build our own models and why that's important for us for controllability. Let's understand how we support third-party models because, as you know, all of these models will have slightly different characteristics, profiles, you know, behaviors. And then we said, but at the end of the day, it's in the interfaces that we build that humans will actually derive the value associated with it. So you know, I, I think we had really good discourse and conversations around what is our stack, what's our framework, and what are we doing in each one of these spaces across customer segments. And so-- And that still
- 16:55 – 19:24
Why experimentation is so important for Adobe
- SNShantanu Narayen
guides us.
- RHReid Hoffman
And [clears throat] you know, one of the things that I think, you know, you've done a, you know, really good job at that a lot of tech companies and others are gonna have to figure out is like, okay, so we're gonna be, you know, kind of using an AI. How much did you decide we're gonna train our own? How much did you decide I'm gonna leverage, you know, open source? How much did you decide we're gonna partner? What were the balances of those considerations? Where are you now? Where do you think you're going in terms of the models and the, the various kind of generative capabilities that are part of the, you know, our current world?
- SNShantanu Narayen
You know, I, I, part of what I've always admired, Reid, is Sand Hill Road and how Sand Hill Road, you know, says, you know, as the biggest, uh, creation of companies and, you know, capital in the world is like run multiple experiments, right? I mean, how, how can you say yes to as many of those things as you can because they're all learning. I think it's probably fair to say at Adobe we're running experiments and innovating across each one of those, you know, different approaches, which is on the marketing side where, you know, we have one of the largest marketing technology businesses in the world. That's where we process so much customer data. There the customers are like, "Hey, we don't want our data, you know, uh- Used for you to commercialize. But if you can learn from our data and others' data in an anonymous way, you know, great, then that improves the state of the art for everybody. So I, I think they're different. PDF, we just recently introduced AI assistant for PDF, for Acrobat. You can have a conversational interface now with the PDF. Uh, the next step clearly is how do you do it across all of the documents, whether they be on your desktop or whether they be in the knowledge management system in the enterprise. And then the third step on that is how do you do it for vertical documents? Yesterday we announced that Contracts AI, which understand contracts and the semantic meaning of it. So, you know, I, I think like all good companies, you know, you experiment in different ways, and then you sort of bring the teams together and say, "Hey, how do we learn and what's the assertion that we're gonna make and what's the path forward?" But I, I, I think shutting down options too early in a company of our size and scale is actually a mistake. And so, you know, I-- this is all about learning and experimentation. And then at some point you have to make a decision, and you have to say, "Okay, this is the path that we're doing it." But why shut it down prematurely?
- 19:24 – 20:53
How will AI impact jobs?
- RHReid Hoffman
You know, I've just, you know, been here in New York launching my book, "Superagency." You know, part of this is that, you know, AI is, you said, augmentation, amplification intelligence. It gives us superpowers. Obviously, one of the things that people have as a worry as workers is, you know, where is it replacement?
- SNShantanu Narayen
I think the reality with all technology, all automation is, you know, I-- it introduces way more jobs and it disrupts some. And I, I, I don't think AI will be, uh, you know, that different. And a lot of the, you know, automation or menial things that people do, it, it'll force individuals to, you know, rise to a higher plane in terms of, you know, the work that they do. For creativity, we think it's that, "Hey, focus on that emotional story that you're trying to do, and, you know, focus on the customer segment." But it will, it will change a lot of the, you know, uh, I would say grunt work that does. And, and some people will find that threatening. Uh, but you've spent way more time and, you know, on where AGI is going and where all of this stuff is going. Uh, but I-- So I think you'll have both in, uh, in parallel, and that's the reality. That's the reality of these businesses. Every single industrial revolution or, you know, change that has happened has simultaneously disrupted some people but created way more opportunity. And
- 20:53 – 23:18
Go to where your customers are
- SNShantanu Narayen
I hope, uh, this is the same.
- RHReid Hoffman
Yeah. I com-- obviously completely agree. When you're looking at the future, it's through a glass darkly. All kinds of things are changing. Customers are changing, technology's changing, competition's changing, startups are changing. You know, Sand Hill Road, you know, throwing lots of different, you know, companies out and figuring that out. How much of it do you think y- it's kind of like a, "Hey, we've got this true north of how we're building, we're doing it internally," and how much of it will be, you know, like M&A or, or partnering or, you know, licensing things?
- SNShantanu Narayen
I, I think we take, uh, an approach where let's understand the stuff that we do well. I mean, with Acrobat and with AI Assistant and the pure tech stuff, we focus more on the applicability on that. We-- you know, the large language models, um, I'm sure you'd agree there'd be four or five people who have the capital to create those large language models and, you know, there'll be maybe one open source, there'll be three or four proprietary. And I think we take a very prudent, pragmatic approach. And the reality is also, you know, if you're an enterprise customer, some of you are gonna standardize on... I-- it's no different for me in how Adobe has thrived by saying, if there are different operating systems or platform, it's in Adobe's best interest to support whatever operating system or platform becomes the platform in which people want to accomplish what we want. I mean, I think Adobe in many ways, uh, won because we supported the Mac and we supported Windows. When iOS and Android came, we supported iOS and we supported, uh, you know, Android and iOS. I think in many ways, and I, I'd be curious your take, all these models are gonna be a different form of platforms, and so great. We should embrace that because, you know, you have to go to where people are, right? And so I-- at least I think of some of these models similar to how I've thought of operating systems, and it's like, hey, where do we leverage the functionality that's there, and where do we augment it by doing something? And so we're like, "Hey, let's go find another hill to climb where we can add differentiated value." So I'm curious as to you-- how you think about it, but that's in many ways we're thinking about it. So yes, we will partner, we will support the models, and we wanna leverage. I mean, I-- this has also become such a scale game in terms of dollars of investments that we'd be crazy not to leverage some of that investment.
- 23:18 – 24:48
How AI is changing Hollywood
- RHReid Hoffman
I a hundred percent agree. And how are you finding your interface with, like, the Hollywood industry? When I go down there and talk to them, they, they all are like, "Oh my God, AI." Um, and I'm kinda like, "No, no, you should be saying, 'Oh my God, AI. There's things you can do now.'" Um, you know, how, how are you finding that and, and, and are they beginning to realize what the kind of creative potential is?
- SNShantanu Narayen
I think so, Reid. I mean, I, I, I think so. I mean, people understand the cost of producing these movies, I mean, and the production and the post-production costs. I mean, take animation, right? And think about how much cost goes into the animation. So I think on the one hand, they're all incredibly excited about the prospect of dramatically increasing the amount of media that they can create for the same cost and accelerate the time to production. So I, you know, I-- that, that excitement I think exists. At the same time, to your point, the apprehension of what it means for certain roles, whether you're a scriptwriter, whether you're an actor, what that likeness is. Frankly, it's the large studios that are gonna be at the forefront of determining what they do. But I, I think the tide is turning in terms of, uh, the fact that the genie is out of the bottle right now in terms of, you know, this AI stuff. People recognize that this is something that they have to embrace, and to what degree and at what pace they embrace it, I think depends on who
- 24:48 – 27:11
How AI has impacted the job of a CEO
- SNShantanu Narayen
you are in that chain.
- RHReid Hoffman
And how, and how has the AI changed your job? Like, what are the things that kind of change in the way that you operate as a CEO, as Adobe CEO?
- SNShantanu Narayen
Well, you know, I-- this is actually not Shantanu talking to you. It's my AI avatar-
- RHReid Hoffman
[laughs]
- SNShantanu Narayen
Because the real Shantanu is out. No, I, uh, in, um, no. I, it's a great question, and, um, I, I, I'm not sure it's changed dramatically yet, um, honestly. And I think, you know, you've seen the software development teams talk about how much more productive it's made them. You hear the marketing organizations talked about how the agility in the marketing campaigns has gone up dramatically. I-- you know, for me, I, I would say the biggest profound impact is I get a lot of mail, and a lot of them have PDF attachments, and those are always the most, you know, um, thoughtful ones that I have to spend time on. And using AI Assistant for me in terms of nowadays every email that I get has the PDF attachment, and it has the AI, uh, you know, Acrobat summary so that I can look at it. And so I think hopefully becoming more efficient. But I, if you have any tips on what else I should be doing to make myself more productive, I'm, I'm all ears.
- RHReid Hoffman
Well, here's not now, but soon, um, I tend to think every professional will deploy with multiple AI agents. So almost everyone's doing mini management. And then that then composes up as you go through a company. And so part of the thing that I've been anticipating is the future of how organizations are gonna evolve is this notion of, you know, how are agents in the mix for individuals? How are agents in the mix for teams? You know, you can put that in a kind of a joking way. It's, "Well, my agent will talk to your agent." But in the joke there's also some interesting questions around information flow, decisioning, work.
- SNShantanu Narayen
Well, I'm aligned in your thinking associated with, hey, agents at the end of the day have to understand roles and tasks and, you know, personas that they're trying to, you know, represent and, and how they engage. I mean, I, I think the ultimate proof of, uh, how effective an agent is is when an agent can interface with an agent and an
- 27:11 – 30:33
Broadening creativity with AI
- SNShantanu Narayen
inter-- agent can interface with a human.
- RHReid Hoffman
Obviously, part of the other amazing thing that AI brings is enabling creativity across even a broader range of human beings and humanity. Where do you see that kind of space of creativity opening up, and where do you see kind of some experiments that Adobe might run or things that might try to the broadening of creativity across the, the, you know, kind of a, the human, across the human population?
- SNShantanu Narayen
Super, super excited about the prospect of that, Reid. We have this, uh, you know, saying within the company that we stand creativity for all, and enabling anybody to, you know, be creative is something that's a passion of ours. And, you know, more people are perhaps able to describe what they want to do in terms of creative expression than use the tools. And why isn't this the most empowering way for everybody to tell their story? And you know, on another dimension, why is it in education right now that all education and reports are still primarily text and numbers? Why isn't there an animation and a video and an image and a link to something else and, you know, feedback associated with every piece? When people talk about STEM, uh, you know, and the importance of STEM, we like to talk about the importance of STEAM. The world without arts would be a really boring place. I mean, can you imagine everything being one color and one font? And so we think that it's gonna be a, a massive unlock and one that we're super excited about.
- RHReid Hoffman
AI obviously creates huge amount of opportunity for reinvention. What are the principal challenges you see with it that you then need to help, you know, Adobe and the world navigate?
- SNShantanu Narayen
Part of our values is how we think about, uh, technology to, uh, you know, transform and unintended consequences of it. And so are we, you know, scouring the earth also to understand where there are good ideas and learning from them or buying them as companies. And so I, I, I do think it will have a, a lot of... It, it requires us to be way more agile. It requires us to be may-- way more vigilant. And it requires us to, you know, to embrace our own products. I've also always said people build their best products when they use them themselves. I think everybody's trying to think about every company and are they gonna be a AI secular winner or an AI secular loser, right? And it's incumbent on Adobe and us as leaders to demonstrate why AI is gonna make us even more of a leader than we are today.
- RHReid Hoffman
Shantanu, thank you very much. It's been a honor and pleasure as always, and I look forward to next time we have dinner.
- SNShantanu Narayen
Really enjoyed it, Reid. Thank you so much for having me on your show.
- RHReid Hoffman
I always love talking with Shantanu. I'm inspired by his optimism and curiosity about what our future holds. His decades of leadership at Adobe are an unparalleled example of how curiosity can keep your business competitive and your culture innovative. I'm Reid Hoffman. Thanks for listening. [outro music]
Episode duration: 30:33
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