Getting Reorganization Right: How Bruce Chizen Drove Change and Innovation at Adobe Systems (page 1 of 7)

In March, the company announced first quarter revenues for fiscal 2004 were $423.3 million, compared with $296.9 million in the same period last year. With a revised revenue target of $1.5 billion for this year, Adobe Systems has come a long way since it was founded in 1982 by two alumni of the Xerox Palo Alto Research Center, John Warnock and Charles Geschke.

During the past two decades Adobe Systems' products have had a major impact on business processes in several industries. Its PostScript printer language, first shipped in printers by Apple and QMS in 1985, revolutionized digital typesetting and made desktop publishing possible. In 1993, Adobe's Acrobat software introduced PDF. Other products, such as Photoshop, won lots of loyal customers.

But brilliant technology does not necessarily create a successful business. By mid-1998 -- when most other technology companies were booming -- Adobe was in trouble, experiencing stalled product sales and a sagging stock price. As part of a major corporate overhaul in August 1998, most of Adobe's executive management left the company, and Bruce R. Chizen was promoted to executive vice president, products and marketing. Chizen led a drastic restructuring of Adobe's business, including instituting several rounds of layoffs and defending the company from a hostile takeover attempt by rival Quark. In 2000 Chizen was named the company's president and CEO.

Now Chizen is hoping to remake Adobe again -- betting that by combining the core electronic document capabilities of its Acrobat products with a new collection of server-based products, Adobe Systems can become a major supplier of application solutions to enterprise businesses. Last month Knowledge@Wharton editors met with Chizen to discuss past challenges, competitive strategy against rivals such as Microsoft, and future plans.

Knowledge@Wharton: Adobe just had the best quarter in its history. You beat analysts' expectations.

Chizen: We beat our own expectations.

Knowledge@Wharton: Photoshop and Acrobat are doing very well. Last December, Fortune magazine named you one of the two best companies to work for in Silicon Valley. Looking back five years, what strategy drove this level of performance? Can it be sustained?

Chizen: The answer to the second question is "yes." It can be sustained. Let me give you some background that can help show the strategy in context. Back in late 1998 we were a typical technology company. Our business processes -- how we operated and managed the business -- were not what they should have been. And we hit the wall sooner than everybody else.

Knowledge@Wharton: How so?

Chizen: In late August 1998, a couple of things were coming at us. We had missed a key milestone on delivering Adobe Illustrator which, at that point, was a critical revenue component. We got caught by the first version of the "Asian flu". The Japanese economy was tanking on us -- and we didn't know. We did not have the ability to understand how well the business was doing. So we had a terrible mess. And that was a wake-up call for the company.

The two founders, John Warnock and Chuck Geschke, decided there was a need for major change. They eliminated a number of people on the executive staff, and we decided to take a step back. We decided we were going to focus the company on doing a few things well. We needed to streamline the organization and execute our strategy.

Keep in mind, at that time the company had about $850 million in revenues.