October 7, 2021
Product

Bruised knees, scraped elbows: An insider's 4 lessons learned from Adobe’s fabled SaaS transformation

I’ve always been a builder at heart. If I were to pick an operating thesis for my career journey from Developer to CMO, it would be that I always thought that “the software should sell itself, literally.” As such, I’ve spent 20+ years building commerce APIs and CMS platforms, I was super early into microservices (as a way to build in-product commerce when everyone was still selling boxes at physical stores) and implementing agile at scale, and spent over a decade building machine-learning systems and models for understanding customer buying behavior across Adobe, Salesforce, Heroku, and now Algolia.

I’ve had the good fortune to be in the driver’s seat behind many of the world’s most well-known SaaS, PLG, and Growth movements. I’m currently the CMO at Algolia.  

  • Algolia is a search and discovery platform that powers more searches than any other company, second only to Google (who chose Algolia as their Search partner for Firebase) and powers experiences across a diverse  set of use-cases (Twilio, Stripe, NBCs media apps, Zendesk, the Sony Playstation, as well as the search for many of the world’s top retailers.). We have 400k+ Developers on our platform across 10k+ paying customers spanning SMB to very large Enterprises. 
  • At Salesforce, I was the CMO of Heroku, an acquisition. Heroku was unique in that we were one of the first DevTools/PLG companies to successfully build an “Online to Enterprise” motion at scale, spanning 100s of millions of revenue across millions of developers.
  • At Adobe, I carried a $1B quota for the Creative Cloud business at the time I left- and started that role running experiments before Creative Cloud was even an idea.
  • I have also advised many well known (and lesser known) companies, especially in the AppDev and DevOps space.

Each of these roles helped me learn a tremendous amount about what it takes to successfully manage a major transformation.  It’s the lessons I learned during my time at Adobe, however, that shaped my career. My first role was webmaster (that was the actual title) running Adobe.com, which—at the time—was the 17th most visited site in the world. We had more traffic at that time than Amazon (Thanks to Acrobat and Flash being on every device!). 

As a key member of the team, I gained a lot of really valuable hands-on experience helping to transition Adobe into the Creative Cloud business. The lessons are too many to count, but here are four that have come in handy again and again throughout my career.  

Lesson #1: Embrace the magic of pricing and packaging experiments

The catalyst for Adobe’s digital transformation was an unusual one. As background, we were consistently beating our revenue numbers each quarter, but our stock price was stuck at the same price. This was because we weren’t selling new products to new customers, and Wall Street realized that our growth was driven entirely by increasing upgrade pricing for existing customers who were “stuck” because Adobe owned about 90% of the market share. (This was obviously incredibly frustrating to those of us squeezing blood from a rock to grow revenue each quarter!)

To bust out of this rut, we needed to expand our total addressable market (TAM). Adobe’s CEO issued a challenge to design some experiments that would help us unlock new pricing and packaging opportunities. 

The most transformative experiment that came out of that was one that we ran in Australia offering Photoshop for $50/month rather than the long-standing $900 price for a perpetual license for the boxed software. This took off like wildfire, exceeding all our expectations. By increasing pricing accessibility for occasional users, we were able to increase TAM substantially. 

This was our first hint that building a program of pricing and packaging experiments can unlock gold. We didn’t even have to launch anything new. All it took to open up whole new markets was pricing and packaging—and in some cases bundling—existing products in a different way. 

After that initial experiment, we started working with different product bundles and pricing. We created a Student bundle and a “Teams” bundle. One of the most successful experiments was around a bundle we called “The Photography Bundle” that consisted of  Photoshop + Lightroom. This bundle was perhaps one of the most contentious experiments (and ensuing offerings). Photoshop was Adobe’s cash cow- everyone in the world knows and wants Photoshop, and it was always priced as a premium product. The standalone Photoshop Creative Cloud offering was priced at $20 a month. The dirty secret was that Photoshop was overkill for most photographers; additionally, Photoshop was pretty hard for newbies to grok- most people were better off starting with Lightroom as their entry to photo-editing tools.  So, as an experiment, we ran a Black Friday offering of Photoshop+Lightroom for only $9.99/month. This was incredibly contentious inside the company! Photoshop was our flagship product and cash cow, and we were going to run an experiment where we offered Photoshop plus its sister product Lightroom for half price?? Fortunately, this offering took off like wildfire- selling more than enough units to offset the margin hit from the price cut. Even with this runaway success, we had to run this experiment several more times to finally get the company comfortable that we weren’t giving away our cash cow. It’s now a permanent and very successful offering. 🙂

As we worked through these various experiments, a few key concepts became really clear:

1. Bundle tools to drive adoption of sister products. In cases where a customer might be interested in a new product, but either didn’t feel like the 14-day trial was enough time to evaluate it or didn’t want to put down $900 to buy it, bundling that tool with another in a monthly product makes it easy to get someone started. And then you can send nurture emails to help onboard them effectively. 

2. Be willing to walk away from an existing business. Launching the $10/month Photoshop + Elements bundle obviously made the original $20/month Photoshop option obsolete. But, we had to be willing to let that go in order to expand our TAM and put us on new growth curves. It’s incredibly hard to risk what’s already working for you; but if you don’t disrupt yourself, your competitors will do it for you. (Looking back, this was probably one of the greatest gifts Shantanu, our CEO, gave us- the permission to be incredibly bold in seeking to massively disrupt ourselves every couple years, to prevent competitors from doing so.)

3. Create a lot of models. You need to look at what could happen from a lot of different angles. How will an experiment affect revenue, adoption, churn? Will the tradeoffs be worth it? Typically, your models will be 30% +/- off, so don’t think of them as written in stone. The idea is to move fast, break stuff, and be decisive. Build your systems for quick learning and iteration.

4. Get out of your own way. In a similar vein, you can’t get hung up on the way things are today. The idea is to change them up so you can create a better tomorrow. In the Photoshop + Elements example, we had to accept that the expansion of the TAM was with ephemeral users who would come and go. This goes against the usual strategy of trying to lock customers in for the long haul. We had to recognize that our best opportunity wasn’t in locking people in, which unintentionally created an unfriendly relationship between Adobe and its customers. We had to have the confidence to trust in the strength of our products and the value of being a customer-friendly company that creates growth through positive relationships instead of brute force.

Lesson #2: Focus on the Day Zero Experience

Day Zero is the “out of the box” experience of your product. When they launch your product, is it obvious on what they need to do to be successful, or are they faced with a blank canvas? Your goal is to have the product help your user get to “Aha” as quick as possible so they can realize the value of your product and want to invest in usage, additional features, etc. This is an absolutely critical step in the customer journey. Without it, your relationship is going nowhere and you spend all of your resources sending people into a leaky funnel.

Building growth around the Day Zero experience has two parts. 

First, aggressively remove any barriers to entry. You don’t want anything getting in the way of that Day Zero epiphany. This means making sure that people understand what your product is. It means getting your pricing to the sweet spot that makes sense for the buyer. It means ensuring that new users don’t get stuck in the trial, but have someplace to go that keeps them engaging and converting. Typical barriers include shady pricing practices, convoluted signup or licensing experiences, and “blank canvas” initial product experiences. All of these can erode trust and confidence in your solution, and cause prospects to just “put it back on the shelf”. 

Second, you need to switch up the company focus from simply selling things to looking beyond that initial sale. It’s not enough to just sell somebody something, you need to understand what happens next by capturing what people do. You need to create data models to show the correlation between certain actions and long-term customer success. This is the kind of information that makes it possible to guide and influence customer relationships over time. At both Adobe and Heroku, we built a program where we discovered and drove  “high-value actions” (“HVAs”) and built models that helped determine the correlation between these HVAs and long-term customer value (Activation, Active Use/MAU, Feature Discover and Expansion, Retention, etc). These data models also helped us understand what our true Personas and User Journeys were- we then fed these back into Product, Marketing, and Sales motions to fuel further growth.  

Getting the Day Zero experience right is not a quick fix. At both Adobe and Heroku, this was a three-plus year process that required a fair amount of heavy lifting. 

A big part of the challenge can be getting buy-in across Product, Marketing, Sales, Finance, Customer Success et al. Sometimes there’s a misconception that “Growth” is “just marketing stuff.” That’s totally wrong. This is core product stuff. The entire company needs to be committed and aligned around this.

That said, while all teams need to hold “Growth” at their core, it helps to carve out a dedicated “growth team” that spans marketing, product, analytics, data science, and engineering. This kind of cross-functional team can serve as a focal point to help discover and drive experiments across teams. For example, at Algolia we have a ring-fenced Growth team that includes Marketing, Product, Engineering, and Data Science folks. While this team spends most of their time discovering and driving their own experiments in the Signup->User Experience part of the product in order to improve Activation/Active Use/Feature Adoption, they also help point other parts of the Product and GTM to areas where customers are getting stuck and falling out.

An important thing to note, Wall Street and VC expectations on company efficiencies (CAC, Magic Number, et al) are being increasingly influenced by companies with strong PLG, self-serve, and Freemium to Enterprise motions. Given it takes 2-4 years to build these programs, companies need to invest heavily now or risk not being able to catch up. 

Lesson #3: Go all-in

Most people tell the Adobe digital transformation story as it was seamless, but that’s not exactly the way it happened. In truth, we fell into it. 

While the Australian experiment was hugely successful, when we launched it worldwide it was a complete catastrophe. It expanded our TAM, but it also cannibalized our existing business at a much higher rate than any of our models had predicted.

Needless to say, this turn of events sparked a major freakout at the company. 

The saving grace in this moment of crisis was having a CEO who was very (very) bullish about ripping the bandaid off and going all in. We were incredibly fortunate in this way, because 99% of the time companies are afraid to make mistakes, which keeps them from being bold. For anyone who has faced this kind of crossroads, the pressure of the innovator’s dilemma is intense. 

Our CEO stood fast. The message was that there was no time for wavering. That ship, as the saying goes, had sailed. The choice at that stage, as our CEO put it, was that we were either all going to be fired, or we were going to be heroes.

Lesson #4: Set clear expectations around your commitment

As Adobe sailed into these uncharted waters, there was a lot we didn’t know. We had to quickly get up to speed on channel conflict, pricing strategies, and the dynamics of retention. We learned that the best way to learn is by doing. You can sit around for months or even years arguing about different models, but you’ll get a much more accurate answer much faster if you just jump in and start running small tests with actual paying customers. Test. Learn. Iterate. Rinse and repeat. 

Of course, this is all much easier said than done. It’s scary to be leading the charge on such a major transformation when everything is on the line. At this juncture, it was imperative that leadership set clear expectations. The entire organization needed to understand not only the vision of where we planned to be in two or three years, but also how rough the journey was going to be. 

When you’re changing the entire game, you’re going to get some skinned knees. You’re going to have to learn a bunch of shit really fast, and you’re going to mess up. The experience is going to be exhausting and painful. People will think you’re crazy, and they will not be afraid to say that to your face.

To keep everyone on track, it’s incredibly important to set expectations with all your stakeholders. They need to understand on a visceral level that there will be bumps. And they need to believe in what you’re doing so that they aren’t swamped with self doubt when Wall Street, industry pundits, and even employees start naysaying.

You have to have the gumption to stay the course without watering down your vision. If you hold back and make compromises, you’ll wind up just doing a bunch of boring stuff that nobody cares about because it doesn’t really change anything, or only makes tiny incremental changes that aren’t enough to fuel your transformation.

It’s also worth noting that your vision should define not only what you’re going to do, but also what you’re not going to do. Being discerning helps you to focus your resources. There’s no way you can do everything at once, so pick three things that you know you can handle and absolutely nail them. You can always add more later, but start with a highly focused strategy that lets you concentrate your efforts.

All that said, many times it makes sense to firm up your base and “add a new leg to the stool”

Now, perhaps some contradictory advice. I’ve seen a lot of well known startups get to the ~$50-100M mark and think they have to “Go Enterprise” to compete with the big players. They go all-in on hiring an Enterprise CRO and expensive Enterprise AEs, and often unintentionally lose sight of their existing business, because building out an Enterprise GTM is really hard- especially if you don’t have any experience in managing such a business. Enterprise changes every facet of your organization, from financial systems to customer success. Making such a drastic change often costs these companies years in growth. It seems they would have been better suited if they kept feeding their existing business, and rather “experimented” their way into Enterprise- figure out the patterns where they’re winning bigger deals, and determine the investments they could make to fatten those patterns vs heavily pivoting the entire company. I hope this doesn’t come across as contradictory to the previous sections- Adobe somewhat “fell into” the Creative Cloud and Marketing Cloud businesses thru experimentation that unlocked serious gold- then we decided to double down. Yes, we had many pitfalls that I’m happy to talk about over beers.

If you forget where you came from, you risk losing credibility with your core audience. (Especially if your core audience is developers.) The good news is that it’s not an either/or situation. You can speak to multiple audiences simultaneously. Companies like Heroku and Twilio are great examples of companies that had a strong PLG/Developer/Bottoms up motion then spun up an Enterprise leg with minimal disruption to their existing businesses.

Final thoughts

  • As an organization gets bigger, it tends to get more conservative and risk averse. It develops antibodies to experimentation, and becomes less willing to sacrifice short-term gains to support long-term bets. The answer is to be aware of these natural tendencies and call them out. Set aside an “experimentation team” as part of a Growth team or elsewhere, and set the expectation that AT LEAST 30% of the tests will fail gloriously, but that your goal is to disrupt yourselves before your competitors do.
  • Be mindful of whether the choices you make are truly good for the long-term health of your business, or just hijinks that will drive short-term revenue gain. We’ve all been addicted to the crack of pricing and contract shenanigans in order to hit quarterly targets- it’s really hard to get off the addiction, so ingrain the manta of “Be the Company you want to be”.
  • This is all really hard. Fortunately, there is a strong and growing community of people who are willing to talk openly about their experiences. Leverage the community. Many people are happy to share their battle scars for the mere price of a beer.

I hope this has been helpful. Reach out if I can be of help!

Jason McClelland is Chief Marketing Officer at Algolia. Prior to Algolia, Jason served as CMO of enterprise MLOps platform Domino Data Lab, CMO of the AppDev PaaS platform Heroku (acquired by Salesforce), and head of commerce and inside sales for the Americas at Adobe.

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