Strong leaders watch carefully for key inflection points, trends in technology or customer habits that are going to impact their organization, and they jump out in front of them. But…this needs to be done carefully, finding ways to test the impact before making any final commitments.
Adobe, the makers of professional graphics software, such as Photoshop, is a good example of doing this well. Traditionally they have sold their products in boxes containing the software on CD’s. The customer uses it until there is a new version with some new features they are interested in. Software vendors charge a fair amount for these products since the customer may use it for a long time. For example, the Adobe Creative Suite, their flagship product, costs $2,600.
About a year ago, Adobe began offering their software as a subscription service, with the software sitting out on the Cloud (an Adobe server accessible via the internet). Making software applications available this way is a very popular new trend. Adobe has gotten out in front of it early. That Creative Suite mentioned above is available as Adobe Creative Cloud, and a twelve month subscription is $50/month.
The advantage for the customer is low cost and the fact that Adobe puts new features in the product all the time so you can benefit from them immediately, versus waiting for a new version with the features, and paying $2,600 again. The advantage for Adobe is a more predictable stream of revenue via the subscriptions, with none of the big spikes and low troughs associated with a bunch of customers buying a new version when it is released and then not buying again for 3 to 8 years.
To find out the consumer appeal of this new approach, Adobe tested it in a small market; Australia. Aussie customers loved it, and the financial results in that market matched Adobe’s goals.
Adobe did what good leaders do:
1.) Get out in front of the key inflection points to generate significant improvements – Not doing so will lead to mediocre performance versus how competition may be doing things.
2.) Look hard for ways to test the impact of the changes prior to making a full commitment – Such efforts are vitally important in avoiding a big mistake.
Adobe has fully implemented their subscription service model and the payoff has been impressive. Their stock price has doubled in the past 15 months.