How Shantanu Narayen transformed Adobe

0:00Shantanu Narayen:On Masters of Scale, we talk a lot about inflection points, those moments when a technology stops being optional and starts being fundamental. AI presents one of those moments, and behind every breakthrough, whether it's medical research or education or even cinematic visual effects, there's infrastructure most people never see. As the essential cloud for AI, CoreWeave is building that foundation. It provides a purpose-built AI cloud designed specifically for pioneers at leading AI labs and enterprises ready to power the biggest ideas and the boldest ambitions. Ready for anything. Ready for AI.

0:44Shantanu Narayen:To learn more about how CoreWeave powers the world's best AI, go to coreweave.com slash ready for anything.

0:53Reid Hoffman:I wish I could look at you and say, we knew all of that up front. We didn't.

1:00Shantanu Narayen: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 Narayan 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. There was a lot of opposition from existing customers as well, because they were a little skeptical and or cynical about why Adobe was doing it.

1:35Reid Hoffman:But there was a lot of excitement.

1:38Shantanu Narayen:This transformation wasn't just about the sales model for Adobe. It also revealed a more powerful way to respond to customers' needs.

1:47Reid Hoffman: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.

2:04Shantanu Narayen: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 30 ,000 people. You've got to have incredible talent at every position. It's like this huge push. There are fires burning when you're going home. Can you believe it? Such an idiot.

2:26Reid Hoffman:And then you go back to, this is totally going to be amazing.

2:29Shantanu Narayen:There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a three-bedroom apartment. Stuff that just seems absolutely nut balls. Ten years later, we're like, well, that's just how you do it. We haven't made it just how you do it.

2:48Shantanu Narayen:This is Masters of Scale.

2:53Shantanu Narayen: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$21 billion in revenue last year. I wanted to talk to CEO Shantanu Narayan about how he ensures that his long-established brand stays innovative.

3:29Shantanu Narayen:Shantanu, good to see you. Welcome to Masters of Scale. Thanks for having me, Reid. Excited. I've been looking forward 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 1998?

3:55Reid Hoffman:When I joined Adobe in 98, we were hard at work on InDesign. Adobe had this vision for how do we create a brand new platform from scratch that allows people to do professional layout. And that was one of my first products that I worked on at Adobe.

4:16Shantanu Narayen:Less than a decade after you joined Adobe, you became its CEO. Was it a goal of yours? What was the process in which that happened? Was it a surprise?

4:25Reid Hoffman:It was a surprise. And even now, when I look back upon it, Reed, you sort of have to pinch yourself because it was magical. I think the company went through a couple of big transformations. I joined in June of 98. There was an economic issue in Japan. The company hit the wall. And we had to have a very significant layoff. And the company sort of said, hey, we know we hired you as a quote-unquote GM, but 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, which was important.

5:07Reid Hoffman:And I think it was that flexibility. I would also say, you know, you have to be right person, right time. and Bruce Chisholm, 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 complimented him with a lot of the business side. And then when he decided he wanted to retire, so 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 loved what I did. 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 professional moments of my life.

5:52Shantanu Narayen:It's been nearly 20 years, so it's been an awesome run. Let's start a little bit with your leadership approach. When you came into the job, what was your kind of theory of being kind of a CEO leading an 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 scale public CEOs should do in their leadership of the organization? 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.

6:25Reid Hoffman:And so I would say 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 try and do that now every year and say, you know, there's so much sort of table stakes of what you do, but 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 think initially I was like, okay, let me just continue to do the things that I was doing.

7:08Reid Hoffman: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 leaders, our most valuable commodity is time.

7:50Reid Hoffman:So 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 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 to opine. And I'm very comfortable with it. But initially, I think I would say, wow, this is where, you know, a good group of people. And so I think that way also, you know, my management style has changed a little bit.

8:29Shantanu Narayen:And how do you kind of balance between that setting of strategic direction, you know, the coordination of the exec staff, the deliberate creation of culture? What are the kind of the elements that are 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?

8:51Reid Hoffman:I think most leaders, and it doesn't matter at what level you're providing leadership, you have to create a vision. And if you're a first line manager, you're creating a vision for the group. If you're a CEO, you're hopefully creating a vision for the company. You have to have the team in place and who is the right team. Are you leveraging the superpowers of the team that exists, whether it's a small group or a large company? And third, I would say you You have to have a cadence for execution because having the strategy without the associated execution is not going to be effective. And so I think with scale, how you do it and where you do it changes.

9:35Reid Hoffman:But at the end of the day, I still have, you know, eight or 10 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 appreciate.

9:50Shantanu Narayen:One of the biggest pivots the company has made under your leadership, which is the shift to the creative cloud subscription model. How was it thought about? How were the risks managed? What made you conclude that this was an important thing to do?

10:04Reid Hoffman:If you go back to where we were, I mean, the reality was the company was doing really quite well. But when the recession of 2009 hit, we were a considered purchase. And so given we were a considered purchase and potentially a discretionary purchase, the revenue dropped quite precipitously. And when the revenue drops in a company that is software, which, as you know, 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.

10:43Reid Hoffman:And so trying to achieve financial stability and financial, you know, sort of growth was a key priority. On the other side, the product teams would say, hey, we have this 12 or 18-month product cycle. Innovation doesn't happen in 12 or 18 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?

11:21Reid Hoffman:You mentioned the word risk. And sometimes I say, Reid, I didn't view it as risk. For some reason, risk seems irresponsible to me. I would say we made an investment. And, you know, sometimes those investments work. 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 transform.

11:46Shantanu Narayen:Well, I think this kind of transformation must have also been met with some uncertainty, concern, reaction from your customers, the creatives. How did you kind of navigate through that?

11:59Reid Hoffman:It's a great question. And as I think about it, and I think that's true even now with AI, You have always two sets of customers, one of whom who are going to embrace that immediately and see the benefit of it. And there are others who are probably going to be a little bit more inertia as it relates to change. Candidly, there was a lot of opposition from existing customers as well because they were a little 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.

12:39Reid Hoffman: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 delivering software that was expected to be always on. We had to make sure that we had compatibility between each of the versions of Photoshop that were out there. So 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.

13:17Reid Hoffman: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 10 features. If you want to vote on which ones are the most important, great. Give us that feedback. When you had this secretive, I'm working on this 12 or 18 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 wish I could look at you and say, yeah, we knew all of that up front.

13:55Reid Hoffman:We didn't.

13:56Shantanu Narayen: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.

14:07Reid Hoffman: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, trial, buy, use, and renew. It speaks to the customer lifecycle. 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 then hopefully they're new. And this focus on usage started. How were products developed prior? People would sit around a room. You'd say, hey, I think these three features are most important.

14:47Reid Hoffman:I would say, no, I think these three features are most important. Perhaps the person who had the loudest voice won. 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. And we had real surprises of what people were using. And it empowered product people because they finally could in these meetings tell us, hey, we know exactly what features are being used. So we're going to continue to invest in that. And ironically, you have less debates when that's what the usage reflects.

15:27Shantanu Narayen:Still ahead, how Shantanu is leading Adobe through an AI-fueled transformation.

15:40Shantanu Narayen:AI breakthroughs are quickly reshaping every industry around the world. Healthcare, education, science, entertainment, and beyond. But true global scale only happens when the underlying infrastructure can maintain pace with the rapid speed of innovation. As the essential cloud for AI, CoreWeave is a purpose-built cloud made for the real demands of today's most complex AI models, bringing the pace, performance, and partnership leading pioneers need to continue pushing boundaries. Ready for anything, ready for AI. To learn more about how CoreWeave powers the world's best AI, go to coreweave.com slash ready for anything.

16:22Shantanu Narayen:When you have a creative vision, you want total control from the first frame to the final render, which is why so many creative teams are using LTX2 from Lightrix. LTX2 is a next-generation open-source AI engine for audio and video built for teams who need production-ready quality and total control. It runs end-to-end creative workflows directly on your own device with 4K video, synchronized sound, and full creative flexibility. No bandwidth limits, no data leaving your machine, just the freedom to generate high-fidelity video with synchronized audio at roughly one-eighth the cost and one-seventh the rendering time of comparable tools.

17:06Shantanu Narayen:Start creating at ltx.io slash model. Welcome back to Masters of Scale. You can find this conversation and more on our YouTube channel. Next, I wanted to talk to Shantanu about Adobe's approach to AI.