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Adobe CEO Shantanu Narayen speaks on a shifting digital landscape

Adobe CEO Shantanu Narayen talks with Yahoo Finance reporter Jen Rogers on how the COVID-19 pandemic has brought about a rapid shift in businesses towards all things digital, and how that affects every aspect of everyday life.

Video Transcript

- Shantanu Narayen is a 22-year veteran of Adobe and has been the CEO since 2007. Adobe is one of the world's biggest and most diversified software companies, supporting everyone from students to the world's largest corporations. Under Narayen's leadership, Adobe has posted record revenue, and he has position the company to capitalize on the work-from-home revolution in a world transformed by the COVID-19 pandemic.

JEN ROGERS: Hi, I'm Jen Rogers. Thanks so much for watching. And Shantanu Narayen, thanks so much for coming on and joining us.

SHANTANU NARAYEN: Thanks for having me, Jen.

JEN ROGERS: So before the pandemic, you talked about how every enterprise realizes they have to be a digital business. And I'm not sure that CEOs and employees realized just how quickly this was going to be proven true. Is the pace of adoption that we have seen in this part of the year recently, the uptick that you've seen-- do you think it's going to slow down? Or does this trajectory continue?

SHANTANU NARAYEN: Jen, my take on what has happened in the pandemic-- to your point-- is it's certainly been an inflection for adoption of technology. But the tailwinds that we're seeing across all three of our businesses, in fact-- what's happening on the creative side, what's happening on the document side, and certainly, what's happening on customers engaging with customers-- I don't think you're going to be putting the genie back in the bottle.

And all of us have seen the benefits associated with engaging digitally. And any company that doesn't have a great web presence, a great mobile app, the ability to do commerce, and the ability to deliver a personalized experience, I think, is going to be disadvantaged. So I believe this is going to be fueled for years to come.

JEN ROGERS: So you just talked about the three parts of the business. Adobe posted record quarterly profit of $3.23 billion last month. That's up 14% year over year. Growth was actually spread pretty evenly if you looked at it across the segments. Digital media, creative both growing some 19% on revenue basis.

Document cloud, though, was up 22%. And I want to actually zoom in on the document business. I think it touches everybody that's working at home-- their life-- a lot with PDF, the electronic signature solutions. Do you see any reason to have a printer anymore?

SHANTANU NARAYEN: Well, as you know, Adobe also created PostScript. And you know, we revolutionized the desktop publishing. So I think, you know, while there are a few cases where paper will still be used when you want these creations that adorn the wall-- you know, when my kids do things-- without a doubt, to your point, this automation of inefficient manual processes is only going to get accelerated. And we used to always talk about the fact that it was nuts that in this day and age people somehow thought that a physical signature was more legitimate than an electronic signature.

And so, you know, without a doubt more and more of these processes are going to be completely automated. You're going to get a PDF as verification for the fact that the transaction is complete. And I believe that this will also actually allow-- not just within an enterprise, between an enterprise and consumers-- but cross-country trade also to, you know, just continue to expand and become completely automated.

JEN ROGERS: You know, when we're talking about paper and you're talking about signatures, really the most important piece of paper right now is a voting ballot. Can you see a future where Adobe could be part of this solution where we would be able to digitally verify and have secure online voting? Or is that something that is always going to need to be printed out?

SHANTANU NARAYEN: Well, I think to your point, you know, clearly the voting process itself and when you go into a voting booth has become electronic. If you remember, we used to have to write that out. And now increasingly a lot of that is electronic.

But there are some countries-- for example, in India-- where, you know, the voting actually goes on for well north of a month. The entire process of how you understand the voter registration lists and manage all of that, PDF has been used to a very significant extent in those particular cases. And the adoption of forms-- as all of us are increasingly filling out forms-- I do see a day where you're going to be able to, you know, create this form. You're going to be able to authenticate who you are and validate it and then just submitted.

And I think that will make it fraud-proof. That'll make it faster. And hopefully, I think to your core question-- it'll prompt more and more people to vote. Because at the end of the day, that is our biggest civic responsibility.

JEN ROGERS: Right now, there's also a lot of focus on truth in social media and in news, whether it's disinformation or deep fakes. Are you worried at all about manipulation of images and content?

SHANTANU NARAYEN: Well, Adobe is taking a really critical role at looking at all the content. As you know, our software is used to create the world's content. And a year ago, we actually talked about what we are calling the "content authenticity initiative," which is to really say, how do we take everybody in the content chain and work as a combined organization and with leadership to make sure that people can verify that the content that they're consuming is authentic?

It is a really critical part of what we are doing. We've partnered-- as you may realize-- with companies like Twitter and "The New York Times." I think you'll see more announcements with platform providers and chip manufacturers. But we cannot do this alone.

I think in our software, when you, Jen, create a piece of video, we want you to be able to sign that and say, this was created by Jen Rogers. And then the distributor-- so in this particular case, if Yahoo Finance is distributing that piece of content, you know, it would be great if the distributors say, you know, this is how you can verify the authenticity of somebody who is standing by it, much like happened with, you know, paper-based publications when people started to create the byline.

And then we will use artificial intelligence and machine learning to really understand, once that content has been posted, has anybody changed it. And so I think this will take a few years. But it will require tremendous cooperation.

It's an area where we have significant resources. And we're really pleased with how people have taken it. But at the end of the day, it will also depend on the consumer. Because when the consumer is consuming content on Yahoo Finance, if the mindset is that we have to make sure that this was actually a piece of content that was signed by who it claims to be, I think that would be the last step in everybody saying, OK, the entire content chain-- all the way from authoring where Adobe plays a role to distribution where you play a role to the consumer-- the expectation is that they're going to check on it.

JEN ROGERS: So there's a lot of parties that are responsible along the way. Do you think the government will also be involved in coming up with a solution here?

SHANTANU NARAYEN: Well, I think in a lot of these cases what is happening is that the technology is moving so fast that-- you know-- trust. I'm sure you think about it from your perspective of the trust of your brand with your consumers is more important than anything else you can do. Because that's why people tune in.

And so we view that very much the same, which is, we will partner with the organizations, whether it's on data and privacy and on understanding it. But I think ultimately we also have to hold ourselves accountable and not just wait for regulation. Because the technology is moving so fast. Customer expectations are moving so fast.

And so in our particular case, what we are doing is actually writing position papers. And whether it's with the IDEA Act in the US or with other places like the EU, we're approaching them to say, hey, here are ways in which I think industry needs to coalesce to further advance what happens in this particular area.

JEN ROGERS: So right now, we've had so much going on with the economy, given the pandemic-- a little bit of an uneven recovery. We are starting to see a little bit more M&A activity recently. You have always been pretty acquisitive. Even though the recovery seems uneven, do you think there is some buying opportunities out here for Adobe?

SHANTANU NARAYEN: A couple of thoughts on that, Jen. Firstly, you know, we're never bottom feeders. And so we're not looking, you know, to acquire things just because they're distressed. I mean, that is not-- we acquire companies when the technology is great, the people and the culture really fits with us, and we believe that we can scale that particular business.

We are very pleased with the portfolio that we have, when you look at all three of our businesses. To your earlier point, there's tremendous growth. But there's a lot of innovative things that are happening.

I think the one area where we're all trying to understand is because culture and values are so important to us as we acquire people. I mean, when we acquire a company, the biggest asset that we're acquiring is, frankly, the people. And so I think we'll all navigate in this pandemic environment-- how do we understand culture and how do we get to know the leadership that will be critical, you know, if we should make an acquisition?

But we're always on the lookout. And we prefer, you know, small businesses that we can completely scale that have a really great technology base and a culture and value system that resonates with Adobe.

JEN ROGERS: So culture has really helped companies, I think, stay connected at this time, which has been so critical as everybody has been working separately. But it's really been more than just the pandemic, in terms of culture recently with the racial reckoning that's been going on in this country. Many Silicon Valley companies have really been embracing different social justice issues. And then other companies-- you know, most recently Coinbase has been out there saying that they want to be apolitical. What is your strategy for Adobe?

SHANTANU NARAYEN: Well, you know, since the company was founded we've had a very simple philosophy, which is, if you don't treat people equal and if you don't understand that your customers are diverse and you don't serve them appropriately, you're never doing the right thing. And so from our perspective, we actually have a set of principles that we've written down. And the set of principles helps us decide, when is this an issue of equality?

And given our platform and given the fact that the company has grown and we're one of the largest software companies in the world, I think it is incumbent on us to use that platform when appropriate to talk about issues that are important to us. The social injustice that you referred to-- we were vocal about some of the things that needed to be done. Because racial injustice is not something that we can stand by and see.

But it's also the same set of principles that allows me to look at it and say, is this something that is my personal opinion? Or is this something that the company stands for? And what I think has been significantly different-- I've been at the company over 20 years, I've been in my role for 12 years-- I think the next generation of employees-- the millennials, who are also joining the company-- they have a point of view where they want to hear from their leadership as to what the company stands for.

So I love the set of principles that we have. We've been vocal when it's an issue that's important for us. You know, we spoke out also on some of those immigration issues. But there are other issues where I believe that it's incumbent on each individual to make their decision. And my opinion is just one opinion as opposed to the opinion of the company.

And I think that's served us well. So you won't see us speak out about every issue. But on issues that are about equality, you certainly will hear Adobe speak.

JEN ROGERS: So as you noted, you've been at a job for a long time. And we do have this millennial generation coming up. Is it harder to be a leader now than it was 20 years ago? Are they asking for more from their bosses? And are all your stakeholders, in a way, asking for more?

SHANTANU NARAYEN: First, as it relates to the millennials and this next generation, I love it. You know, we have had a very aggressive college hiring program. And these people are scary smart.

And their energy-- I mean, if there's something that I miss, it's not being in the room when you have, you know, the summer internship program or the new college graduates. And you're in that room, and they're just questioning you about everything that Adobe does. And you know, that really tells you that they're there to question the status quo and they're there to push the envelope forward.

And so any company that doesn't realize that you are trying to target them as employees but also as customers, frankly, in terms of, you know, how they will look to companies when they make their purchasing decisions or how they innovate. So on that question, on that front-- no question.

You know, we love the fact that we can have as many millennials and the younger generation. And frankly, all around the world-- college hiring is the most ambitious way in which we hire people.

To your other question associated with, you know, the various stakeholders that people have to deal with, we've always felt that, you know, employees, customers, but the communities in which we participate are an important part. Well, well, before it became fashionable in Silicon Valley-- John Warnock and Chuck Geschke, who started the company-- we gave away 1% of net profits, you know, to causes. And we were profitable from year one. And so, you know, a lot of companies give away profits, but they're really not profitable yet.

And so we've always believed in giving back to the community. But you're right. I mean, whether it's sustainability, whether it's climate, whether it's social injustice, whether it's, you know, commenting on political things-- the expectations of leaders is different right now. But again, I'm so fortunate. I mean, between [INAUDIBLE] who heads up our know entire marketing organization, and Gloria Chen, who's our chief human resources officer, and Dana [INAUDIBLE], who's our chief legal officer-- you know, we have a group that enables us to have a conversation about, you know, what is it that represents what Adobe stands for? And so I think writing down those principles has helped it not appear like we're shooting off the cuff when it comes to one of these important issues for stakeholders.

JEN ROGERS: It is interesting hearing you talk about the history a little bit. Because Adobe has been front and center on issues before. It has a long history. And I think it's fair to say that we're all content creators now. Like, literally everybody is-- you know, my kids turning in their digital homework, here I am talking to you this way, a CEO making a presentation. And Adobe is actually involved in many of those experiences.

But in some ways on the consumer front, you might not be-- you're not as big a household name maybe as, you know, like Netflix is, which is a verb? Are you OK with that? Would you like to be a household name? Or do you think that Adobe's role is to be just in the background of everything?

SHANTANU NARAYEN: We certainly-- when you think about the content workflow and creativity, in particular, Jen, to your question, absolutely our mission and our belief is that we need to deliver creativity for all. And you're absolutely right in that we probably started at the tip of the pyramid. We delivered the world's best creative products. But the halo effect associated with using those, you know, really made other people who didn't necessarily classify themselves as creative professionals say, hey, Adobe is still the best products in the world, and I'm going to do it, whether it's Photoshop or Illustrator.

We have embarked on a very aggressive strategy to make sure that our tools are accessible, are affordable. Even when we completely pivoted to the cloud, as you know, it made it so incredibly affordable for somebody to use it.

But I'll name a few products. I mean, we just released Photoshop Camera, which allows you to take pictures. We were talking about filters before we went on air. And that's something that you can do, you know, a magical job of. Photoshop Express-- we've really embraced mobile not just as a consumption device but as a creation device. And so with Spark and a whole bunch of new suite of products-- Adobe Fresco to be able to draw.

And you know, we're driven a lot by these hypotheses. So we say everyone has a story to tell. It's crazy that you somehow believe that you can draw better with a mouse than you can with a stylus. So let's create the world's best drawing products. And we have done that.

We've said that Illustrator is coming to the iPad. And Adobe MAX is the largest content creativity conference in the world. And you'll be seeing some incredible innovation.

And you know, one last thing that I would say there. An area of particular passion for me is education. And when you think about it, it's crazy that in this day and age that most education projects are still text, you know, and maybe a few pictures, and not animation and interactivity and video. And you know, we want to be one of the companies that helps transform how people communicate.

JEN ROGERS: So Adobe MAX is your marquee annual event. Usually, you could have 15,000 people getting together. And of course, it's a virtual this year. Reed Hastings, Netflix CEO, has said that working remotely is a pure negative.

So you have all these creative people that would normally be getting together. You have you finger on the pulse of creativity. Do you think creativity suffers at all as we work remotely?

SHANTANU NARAYEN: Two separate answers to that Jen. I think the first answer to that is as it relates to people working remotely, focusing on collaboration and focusing on how we can make people more productive when they're working remotely is absolutely a huge area of focus for us. It's actually something we've done with a product called XD. For example, we allow, you know, simultaneous editing of things.

And that used to happen in the creative profession because a freelancer would maybe talk to an agency or talk to a corporation completely remotely. And so from that point of view, you know, I'm a big believer, and then providing more creative collaboration tools is something that Adobe can really distinguish themselves on.

To your other point of-- you know, the whole creation process and co-creation and whether it's for creatives or whether it's for office workers-- what's missing? You know, my belief is that we have seen incredible resilience from our employees, and they've all, you know, moved to working at home. When a project is well-defined in its existing, I think it's much easier for that project for people to work remotely.

JEN ROGERS: Shantanu Narayen, thank you so much for joining us. I hope we can get together one day in a room with a whiteboard and we won't just be virtual.

SHANTANU NARAYEN: I really look forward to that. Thanks for having me again, Jen.