Lead Story

Geschke
Driving Adobe: Co-founder Charles
on

Challenges, Change and Values

In 2007, Adobe Systems marked its 25th anniversary, a relatively long lemire Jor a company that sells peron
nai
computer sofware, an industry barely more than 30 years old. Surviving so long in this rapidly-cham
ging
business has requireda certain nimbleness. Adobea products-and 1s business models-have evolved
computing moved from stand-alone PCs to the global communications network of the Internet and worltuid
as
vide
web. But behind these changing technologies is a consistent set ofbusinessprinciplesestablished by Adobe
hwo co-founders and current co-chairmen Charles M. (Chuck) Geschke and John Warnock. In June 191
Adobe shippedthefirst version ofits Acrobat sofwarefor creating and viewing electronic documents. Withth
rise of the web, PDF became a de facto standard for distributing richly Jormatted electronic documents
What prompted you and Warnock to leave Xerox?
Geschke: Xerox loved [what we had done]. They said, 'We'll make [your invention) a corporate stan-
dard.' I said, 'Great!I went to Connecticut to [Xerox] headquarters and said, Tm here to talk about the
marketing plan for rolling [our invention] out. They said, 'Oh, wait a minute. At Xerox it takes seven
years to develop a product and we can't talk about this because other people will get the idea and beat
us to market." I said, 'Seven years! [In the] industry you're about to go into, that's two to three genera
tions. By the time you bring it out it will be worthless:" [They said.] 'Sorry, [it takes] seven years ar
Xerox. John and I were frustrated. It turned out that his thesis adviser at the University of Utah was on
the board of the investment bank Hambrecht & Quist. Bill Hambrecht was one of the first
guys pushing
venture investing in high-tech companies. We told him our
plan, which was to build a completo
publishing system the computers, the printers, the typesetting equipment, everything-and sell it to the
Fortune 500 so they could bringa lot of their production work in house. He liked the idea because he hated
financial printers. Every time he did a prospectus he felt that he was being robbed. He agreed to invest
$2.5
million over two years in two equal payments and told us we would have to
quit our jobswhich
was a little bit of a
gut wrench, although we knew with our backgrounds we could
get a job in Siicon
Valley pretty easily.
So we opened our doors and
began recruiting people.
If your original plan was to sell conplete,
turnkey publishing systems, why did you switch te just
marketing PostScript printer software?
Geschke: One of my professors from Carnegie Mellon, Gordon Bell, had left Carnegie to become tne
head of R&D for Digital Equipment [Corporation]. After about two
months, he came by to see what we
were doing. We showed him what we were involved in and
deseribed our business plan. He said, "wo
that looks very cool and it solves a
problem I'm having. But, of course, I don't need any comnputers -I
 Understanding Leaders and the Basic Concepts in Leadership
h a p t e r1 9
517
And I've
Equipment. And got a deal with Ricoh for the
teams that are failing miserably
printer
soI don't need that. But I have two
or
at
Digital

velopment

are
figuring
Ddevelg u y s re doing as part of your solution. Why don't how to interface them together. That's
three
out
you just sell me that
hat you swe've got this business plan that raised $2.5
million dollars. We
software? We said,
change your mind, call me. In about two more have to do that.' He said,
Well.

Cve
Steve Jobs [on the] Macintosh
months, friend of ours who had left Xerox
a
work for
brought Steve over. We showed Steve
owot
said,
wow! But I don't need the computers, I've
Wow! But
got this Macintosh [in
what we were doing and
he
saI haveaa deal
he
with Canon tor the
deal wit
lascr development]' which he showed
tting nowhere with this
printer,
software. Sell me
so I don't
need that. He said, But
my development
guys your company, come work for me and I'll
my product. put it in
aL aCtually consider selling the entire company to Apple?
hke: No, not really. We heard him,
we
tort Our own company. And he said, "Oh,were polite. But we said, 'You know,
Geso

all right, I
Steve, we really want
can understand that. So,
Wo said, We have this business plan that raised $2.5 million.' sell me the software.
He said, 'I think you guys are nuts. You'll
ehange your mind. When you do, call me. So we talked to the
chairman of our board, Q.T. Wiles, whom
Rill Dut in as sort of a fatherly figure to advise us. He
said, Jobs is right-you're nuts! That business
nlan was only there to get you the money. Your customers are
to be. Throw the business plan out and do a deal.' I called up telling you what your business ought
Steve, hat in hand, and said, We
changed
Our mind: we would like to arrange a deal to license
you the software.' He said, 'How much do you want
for the company?' We said, "We're not for sale,
him. He bought 19.9% [of Adobe Systems] as
Steve. He said, 'Oh, all right.' So we worked a deal with
part of the deal, which was a 5x multiple on the original
venture investment and we did a deal with a
prepayment of future royalties. Altogether, we brought in
about $3.5 million.
The issue of succession seems to be
on Steve Jobs. Oracle is
challenge for many technology companies. Apple is very centered
a

Larry Ellison centric.

very
Geschke: It's hard. If you want to give real value to your shareholders and build a
company that has a
long life, you realise pretty quickly that that is a major problem and you've got to start
should have been brighter and known that we couldn't go outside; you have to do it from
working on it. We
the inside. I have
always believed that the principles and values of the company you build is an important ingredient
in its success. You can't get someone to come in from the outside and just pick that up in a six-month
training period. It doesn't work that way. Not everybody agrees with some of those principlesthey think
they have to do it a different way.
Tt seems ot Adobe's
like you've tried to maintain the consIsteney corporate culture even as the com-
pany's technology focus has evolved
Geschke: We really didn't start emphasising Icorporate culturej until roughly 1989. When we began. John
and I wanted to build a company that we would 1ike to work in. Why would you build a business
didn't want to work in? We both had enough experience tnat we knew there were a lot of thino
shouldn't do and had some ideas about things tnat we thought were important to do. But wo
Start verbalizing it until it became clear that, as w sot DIgger and we had to confront toua really
that everybody understou and could help us enunciate whe
needed to make
about, and
sure
this ingrained
make tnis
and make ingrained in how thethe hus
business ran. So I started at
were, what that culture was
was whole thing. In 1998, I wrote a
[six-page] memo
lea vear giving talks O
hat the background cultural ideas were, but someandofdistributed
the
it to
the whole company tha things that
about
that were
deviating
deviating from good principles
E00d prineiples ot
trom of how the business
would run.
we had started to do When new
 518 Organisational Behaviour
employees come in, they're still getting a session at employee indoctrination to give them that hac.
ground so that they understand the kind of company they are coming to work for. ck
What were some of the key points in the memo you sent to the employees?
Geschke: I talked about the fact that we were having way too many meetings that were too large. If you have
a
decision-making meeting, you can only have four or five people in the room. Ifyou have a communicatio
be
meeting, careful whether you even need to have it. There are lots of ways to communicate; you don't
need to bring all the people
physically into one place. Mundane stuff like that. Treat the company's assets
the way you would treat your own.
They don't belong to you; they belong to the shareholders.
One of the things I talk a lot about is the
necessity to juggle all of the constituencies that have an
interest in the business: shareholders, customers,
employees, vendors, and the communities in which
we operate. Those constituencies
are all mildly in conflict with one another in terms of
for them. Your job as a leader in a
what's best
company is to find an appropriate way to juggle those conflicting
interests so everybody feels like they're
getting fair deal, without letting any one dominate the others
a
because they'll drag your company down. I talked about the
difference between leadership and manage
ment. Your job leader is to create more leaders-not more followers. That's what
as a
you need to do
as a
manager. That's actually a quote from Ralph Nader,
be happy to ship it to you. There was de-politicised. you'd like to see that paper, I'd
If
nothing private about it. [For more on Geschke's memo, see sidebar
Geschke on Adobe's Culture'] Don't tell
my friends at the Wharton School, but I never took a business
class in my life. John didn't either.
What do you think is the
biggest challenge Adobe is facing going forward?
Geschke: Inventing the future. We'll never succeed
unless we continue to open
believe that our technology and what's up new vistas. I honestly
happening in the market-where
is the sweetheart point in our whole envelope ofessentially visual communication
is going to the web all
on us if we can't
figure out a way to take advantage of that shift in the products and technologies. Shame
the distribution of information. A lot of what way the world is moving with
are there
imaging standardsare things that we think we have a today-the
solution
limitations of browsers and of the weo
mechanism, that value is going to differentiate. for. As they become the
primary delivery
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