Adobe CEO: Creativity, Innovation and Unreasonable expectations

Narayan, Chair and CEO of Adobe. Shantanu, what an honor to have you on.

The second business is, as you mentioned.

And so that's the creative business. Our newest product there is Express, which is enabling this vision for creativity for all. So anybody who has a story to tell, whether you're a K-12 student or the largest enterprise in the world, that's the creative business. Probably we're best known for that. And, as you pointed out...

And that was, you know, as I said, the PDF, it's called the Document Cloud as well. Perhaps the most recent business that we have incubated and created from scratch is enabling any business to engage digitally with their customers. So we call that the Experience Cloud, powering digital experiences for enterprises. And that's close to a $5 billion business for us as well now, Nikolai. So three different areas of.

We went from a company that just licensed software for a few hardware manufacturers. when we did Postscript. We built an applications business. As you are aware, we completely transitioned and we were the first major software company to transition to the cloud. And then we created the digital marketing business.

So I think it's a fundamental reinvention and a willingness to make that investment, to invest in deep technology, I think, has been key to our success.

And the Founders Award is given to people who represent not just what they do, but how they do it. And so I would say culture is,

you know, the key to the company. Very simply, they used to say something as straightforward as we want to create a company that has great impact and where great people want to work. And, you know, captured in that single sentence actually is such deep insight into how you build great, lasting companies.

So I think the first thing I would say, as it relates to pace, is you have to be aware of which part of that S-curve you are on. And not every one of them has to innovate at that pace, because, you know, perhaps the customers are not willing to even welcome that kind of innovation. The second thing I would say is you have to be impatient, but it's important to be thoughtful about what you're impatient for. In some cases, you may be impatient for functionality and developing a product. In some cases, you may be impatient and the pace is all about customer acquisition.

In other phases, it may be about revenue. And so I think pace, to your point, is a really important thing, but I'm not sure one size fits all in terms of pace. And so if everybody was at a frenetic pace, maybe you're not actually managing the company effectively enough. But when you need that sense of urgency, I think one of the ways in which you create pace is by inspection. I've always said, Nikolai, people do what you inspect, not what you expect.

And so I think, you know, constant inspection and making sure that, as leaders, we're removing the obstacles that allows people to proceed at the pace that they want. I would say the fundamental product person wants to go as fast as they want, right? And so I think bureaucracy sometimes comes in and potentially slows things down. And so, you know, our job is removing obstacles. And so, for the things that require incredible pace, fast decision making, are we providing the environment that allows the people who are actually in charge of that to do that?

But I think having that conversation and having time, and what is our most valuable commodity? Time is our most valuable commodity. And so when you're spending time as a leadership team, as well as with individuals, I think that's what you have to do as a company. And so, you know, this is not about micromanagement. It's actually about freeing people to innovate at the pace at which they want.

But if decisions need to be made, what's the monetization, how are we going to go to market, who are the potential partners, how do we think about, you know, how we get the message out? I think facilitating and enabling that is a big part of what you have to.

So how do you perceive it?

And I think the same is true of AI and generative AI. I mean, the buzz, as you know, is all about generative AI. Adobe's been deploying AI in our products because if computers, what are they good at? Computers are good at pattern matching. Computers are good at, you know, automating mundane tasks.

And when you think about creativity, in particular, if you can enable somebody who has this creative idea, they're trying to create something, they're trying to communicate something. But the thing that they fear the most is the blank page, right? I mean, how do you start this creative process? And I think generative AI is this massive enabler to allow people, if you're ideating or if you're prototyping or if you're brainstorming, to start that. So I believe that, you know, AI will enable people to be more productive.

They will, you know, eliminate mundane tasks. It will allow you to automate things that need to happen and it will allow inspiration. And so, used effectively, any piece of technology is going to dramatically expand the addressable market. I mean, this is now about when computers came and the fact that we democratized desktop publishing, you know, the market share and our install base went up dramatically. When we moved to the cloud and we said, hey, now you can have access to this at a monthly subscription, it expanded dramatically.

When we added mobile applications, it expanded dramatically. And I think the same is true. I think you, I, everybody has this creative spark. And if we can use the product, you said you took the Photoshop lesson over a weekend. We just want you to be able to say, hey, I want to take this image.

I want to remove this. I want to have a conversational with it.

How do you stand out? You know, how do you create a following if that's what you're trying to create? But the sheer volume of what goes on is going to massively increase.

Because I think you and I and others wake up in the morning and we don't say, oh, I want to use the computer. We say we want to get something done. And so, at the interface layer, what are we doing to enable our products to be simpler? The second thing we said is, where can we leverage other foundation models that exist? And where should we be creating our own foundation models?

Because the foundation model is sort of the brain and it's the center of activity, of what's happening. And so we said, imaging, video, we need to create our own models, because understanding that process of what the models really can enable somebody to do, when you do something like generative fill, perhaps the most widely adopted and accelerated adoption of a feature in Photoshop in the history of Photoshop, it means that we're thinking about how this product can be used to accomplish something. And then data. And the data is like, okay, how are these models trained? Where did the data come from?

And so I think Adobe was very thoughtful about all three areas. We've innovated dramatically. on the interface layer. You can now, with Reader, have a conversational interface. In Experience Cloud, if you're a marketer, you can say, hey, I want to run a campaign for this segment.

And in Photoshop, you can do things. in Express. You can do things like generative fill and an AI assistant that enables you to take what's in your mind.

The foundation models, we've created our own foundation models in imaging and video. But also at the National Association of Broadcasters show recently, the NAB, it's the big video show, Nikolai, we showed how we can actually integrate other models as well. And so we showed whether in Premier, you can think about whether it's OpenAI, Sora, whether it's RunwayML, or whether it's PICA, you can actually create and integrate these models. And so that's why I like this taxonomy that we have of what are we doing at the interface layer, what are we doing at the foundation models layer, and what kind of data are we using to train whatever models. We were differentiated in that we said, we will train our models only on data that we have license for.

And so we can indemnify a customer like you. And so if you're using our model, we can indemnify you. But you know, the world has other models, and we have to be supportive of the other models that other customers might be using. So Firefly, specifically, is about the naming for our models. And it's also this, you know, playground that we have as a destination site.

We're using OpenAI for text. So when we use, you know, things like in PDF, and you want to try and create a summary of a PDF or have a conversational interface, we will support it. But we've also described how other large language models, whether it's from NVIDIA, whether it's from Microsoft, whether it's from Google, whether it's from OpenAI, we will support those, because, you know, Adobe is always one in recognizing that there's a heterogeneous world out there. You know, we supported Mac and PCs from day one. We support Android and iOS from day one.

And I think our job is leveraging the platforms that exist. And AI is a new platform.

complex than 4, how is that going to change the playground?

I mean, it's mind boggling to think, perhaps, that a baby born today for the first time, perhaps in civilization, a computer may be able to not just have more information than a baby, but also to be reasoned better than a baby. And so I think what will happen with the next version of, you know, whether it's OpenAI's models or Google's models or the Adobe models is, you can start to do reasoning. What does that mean? What does that mean for a creative? When you're thinking about creating an image, it's in, you know, it's got a certain set of dimensions.

When you say, I want to create a video and I want to see a person walking down a street and, you know, crossing the light, you have to understand physics, right? I mean, you have to understand physics so you don't go in the ground. You have to understand physics so you don't hit, you know, the building that you're walking into. And so I think we're going to start to expand on this model of, you know, thinking about reasoning, certainly resolution, certainly, you know, inference. And, as you know, with AI, there's a lot of activity that's right now happening with training, which is everybody's training, these models.

The real value is going to come from inference, right, and how people use it. And I think financial services companies like you, you're going to use AI to do financial reasoning. and perhaps, you know, faster investment, you know, decisions. And so I think we're walking up the stack from, you know, just being able to do something like a text to an image or, you know, a prompt creating a prose to how do I reason and how do I think about it? And it's exciting.

I don't know if, you know, at your institution, you're reducing the number of software engineers and developers. We're all saying, how do we make them more productive? How do we allow them to, you know, do more at the same cost? So there will be an efficiency increase. And I do think there are, like every generation of technology, some things will get disrupted.

But overall, it creates more opportunity. And I certainly believe that for creativity. I mean, creativity.

We actually started when we thought about Adobe and we said, listen, we create the world's content. And it's really critical for us to also take responsibility for what's happening with content. And so we created this thing. You know, it's called Content Credentials. Think of it as a nutrition label, Nikolai.

And when we started this, we said we have one part in the chain, but we have now got thousands of partners who have signed up for this Content Authenticity Initiative, as it's called. And what the Content Authenticity Initiative is, camera manufacturers, when they take a picture, they're putting like a digital signature on that picture, saying it was created with this camera at this time, taken by Nikolai. When you edit it in a piece of software, we stamp that with, you know, what's happened. If somebody who's in the content distribution game, you know, whether it's Meta, whether it's New York Times, whether it's the BBC, they've all signed up to carry those credentials. So I think the plumbing and the infrastructure for deepfakes is all there.

I'll tell you what the real challenge is. So when you talk about deepfakes, the ability to look at the provenance of a piece of content is all there. The question is, will a consumer want to see where that came from, who created it, who might have changed it? And so now we have this ability. We're working with the U.S.

government. You know, 50 percent, I think it's 50 percent of the world's population is going to have an election, I think, in a 12-month period. Some of them have certainly happened. And so, in that particular context, what we are saying is, when you see a piece of content, you can see this label which says, you know, it says content credential. Think of it as a nutrition label.

If you click on it, it will tell you. It will tell you who created it, when it was created, when it was perhaps altered. The question is, how many people actually read the nutrition label when you're eating food? And it's the same issue with content. How many people are going to say, I want to know where that piece of content was created?

So I would say the technology companies, the people distributing this media, we've all participated in the deepfakes, you know, sort of lifecycle to understand how we can bring that value. Now, the consumer has to say, when somebody that you know is saying, I want to see that piece of content, are they going to insist on evaluating the content credential? Because neither you nor I can come in the way of people creating content. It's the question, as the consumer, how much do they care about where they came from? Hopefully that makes sense.

we are, of course, still very young, and so on. But we, you know, we're not like 22.. Do you think, do you think it's a disadvantage for us to really understand and grasp the possibilities here? Is our experience good or bad?

and how do we channel, you know, people into, you know, align them into creating whatever objectives they are, and then how do we support it? And so I think our role changes as it relates to an organization leading it. And then, as consumers, you know, we will see the benefits, right? We will see the benefits when we go to a website and somebody knows exactly who we are. You know, this is our experience.

cloud opportunity. I mean, the experience. cloud vision for Adobe was born with this insight that when we moved our entire business model from a two tier distribution model to engaging directly with customers on the website, we were like, hey, we should build the infrastructure. Nobody has automated marketing, right? I mean, supply chain was automated.

Finance was automated. H.R. was automated. But how many times do you go to a website, Nikolai, and you're like, why doesn't it know everything that I've done with this website? And why do I have to enter my data?

And why can't it tell me if I like this piece of content? Hey, give me five recommendations that are truly relevant for me. And so I think AI is going to be used. So, as consumers, I think you and I will certainly experience a lot of the benefits of this. But as people running large organizations, I think our job is understanding the technology to a level so that we can actually appreciate what it can and cannot do.

But then channeling that into, you know, really understanding how we evolve our businesses to take advantage of it and not have our head in the sand.

And so, you know, I think the first thing that was really inculcated in me, my mother actually taught. She was a professor of American literature. So I think they instilled in me this curiosity. My father was an entrepreneur. And so, you know, I learned from him, you know, how one has to innovate.

And I think the other part of the Indian culture that has certainly served me well is we tend to take a long term view. And so, you know, I think all of us running companies, yes, table stakes, is executing on it on a quarter by quarter basis. But fundamental innovation takes time. So I would say the importance of education, intellectual curiosity and, you know, taking this long term view and outlook on how you build a business that is built for greatness. I think those were the two things that perhaps, you know, I was.

I was really influenced from my culture.

J. Banga and the other top Indian leaders in America?

They really emphasized an all round education. But if you think about it in that, you know, I came to this country in 1984, 60 or 70 percent of my graduating class would come to the U.S. for higher studies. I mean, you know, the U.S. was this phenomenal place where it allowed people to come.

You know, it was the land, it is the land of opportunity. And it gave us, you know, this gift of education. I would say today, not a lot of those people are coming. I mean, from institutions in India, maybe five percent of people are coming because there's so much opportunity in India. I mean, you know, I think the economy in India is exploding.

And I have said, if I was graduating right now, I'm not sure I would come to the U.

S. given how much opportunity there was. But to answer your question, in those days, the entire generation of people who are now, you know, in the U.S., we all came here. We all came here to pursue a master's in computer science or a Ph.D. or an MBA.

And we stayed because here's where the opportunity is. Now there's clearly a reverse migration.

If you were to elaborate a bit on what being Indian means to leadership.

If you wanted to get anything done, you had to be incredibly resourceful. I don't take no for an answer. When I want something done, I'm like, OK, let's keep brainstorming. Let's keep thinking. And, you know, I'd rather, you know, aspire for something incredibly and fall a little short than, you know, try and just set your bar so low that you can easily cross it.

But I would say the Indian entrepreneur today, when I grew up, the Indian entrepreneur was focused on making a market in India. Today, the Indian entrepreneur has global aspirations. You know, you have access to capital, you have access to talent. And, you know, all of them are focused on, you know, how you can create it. And, you know, there's something so natural about being in the culture that you grew up with.

I mean, all of us, as immigrants to this country, had to adapt to the US. And so I, when I grew up, there wasn't really a tech industry in India. that's changed. There wasn't access to capital. I think, you know, when I grew up, when you took a loan from a bank to set up a firm, I mean, the interest rates were something like 18 or 20 percent.

I mean, you know, prohibitively expensive to create businesses. The notion of equity and venture capital just didn't exist. And so. but, you know, this is where I think it doesn't matter whether it's Hyderabad or, you know, Bucharest or other places. I mean, access to talent and capital has become a worldwide phenomenon.

And I really hope that, you know, post-COVID, I know these supply chains, everybody has said, hey, we need to have our supply chains closer to us. But there's such a power of having free trade across the globe, which I hope we don't, you know, go away from that.

I mean, you know, sailing in Bombay, where you're sailing in the waves, was just this, it's this incredible rush that comes, you know, and competitively, how you are constantly trying to improve. Sadly, I've given up sailing, Nikolai. When I came to this country, I said, you know, education was the thing I focused on and family, and now golf is the thing.

Now, you are one of the most well-liked CEOs, and we see that from surveys at Glassdoor and so on. What, is it important for a leader to be liked?

And if I model those values, then, you know, people, hopefully at least say that, you know, he's true to what he stands for. And I think people would say I'm approachable. And, you know, I like that. We are a very egalitarian company, and it's the way Silicon Valley is. But, you know, every time you get that, I will say, it's humbling.

It's humbling to hear that the things that you do are appreciated by people.

Why aren't you doing this? And why aren't you doing that? And he would always push me and challenge me. And later, I realized that, you know, he saw in me something, hopefully, that he said this guy is capable of more, and my job is pushing him to do more. And I would say that influenced me a lot, as my management style, which is my style, is all about saying, how do you set unreasonable expectations?

And people amaze you with the ingenuity. And so, hopefully, I'm providing opportunity to people. I believe in a management style with the leadership team, especially at the executive team, where, yes, they all wear a functional hat. You might run a business. You might be your CFO.

You might be head of, you know, people. You might be your GC. But first and foremost, you're all people who represent, as the executive team, the company. And so, that's been my management style, which is, like, I'm very... Information in too many companies was deemed to be power.

I have exactly the opposite leadership style. I believe. you give people access to information, and that's what makes them more productive. So, I would say, you know, again, there isn't one style that works. I'm not, you know, arrogant enough to believe that that's the way one should operate.

But if people know what your style is, then hopefully, you know, the people who embrace that style and resonate with how they want to be managed, they can thrive. And so, that's how I would coach, which is, like, I'm always available. I'm accessible. Hopefully, people wouldn't say I'm not a micromanager. But...

And somebody gave me this expression. So, I will, you know, give credit to them, which is, they said, management for me is a little bit of, you have to have your head in the cloud and your feet on the ground. And I am in the details, Nikolai, as well. Because I believe that if you're not in the details and if you don't have... I don't know how you set a vision for the company without understanding a little bit of the details.

And, conversely, if you're only in the details and you're not, you know, setting a vision. So, you know, but my management style is evolving. And one last thing...

Omniture was all about, you know, getting analytics. And we said, hey, data is going to be important and analytics is going to be important. And we said, you know, why is it that Adobe was always about the art? We allowed creativity, but we weren't about the science. You know, that old marketing adage, 50% of my marketing is working.

I just don't know which 50%. So we said, we should create the new next generation marketing stack. And why is it that digital marketing doesn't exist? We didn't really know at that point everything that needed to be done and how that will evolve. But you get comfortable with ambiguity.

I think, as leaders, you and I have to get very comfortable with ambiguity. And so that was for me, planting the flag, which is saying, we're going to go create the stack.

We built that completely from scratch. And so you understand what the building blocks are associated with it, and you're ruthless about execution. And, you know, you keep going from the long range, what you're trying to accomplish in the short range. And that's what I say. And I was perhaps when I took over, in all candor, I was probably better at the road building because I was chief operating officer and I needed to get my head around everything.

But you realize, when you're in a room and you're trying to motivate or inspire a room, 50% of the room probably doesn't care about what they want to do tomorrow. They want to know what hill you want them to climb. And, you know, what is the, you know, are you trying to win a World Series? What are you trying to do? That's planting the flag.

The other half of the room doesn't care about, you know, where you want to go. They're like, hey, tell me what I want to do, because I feel motivated by that. And so, as leaders, we have to change our management style to inspire people to do their best. If we don't recognize that, then I think we are not recognizing what our jobs are, which is our job is making them productive. Our job is not saying, hey, you got to manage the way I want you to.

And so I think, recognizing that there are different people with different motivations, who get inspired by different things and can contribute in different ways.

Exactly how that manifests itself in video, et cetera, we don't know. And so the unreasonable expectations are to say, I want you to create this video model. I want you to create an animation model. I don't know exactly how that's coming, but that's where the ingenuity of those developers and the engineers and the product people comes in place. And so I think reality distortion is different, which is, you're in denial perhaps sometimes of what's happening.

Whereas I think unreasonable expectations is about actually, in many ways, at least for me, saying I have more faith in what you can do than perhaps you have in yourself. And I think that to them, they seem they're unreasonable. And then, you know, when we moved to the cloud and we said, OK, we want to add so many subscribers, people were like, I can't add up to that. And you're being unreasonable. I'm like, no, we should go for it and we should figure it out.

And then, you know, we greatly exceeded it. I mean, and this is where I, that's what I call unreasonable expectations.

And so, having somebody that you can be completely yourself and talk about, you know, what needs to get done and, you know, learn from them over time. That self-help group is immense.

The real thing is they're a sounding board for us, correct, Nikolai, and they're a sounding board, George Roberts, you know, the founder of KKR. I'm fortunate enough to have got to know George Roberts really well. And, you know, the advice that he gives and to see, you know, the passion that he has for driving business and staying, you know, very current and putting money to work. I mean, that's something that I've learned from him, which is like I don't use the word risk. I use the word investments.

We're paid right in our jobs to make investments. Some of them work. Some of them don't. But hopefully, you know, we have a better track record. So those are two among the others.

There's Romesh Wadhwani, who is an incredibly successful Indian entrepreneur. So I'm blessed. I actually probably create fewer friends, but deeper friendships. I'm not a big networker, but that's my self-help group. And I wouldn't spare it.

And then, you know, your family, your family always is there, you know, in thick and thin. And when you have I used to say this, apparently there's some research that's been done. When you have young kids, they are more willing to, you know, tell you, you know, the truth than anybody else. And you have to seek out these truth tellers. And, you know, so your wife, my two kids, they will tell me like they won't sugarcoat anything.

And that's invaluable because, unfortunately, as we get more senior in our roles, everybody is telling us how good the ideas that we have are. And you have to seek out those truth tellers. New college graduates, when you hire them, they are far more willing, because they ask you the tough questions. You know, to say, why are we doing this? Why are we doing that?

And so I think we all have the ability to do it. The question is, are we going to seek them out? And how do we put into practice what we learn from them? Right. Oh, one last thing I'll say, one last thing I'll say, serving on a public board, I serve on one board.

If you think about pharma, when people who are running pharma companies are making medicinal bets in therapeutic areas, chances are, you know, in many cases, you know, their successor might reap the benefits of it, right? Because of the timetable associated with, you know, medicinal development. And so I learn again, that long range view of what needs to be done, the global nature of, you know, what happens. So you're always learning. The question is, is your mind open to that?

learning? I mean, every experience that you have with everybody, when, when I hear these questions, I'm probably going to go back, Nikolai, and say, why did he ask me that question? And what was perhaps behind it? And what should I take away from it? You know, as somebody who is in the investment business, and you're thinking about it, clearly, you're trying to piece this picture together.

So I think every interaction is a learning experience. You just have to be open to it.

Why do you think the same person should have them? And why are we wrong?

I would say, to you, as an investor, I would say a couple of things. First, is the board, you know, is there good board refreshment? Are the people on the board, people whom you would look at and say, hey, are these people who have, you know, created tremendous value? And are they going to be people who are just yes people? Or are they people who are going to push back?

I mean, Dave Ricks from Eli Lilly, you know, one of our recent board members, you've seen the tremendous success. So I would say, and I do think the information asymmetry that's happening between, you know, people who run a company and the board, it's actually increasing, right, given how complicated the business is. And so if you have a lead director, and the lead director has the ability to, you know, engage with the board, you have the private sessions, you have the ability to, you know, create an alternate mechanism by which you're doing great corporate governance. And I think the U.S. philosophy is trust somebody until they're proven untrustworthy.

And if I'm not, then, you know, what's the board's number one job, Nikolai? The board's number one job is hiring and firing the CEO.

I don't take it for granted. I will say that. And, you know, every year, and when I was named chair, it was a massive honor for me. It's not one that I take lightly, Nikolai. And so hopefully you, as an investor, feel good about that.

Okay, this is not a perk, it's an honor and it needs to be earned and it needs to be, you know, refreshed.

You know, I've read a lot of mystery growing up. I read less management books. If I read the management books, I typically skim them. If it's written by a friend of mine or somebody that I know, then I read it, you know. And I read a little bit about history.

Not enough. I mean, that's one regret, Nikolai. I don't read as much as I did growing up. And I really I really should get back to it more. I get great pleasure in reading, but I am not doing as much as I should.

You know, it's priorities, right? We all don't have as much time as we would like.

I mean, I was fortunate in that I didn't follow the conventional path. When I did my MBA, everybody said, hey, you now have to go into, you know, product management or business management. And I'm like, I would like building products. I'm going to build it. And so I think people really do their best work.

when you come to work in the morning and you don't think it's work. You come because you have a passion. You can't wait to get out of bed. And so find something that gives you that feeling, which is like, I like being here. You know, I like engaging with people.

And if you're doing it because you think it's the right thing, or, you know, it's a step along the way and you hate it. But, you know, you believe it's good for your career.

It's not going to work. And so follow your passion.