Shantanu Narayen and the Art of Getting to Great

read in Forbes

Shantanu Narayen is stepping down. Adobe recently announced that its long-running CEO will retire after nearly two decades at the helm. The company remains strong by most measures. But like other SaaS companies, Adobe has seen its share price collapse in the past year as investors try to make sense of what artificial intelligence might do to its core business. Still, its outgoing CEO has a lot to be proud of.

When Narayen took over, Adobe was a product company in the most classic sense. Its suite of tools, like Photoshop and Illustrator, was the de facto standard for design professionals. But it was still software in a box that depended on unit sales and voluntary upgrades. Under his leadership, Adobe successfully transitioned its core products into cloud-based services with a subscription model. 

Narayen saw growth potential in expanding Adobe beyond its core business. In 2009, the company acquired Omniture to offer customers digital analytics. It expanded its e-commerce capabilities. And it acquired Marketo to strengthen its position in marketing automation. In a short span of time, the company moved from solely offering creative tools to orchestrating how brands create, manage, and measure customer experiences across multiple channels.

When Narayen took over Adobe, it was a $3 billion company. Today, it’s closer to $25 billion.

There’s a tendency to look back at transformations like that and compress them into a narrative of inevitability. But in the moment, they can feel like a series of uncomfortable decisions in the pursuit of something not yet fully formed.

Each of the moves Adobe made brought its own challenges. The company’s expansion into marketing automation and analytics forced it to learn a new business with different buyers, different economics, and a different competitive set. Those moves created a period when the company was less efficient, less certain, and, in some ways, less effective than before. Margins compressed, and the business became harder to run. Capabilities that had once defined success no longer mattered as much.

Stories of growth and transformation can look great in the end, but they’re incredibly painful in the middle. But future-focused leaders like Narayen recognize that they sometimes have to step away from a solid business to build a better one. They understand, almost instinctively, that you have to give up the good to get to the great.

The Success Trap

If you were to listen to how most companies talk about strategy, the language tends to converge around a familiar set of ideas: build on what’s working, stay close to your customers, and protect your margins. None of these is wrong. In fact, they’re often exactly what made a company successful in the first place. But over time, high-performing companies become increasingly optimized around their current business activities. And that optimization begins to narrow how a company understands itself.

Success has a way of turning current business activities into identity. What started as a set of things the company does becomes the definition of what the company is. “We make widgets” becomes “We’re a world-class widget maker.”

That’s fine up until the point when companies need to expand beyond what they already do well. When that happens, growth can seem incredibly risky. The moment you step outside your current business, you’re no longer leveraging your existing assets. Typically, the economics get worse, and execution gets uneven. It feels like you’re learning again.

There’s a concept in mathematics called a local maximum. It describes a point on a curve that’s higher than everything immediately around it. That doesn’t mean it’s the highest point overall—that point is called the absolute maximum. A local maximum is just the highest point that’s close to you. If you imagine you’re on a hike, a local maximum is the highest point on the hill you’re currently standing on. But from where you are now, you might be able to see bigger hills or even mountains in the distance. Now, imagine that you wanted to move from your local maximum to one of those bigger hills. As you started walking towards it, you wouldn’t be walking upward. You’d have to walk downhill first to get to that bigger hill.

In math, that decline can be calculated. In hiking, that downhill scramble can be fun. In business, that drop in performance can be excruciating.

Margins dip, performance becomes less predictable, and the clarity that once defined the business gives way to ambiguity. From the inside, it can feel like something is wrong. That’s the moment when most companies retreat. They interpret the decline as a signal that the move was a mistake. They back away from the new business and go back to what they know how to do. That’s why most companies stay where they are. They continue to optimize for the hill they’re on. And in doing so, they lock themselves into the present.

Unwilling to Give Up the Good

Companies fail when they get disrupted by external shifts beyond their control. In some cases, they didn’t see it coming. In others, though, those big shifts were visible well in advance. When that’s the case, failure happens because execs aren’t willing to endure the cost of change. They’re unwilling to give up standing on that local maximum and walk downhill. When the flood comes, the hill they’re on proves to be too short to save them.

Kodak built the modern photography industry. And then they were disrupted by their own invention. In 1975, a Kodak engineer built the first digital camera. The implications of that new device weren’t hard to see: photography would eventually become digital. And yet, Kodak failed to make a move. The problem wasn’t awareness—it was economics. The company made most of its money from film and film processing. Those businesses were incredibly profitable. So rather than moving quickly into digital, company execs chose to proceed with caution. They invested in digital, but only at the margins. They treated digital as an extension of the business rather than the future of it. They tried to protect the economics of film for as long as they could. But that decision came with a cost. As digital photography improved, other companies moved more aggressively. Over time, the center of the industry shifted away from film entirely. By the time Kodak fully committed, the advantage had already passed to others.

Sony made the same mistake. The company had built one of the most powerful positions in music. Sony made devices, oversaw distribution, and created content. When digital music began to appear, the implications weren’t hard to see. Sony engineers even developed an internal prototype of an MP3 player. And yet, their leaders refused to move decisively. The company had co-developed the compact disc with Philips Corporation years before, and both companies received a royalty payment from every CD sold. Execs were loath to kill that revenue stream. When Apple introduced the iPod, Sony found itself left behind. The center of the industry shifted toward digital distribution, and the company that had once defined music was no longer leading its future.

These companies weren’t stupid. And they weren’t blind. They didn’t lack the capabilities to build a new future. They were simply unwilling to give up a solid and profitable business in favor of a better one. They defined themselves by what they did, protected the economics they had optimized, and avoided moving towards a future that would look worse before it looked better.

Getting to the Great

The leaders who avoid the fate of Kodak and Sony aren’t operating with better information than everyone else. They see the same signals, understand the same tradeoffs, and feel the same pressure to deliver results in the present. What distinguishes them is what they’re willing to do about it.

Future-focused leaders are willing to move toward something that initially makes the business look worse. Jeff Bezos made that choice when Amazon was still primarily a bookseller. At the time, the company was getting better at what it already did. The logistics were improving, the economics were strengthening, and the system was becoming more efficient with each passing year. By most conventional measures, the right move would have been to continue refining that model.

Instead, Bezos chose to introduce a product that directly challenged it. He built an eBook that would eliminate the need for physical books altogether. And he called it Kindle… like burning books. That name captured the implication: the future of reading would not look like the present, and Amazon would need to participate in that shift even if it disrupted its own business in the process.

The move introduced new complexities. The economics were different, customer behavior had to be learned, and the organization had to build capabilities it didn’t yet possess. For a period, the business became harder to understand, not easier. But it positioned Amazon inside the future of reading before that future fully arrived.

Future-focused leaders recognize that they often have to step away from a good business to get to a great one. Over time, that recognition becomes less of a calculated decision and more of an instinct—a willingness to accept that progress, in its early stages, will often look like decline. They understand that you have to give up the good to get to the great.

The Next Test

That instinct is part of what made Shantanu Narayen so effective. He was willing to expand the definition of Adobe’s business and accept the consequences that came with that expansion. He led the company through a period where the metrics were less flattering, and the path forward was less certain. He did it because he believed the alternative was worse.

Now, Adobe faces another moment like that. Artificial intelligence will reshape creative work, marketing, and the tools that Adobe has spent decades building. The opportunity is substantial, and so is the disruption. The question isn’t whether the future will arrive. It’s whether the company will be willing to move toward it before it becomes comfortable to do so.

Years after the iPod took off, I sat down with an exec from Sony who had worked on that prototype digital music player. And I asked him why he thought they hadn’t moved forward with it. The exec shrugged and said something in Japanese. “Atatakai furo kara wa dare mo detagaranai…”

Then he translated it for me. “No one wants to get out of a warm bath.”