Getting Reorganization Right: How Bruce Chizen Drove Change and Innovation at Adobe Systems (page 7 of 7)

Although Adobe documents these formats, you, alone, still control them. Have you found a profitable middle ground between proprietary architectures and open source?

Chizen: With PostScript and PDF we found that publishing the specifications, making them open -- but not open standards, but not providing open source -- is the right path for us. Once something becomes a standard driven by a standards body, it moves at a glacial pace. And innovation slows down significantly, because you have to get everybody to agree, and there's lots of compromise. If you make it totally open source, you don't get a return on investment.

We believe that by opening up the specification, we allow other people to take advantage of it. But because we still own the source, we get to innovate around that standard more quickly than anybody else. We have found that to be a great balance. PDF is the best example of that. We work on Acrobat, we work on PDF, we announce the product, we ship it, we open up the specification. We're already working on a whole series of applications, and we're already working on the next version of PDF. It seems to work. Customers are willing to pay a price, and even a premium, if they believe what they're buying is innovative and reliable.

You can get [the open source imaging program] GIMP for free; you can get Photoshop for $699. Clearly people are spending $699 on Photoshop. So, we think we've struck the right balance.

Knowledge@Wharton: You talk about the need to make a profit on your work -- Acrobat is an interesting case in this regard. Throughout most of the ten-and-a-half years that it's been a product, it didn't make a profit. Now it's Adobe's most profitable product -- having surpassed Photoshop a couple of years ago. Why did Adobe keep investing in a product that was losing money for such a long time?

Chizen: We believed that if we could create the standard, we would have an advantage in building more and more applications, and we could make a lot of money on it. If you look at what Reader has done for Adobe, we are able not only to build Acrobat on top of it -- this quarter I think we did $108 million in Acrobat -- but we're able to build a server business on top of it. It's that vision about the future that helped us stay with Acrobat for those years.

Let me give you an example of how Acrobat evolved. In late 1998 or 1999 one of our customers, Pfizer, was trying to get us to make PDF more open -- in terms of extracting data and inputting data -- because the company wanted to do their clinical trials around PDF. The pharmaceutical business is all about getting to market fast. The quicker you get to market, the more money you make on the drug.

Pfizer would do field surveys -- and they could take years, because people would fill out a piece of paper, it would have to be mailed back to Groton, Conn., somebody would type it into their Oracle database, and then they'd submit paper to the Federal Drug Administration. By moving over to PDF, they ended up getting the first two drugs to market early enough to a point where Pfizer publicly said it would generate an additional $140 million in revenues on those two drugs. We said, "Well, this is ridiculous -- we just sold a couple of [copies of] Acrobat." They're using PDF. They spend a lot of money on custom development. Why don't we build tools to replace the need for all that custom development, so we could then sell them to everybody else?

That's what we've been working on for the past few years. That's where our server products are coming from. Now we can help anybody with document workflow, not just those with a great deal of money and foresight.

Knowledge@Wharton: If you were to look out five years, where would you expect Adobe to be?

Chizen: Today many customers still think of us as a graphics company. Some think of us as the Photoshop company, and some as the Acrobat company. Five years from now we'll probably be thought of as the enterprise company -- unless you're a creative professional, or unless you're into digital photography.

That's where the analogy goes back to Honda. If I said "Honda", we'd all say "automobiles" -- unless you happen to be a motorcycle enthusiast, or unless you happen to be mowing your lawn in Japan. Five years from now, will we think of Honda as the jet engine company? Maybe. I don't know. But for Adobe, I believe we'll be thought of as the enterprise company. However, we'll continue to have a very loyal following of creative professionals, and we'll continue to provide solutions for the digital photography enthusiast.

But, more so, we will be the enterprise software company, providing document services to bridge that document-to-backend workflow. The opportunity is so big. It's unique and exciting.