In today’s episode, we’re exploring one of the most ambitious and successful business model transformations in modern corporate history, the shift of Adobe from a traditional software company selling packaged products to a thriving subscription powerhouse. And who better to walk us through this journey than Mark Garrett, Adobe’s former chief financial officer and the architect behind this transition?

When Adobe first announced its move to a subscription-based model in 2011, there was plenty of skepticism. Analysts questioned the financial impact, customers worried about cost increases, and internal teams faced the daunting task of restructuring their entire go-to-market strategy. Mark and his team remained steadfast, not just in their belief that subscriptions would create more predictable revenue, but also that they would allow Adobe to serve customers better with continuous innovation and improved accessibility.

Since those early days, Adobe’s market cap has skyrocketed from around 16 billion before the transition to well over 200 billion, proving just how powerful a well-executed subscription strategy can be.

In this conversation. Mark shares the behind-the-scenes story of how Adobe made the leap as a public company, maintaining exceptional financial performance while also enhancing customer satisfaction. We’ll discuss the key strategies behind their transition, the biggest challenges they faced both internally and externally, and what other companies can learn from Adobe’s playbook. If you’ve ever wondered how to execute a high-stakes business model transformation, how to balance Wall Street expectations with long-term customer loyalty, or how to design a subscription offering that truly delivers ongoing value, this episode is for you.

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Listen to the podcast here

A Behind-The-Scenes Look at Adobe’s Journey to Subscriptions with Mark Garrett, the CFO Who Architected That Transformation

In this conversation, Mark shares the behind-the-scenes story of how Adobe made the leap as a public company, maintaining exceptional financial performance while also enhancing customer satisfaction. We’ll discuss the key strategies behind their transition, the biggest challenges they faced both internally and externally, and what other companies can learn from Adobe’s playbook. If you’ve ever wondered how to execute a high-stakes business model transformation, how to balance Wall Street expectations with long-term customer loyalty, or how to design a subscription offering that truly delivers ongoing value, this episode is for you.

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Robbie Baxter: Mark, welcome to the show!

Mark Garrett: Thank you, Robbie. It’s great to be here, and have this exciting conversation with you about subscription.

Robbie Baxter: I’ve been really excited to get you on the show because the story of Adobe’s transformation into the world of subscriptions is really the key in the history of the world of subscriptions, the subscription economy, the membership economy, and the world of SaaS. I’m really interested in hearing it from your perspective.I wanted to start by just getting a little background on what you were doing at Adobe, and where you and the organization were just at the time leading up to this move to subscriptions.

Mark Garrett: Sure. Adobe, when I joined at the beginning of 2007, was at the time just about a 30-year-old tech company. So this is a tech company that’s been around for a very long time. It was a company that literally shipped software on a CD in a box when I joined. That was the model.

It was a company that was doing extremely well but we were growing slowly from a revenue perspective, single digits let’s call it on the top line, but very profitable on the bottom line. When I joined, the company was shipping at the time Adobe Creative Suite 3 in 2006, and it did extremely well. 2007 was a terrific year but the company traded from a stock perspective on product cycles. In other words, we shipped a new release of the CD in a box every 18 to 24 months, and nothing came out in between those releases, and when I joined, the CEO that hired me said, “Look, 2007 is going to be great. We just acquired Macromedia. We integrated it into Creative Suite 3. It just shipped. Everybody’s going to buy the release.” And they did. It was a great year. But again, the product was growing from a revenue perspective very slowly. The stock traded on the mystery of the next release and then sold off on the history of that release. So the stock went up and down and you could draw a regression line through it. It was pretty flat for a long time. The executive team was not very excited frankly about the business, because it was a slow-growing business, and most executives don’t like to be in a slow-growing business. Lastly, the customer experience of getting a CD in a box was not great. The reason I say that is because in between these releases that were 18 to 24 months apart, there were no product updates. There was no refresh. You just used that release for 18 to 24 months, and then you either upgraded to the next one or you didn’t, and a lot of people didn’t. And that was not a sustainable model.

So when I joined, the 1st couple of years was good and then the big recession hit in 2008, and that kind of changed everything which we can talk about. But up to the thought of moving to a subscription model, the takeaway is it was a good and profitable business. It was a good customer experience, but not a great customer experience in a single-digit growth company, which was just not all that exciting to the management, to employees, and especially to shareholders.

Robbie Baxter: Yeah. If we broaden the lens a little bit, subscriptions were not very popular in in the software world. There was Salesforce, they were subscription-based from the beginning but there weren’t any public software companies that were using a subscription model.

Mark Garrett: Right. Salesforce was probably the only one that I can recall. In fact, if you remember way back then, they used to have this little logo of a circle with a slash through it. That said software right? No software. Because they really were the first to offer a subscription service, but they entered the public company market with a software as a subscription offering. They never had the perpetual model that Adobe had. So it was great that they introduced it, but they didn’t have to do the transformation that we had to do.

And to carry on your conversation there. The 2008 recession was really the tipping point for us as a management team because we had this business that was slow-growing but very profitable, not very exciting, and not a great experience for the customer, and when the recession hit, the CEO Shantanu Narayen and I kind of looked at each other and said we shouldn’t waste this recession opportunity, which sounds kind of crazy. But the stock was down. The market was down. Nobody was doing well.

Our head of product Kevin Lynch at the time, was the CTO, said “We do not have a very good customer experience with this CD in a box,” I looked at Salesforce during the recession and saw that their revenue held up very well during the recession because it was a subscription you had to pay if you wanted to play. Adobe didn’t have that. We had a whole bunch of people who skipped releases during the recession because they didn’t have to upgrade. And so we got together as a management team at one of these classic off-site meetings and decided we needed to do something drastic. After 3 days locked up in a room in Carmel, we decided that subscription was the way to go.

It afforded the CTO an opportunity to have a product where you could leverage the cloud, which was incredibly important. So, in other words, you could sync across devices, you could share your content with other people, you could store all your content in the cloud, you could collaborate with other people. So from a product perspective, he thought, “Hey, this would be great if it was a cloud-based offering.” And I looked at Salesforce and said from a financial perspective, as the CFO, this is going to give us the chance to have recurring revenue and not have these major dips during the recession when people weren’t upgrading through our upgrade cycles, and that’s kind of where the idea came from. This was in kind of 2008 – 2009.

Robbie Baxter: How important was it that there was a recession to the willingness?

Mark Garrett: I think the recession was incredibly important because it created a compelling event.

I honestly don’t know if we would have been as aggressive in moving to a subscription model, were it not for the recession. I think we looked back at the business in 2008 – early 2009, revenue dropped probably 20%, just because of the recession, which was devastating. We had to do layoffs, which was even more devastating. And when the CEO and I sat down and started thinking about what to do, we said, “Look, this can’t be a company where whenever revenue takes a dip. We have to do layoffs. That’s just not the way to run a business.” And the way to fix that is to not have these revenue dips, and the way to fix that is, to have more of a recurring revenue model. Which is what subscription offered but the old model of shipping a CD in a box did not, so I think it was just an incredibly compelling event that pushed us in this direction.

Robbie Baxter: This was off-site, you said in Carmel. With the executive team, the product was on board, tech was on board, CFO and CEO were on board. Everybody was aligned. How did the board respond to this? And how did you, as the CFO communicate what you expected to happen over the next few years?

Mark Garrett: So when the Executive team got together, it was universal that we needed to do something dramatic, and subscription was universally the answer that we came up with, and that included our head of marketing, our head of product, of course, the CTO myself, the CEO, and actually HR was very important in this as well. So Donna Morris, the Head of H, was also on board, and I’ll explain why that was so important.

We decided that we needed to do this, and we knew that in doing this it was going to require support from the management team, not just the executive team, but the entire management team, the board, our customers, our partners, and our shareholders. So there were a lot of constituencies that we had to kind of bring along with us, and the best way to do that was to be transparent. But the transparency was kind of a little bit more mine to own, especially with the shareholders and the board. The board was very supportive. This was a board that had its founders 30 years into the business still with the company and they always had a very long-term view of where the business needed to go and not focused in the short term on the share price. Getting the board on board was relatively easy but getting the employees on board was the harder part. There were a lot of people in the company that had existed for 30-plus years with the old process of shipping a CD in a box. And that was something that some people couldn’t get past.

I’ll give you an example of that. When we had a new release coming out, the engineering community had two-plus years to think about what was going to go in that release, because they knew that they had 18 to 24 months to put new features in, to do quality assurance, and getting them to think about moving from that kind of a model to a model where it’s SaaS where you’re up and running 24/7, and every single release can happen day to day, not in between these 18 to 24-month cycles. And there were a lot of people that just couldn’t get their head around that.

So that’s why I mentioned HR before. There were a lot of internal HR changes that needed to happen to get employees to either commit to making this change, or frankly to move on, and some people had to move on. They had been doing this for 30 years the old way, and they weren’t ready to move to the subscription model. There were a lot of people who didn’t think this was going to work. From the employee perspective, it was a little bit harder from a change point of view.

Robbie Baxter: Yeah, I’m so glad that you brought that up because there are still many organizations, even today, that are making this transition from something that you buy to something that you subscribe to. The automotive and healthcare spaces are changing right now a lot of companies are wrestling with these challenges that you went through and pioneered an approach. The human side is often overlooked.

I think about two areas. There’s the I don’t know how to do that right. You’re asking me to do things in a different way, and I don’t know what that is. And then there’s also the I don’t want to do that. I like the way I always do things. Then there’s a whole separate issue that you alluded to, which is out of deep love for the company, which is I don’t believe it’s going to work, and so I’m going to drag my feet, and hope that you don’t make this big change.

Mark Garrett: That’s right, and a lot of people had to leave because of that. I could go through every function in the company every single function, finance, R&D, marketing, HR, and IT. Every function in the company had to change dramatically. I don’t mean a little bit, I mean dramatically, and I’ll give you a couple of examples. In finance, this was my team. We used to track the number of boxes that we shipped. That’s how we ran the business. How many boxes of Creative Suite shipped? That had to change to: How many subscribers? What is the average revenue per user? What’s the turnover rate in the subscription model? What is our annual recurring revenue? Tons and tons of metrics that just didn’t exist before.

The finance team had to move from just understanding how many boxes shipped to why is Photoshop doing better in the US than it is in Japan. Why are people not adopting a subscription model in Japan but they are in the US? Because in a SaaS model, you have an infinite amount of data. Right? You’re getting real-time information every day.

But when you’re shipping a box, the only information you have is that somebody bought a box. That’s it. You don’t know if they use the product, how they use the product, and when they use the product, but with a subscription, you know everything. And so the finance team had to really change their whole moniker on how they thought about the business.

Photo by www.webdesignmuseum.org
Adobe in 2005

In IT. Our website was the old-school information website. If you came to the Adobe website and looked up Photoshop, it would tell you, here’s what Photoshop does and how to use it. That’s it. That was the wrong model, right? So we looked at Netflix. If you go to the Netflix website, you got to remember, this was 15+ years ago. Even back then you were immersed in the product the minute you went to their website. So we had to change our whole website. Immerse in the product immediately and you click to buy. We didn’t even have an online store. We went from 0 business online to over 1 billion dollars of business online, because once it’s a subscription model, you just go to the website, you click and you buy. And we didn’t have that before. So every function in the company changed dramatically. It was a major change from a personnel perspective.

Robbie Baxter: It was also a major change for your customers and quite controversial at the time.

One of the things that you’ve told me in the past is how important it was for you to be able to look your customers in the eye, and truly believe that subscriptions would be better for them. Why did you have that confidence?

Mark Garrett: Well, in the beginning, we decided this needed to be a product-led change, not a finance-led change. I’ll give you an example of what I mean by that. When you go to buy a car. If you’re going to pay for the car upfront, or if you’re going to lease the car. You basically just do some math which is better for me financially. It’s the same car. We didn’t want this to be, do I buy the car, or do I lease the car? We wanted this to be is you’re going to lease the car because it’s a different car. It’s a better experience. You get to leverage the cloud, collaborate, share, and sync. And store in the cloud and get updates all the time. So we needed to be able to look the customer in the eye and say, “This is a much better offering for you.”

And the reason that was so important is because in the beginning we had both the old perpetual model, the CD in the box, and we introduced the subscription offering in 2011. We left both offerings in the market at the same time, because we didn’t want to just rip the old product away from everybody and force them to the subscription. So we had a bit of a carrot model, which was, you can stay with the old box if you want but this subscription offering is better. It’s not the same but it is a much better offering for you, and you should want to move over here, and that took a lot of doing, but if this was just a financial exercise, people would still be migrating over from the old model. It would take forever and I didn’t want that, because Wall Street doesn’t like long-term transitions so we really needed something that would move people over as fast as possible. That this is going to happen relatively quickly and show the customer that they’re going to be better off. In the very beginning, we had something like 20,000 Photoshop customers sign a petition saying that Adobe is just doing this to raise prices and extract more money out of us, and this is going to be awful for us. That was a test for the executive team. That kind of scared us a little bit, to be honest with you. So the way we address that is, we said to the Photoshop community, “We’re going to Bundle Photoshop and Lightroom together and give you a much better offering at a great price if you move over to the subscription offering,” and it worked. They kind of calmed down, and they saw the benefit. This was the carrot model again, and they slowly but surely started moving over and that was one of my, I called it Burn the Boats moments where I told the executive team, “Look, we laid out a strategy. We think this is a better product. We can look the customer in the eye and show them it’s a better product. We can’t flip-flop here. We’re committed to this. We’ve got to just show the customers that they’re better off,” and it worked.

Robbie Baxter: It sounds like you had a very good story for your customers, obviously making all the product changes is key to that. Otherwise, it’s just math, as you said. And you introduce some carrots in terms of pricing and bundling, to make it a little more palatable for them to take the risk and learn a new way of engaging with you, and also make a longer-term commitment to paying you on a regular cadence.

It has been my experience that in this type of transformation, there are usually some edge cases who maybe aren’t going to find the new solution better. So when I think about Photoshop, I think about the moonlighters and the wedding invitation creators who don’t have any colleagues, aren’t collaborating, don’t need all the bells and whistles, don’t need any shared dashboards, and who are paying for the software out of their own pocket. How did you think about people like that or other small segments where the features didn’t quite make it worthwhile to change?

Mark Garrett: It was a carrot and a stick model and after we saw this was working, so 2011, it was introduced. In 2012-2013. We said, “Hey, this is working. We can look the customer in the eye like you said, and tell them that they’re better off with this new product. We needed to get the rest of the install base to move over, and that was the hard part. It was easy to attract new users. That was another reason we did this because it attracted new users that didn’t want to spend the upfront money but getting the existing install base after 30 years to move over to this model was the hard part. The carrot model worked for some but to your point, at some point, we had to bring out the stick. And the stick was once we were sure that we were on the right path, and that this was going to work.

First, we said, Creative Suite 6 is the last perpetual release. We’re going to do in this offering. You can keep buying Creative Suite 6, but there will not be a CreativeSuite 7 under the old model. You’re going to have to move over if you want new features and new functionality, you’re going to have to move over to the subscription model. It upset a few people, but they had the chance to buy Creative Suite 6 for quite a long time, and then the last stick was, we said, “We’re taking Creative Suite 6 out of the market. So you have no choice anymore. If you want to upgrade to a new Adobe offering, you have to move over to the subscription model,” and that’s what kind of got the rest of the people over.

Robbie Baxter: When did that happen?

Mark Garrett: It was roughly 2014-2015. It took 3 years. We haven’t talked about Wall Street yet, but it took 3 years to call it a 2 billion dollar of Creative Suite revenue and move it to a subscription model. It took 3 years to move everybody over, including attracting new users. But after 3 years we pretty much had the entire revenue base of the perpetual model moved over to a subscription model.

Robbie Baxter: JB Wood’s idea of the Swallowing the Fish, which has now become a popular concept where your costs are going up while your revenue goes down, and then at some point they meet back in the middle, and then hopefully, your revenues go up.

That was a 3-year process for you but for many companies, it’s longer.

Mark Garrett: In 2011, I got on stage at an investor conference that we held and I told Wall Street we were going to do this. We were going to move from this old-school CD in a box upfront perpetual model to a subscription model, and for the next few years at least, revenue was going to drop like a rock, profit was going to drop, cash flow was going to drop. But it’s a little bit of a Jedi mind trick thing where I said, “Look over here, don’t look at the old model. Don’t look at the P&L.” It was pretty scary to tell that to the investor community. Think about that, how do you tell investors not to look at the P&L? But look at the number of new subscribers we’re getting. Let’s look at the ARPU that we’re getting out of each of these users. Look at the ARR. Look at all these new metrics as that starts to go up. I want revenue to go down in the P&L because the faster revenue goes down. That means more people are migrating over to the new model. That took some doing with Wall Street. But eventually, that got them to the point where they saw the new metrics taking hold, and they got excited about this transformation. So it took a few years to kind of get everybody to come along.

Photo by Vlada Karpovich
In 2011, Adobe transparently told Wall Street: Revenue and profit will drop, but ARR will grow. A bold shift from CDs to subscriptions that paid off.

And interestingly, I gave them a 3-year model back then and I told them, this is what the P&L is going to look like over the next 3 years. This is what the new ARR is going to look like over the next 3 years, and if we’re tracking along that model. You should be good and we did. We tracked very nicely along that model when the 3 years was up and the 2 billion converted over to subscription, then they said, “Okay, now, what?” And I said, “Well, here’s another 3-year model.” That took them from 2013 to 2016. And I said, Now you’re going to get the compounding effect of all of these subscribers that we have that are paying you every single month instead of people that we’re skipping versions or dropping out. That 2 billion dollars is going to grow 20% a year for the next 3 years. And it did. And that’s what got them very excited. That’s where the stock went from $20-$30 to ultimately over $700 because you got that compounding effect of all of these subscribers.

Robbie Baxter: It’s really a remarkable story.

At that time, how did you think about the actual steps leading up to the transition? The pricing change, testing the model to make sure it was working, and adjusting along the way. What was the day-to-day process of bringing it to market?

Mark Garrett: Back in 2008 or 2009, when we were 1st thinking about doing this, we said, “Look, we don’t know if this is going to work. This could be a complete disaster. We could really upset the customer base. Let’s do a test. We chose Australia to do the test because Australia is in the middle of nowhere, and it’s very much like the US Market. And if you do a test there, it’s not going to bleed into other countries very easily.” All we did was instead of buying Photoshop, for at the time it was something like $750, you can rent it.” And this truly was the buying the car versus renting the car. We found out that 40% of the people signing up for the rental had never used Adobe products before, because now it was affordable. That to us was game-changing, because now we saw we were going to bring new people into the franchise, and that was our experiment that worked exceptionally well that when we rolled out the subscription, we knew we were going to be getting new entrants into the Adobe franchise that never existed before.

Robbie Baxter: Those people were really getting the new math, right? Same old product at that time but with new pricing. So it answered your question about how do people feel about subscriptions and you saw that it would it could grow the market.

How did you get comfortable that they would like the SaaS version?

Mark Garrett: I think it came down to the product. Because just renting the Photoshop box, was the exact same product. It was kind of expensive frankly, the way we rolled it out. It just saved them from laying out $750 upfront, but they were paying quite a bit per month and we thought, “Boy, if they had new features, if they could share, sync, store, and collaborate with the cloud, they would really like this offering.” And so that’s what gave us the confidence. We knew the true subscription offering was going to be a much better product than the box.

Robbie Baxter: How did you think about pricing?

Mark Garrett: So pricing was a huge exercise because when I joined, the Adobe pricing was spread out around the company. I kind of came from IBM, where we had a specific function dedicated to pricing so I asked the CEO, let’s consolidate pricing into one place. We did that. We pulled it all together. We put it in my organization. And the 1st thing we looked at was, what is the price of the subscription going to be? It was very challenging to figure out what that right price point was because we didn’t want to set the price and then have to increase it. So you have to be really careful about what that entry price is. And the way that we decided was for people who had been buying Adobe products and upgrading every single cycle, we didn’t want to have them pay more for the subscription offering So we wanted them to be neutral. If you were every 2 years buying the new release, you wouldn’t have to pay more for the subscription. The people that were skipping versions. We were kind of okay with them, paying more. So if you bought Creative Suite 3 and used it for 6, 7, or 8 years, you paid us once, and that was it. Because you were getting more functionality along the way every time we upgraded the subscription offering. We went through an exercise where we said, “Okay, the max price is the price that affords people that were upgrading every single cycle to pay the same amount, but on a monthly basis, instead of upfront. That was the max.” That worked. People who were upgrading every single cycle easily moved over to subscription. They weren’t really paying more for it. But the people that were skipping were paying more, and we were okay with that. That kind of gave us the boundaries of how to price it.

Robbie Baxter: Once you launched and you went through your first 3-year range with launching the product, setting expectations with Wall Street, and then the second 3-year phase of things are actually now going to get even better. We’ve been through the hard part. Can you give us a snapshot of the outcome of this experiment and what it did for the company’s future trajectory?

Mark Garrett: It was phenomenal. We had now a much better product offering for the customer. We had 100% recurring revenue. We had people no longer skipping versions because if you wanted to use the product, you had to pay for it every single month. So it was financially beneficial to Adobe but at the same time, it was a much better product for customers. The stock price was probably a low of $20 and a high of over $700 during this. I don’t think it could have gone any better. If I could do it all over again, I would have tried to do it even faster had I known how successful it was going to be. Wall Street was ecstatic. We delivered on all of our expectations.

There are a couple of things along the way that I maybe would have done differently. For example, we didn’t do it for Acrobat at the time. We only did it for the Creative product. Acrobat came many, many years later. If we had known how well this was going to go, we probably would have done Acrobat at the same time. There were a few markets like Japan that took a lot longer to get to a subscription offering. Japan just didn’t like renting software. If you went to Japan, people would have the Creative Suite box literally on their desks like a trophy, and you lose that when you move to a subscription. And it took a lot longer culturally, for the Japanese market to adopt this kind of model.

The other one that was more difficult was education. We have a big education market and students are in school for 9 months of the year. For the 3 months that they’re off, they don’t want to be paying for something that they’re not using. So we had to kind of adapt to the education market that we probably didn’t think through completely at the time. So there were some things that if I looked back I’d do them differently. But it was an incredible success, and the hardest part about this frankly, was doing it as a public company, because revenue was going to go down. Cash was going down. Earnings were going down while we were doing this transition, and my biggest fear and a little bit of the boards was that somebody would have come along and acquired us, because the stock was down to like $20. We were in a place where someone could have picked up the whole company if they really wanted to. But we kind of managed through that quickly, and it never happened but that was something that I was always concerned about at the back of my mind.

Robbie Baxter: Since you’ve left Adobe after a long and successful tenure there, you have advised several companies. You were a public company CFO of the year. You had many offers. It’s a very nice award. You have now become an advisor and a board director for other companies, including Snowflake, Inc., which has a consumption-based pricing model. At this stage in your career, what is your advice to organizations about how to think about what the right business model is, how to think about pricing, and what is best for companies and for their customers?

Mark Garrett: I would say probably 3 things. I’ve said this a lot, but it starts with the product experience with the customer. So no matter what you’re doing, no matter what kind of business model you want, no matter what you’re changing strategically, it’s all about creating the best possible experience you can for your customers, and that’s what we started with. This was not a financial exercise, It was a better product offering that came along with a better financial experience for Adobe. I’d start with what is the best product experience you can come up with for your customers and then lay out that product strategy.

Number 2. I said this before but I was a firm believer in Burning the Boats. There’s no going back, right? You can’t flip-flop. It confuses customers, it confuses shareholders. Once you lay out your strategy, if you have conviction in it, stick to it, and don’t look back, maybe adapt, but don’t look back

Lastly, I would say that an uncomfortable amount of transparency with those constituencies that I talked about before. Employees, executives, the board shareholders, partners, and management. I was so transparent that some of the executive team was worried I was giving away too much information, but it made everybody comfortable. They understood what we were doing, why we were doing it, and what it was going to look like when we came out of the tunnel. And that was incredibly important.

On pricing, you just have to do a lot of math, but try to figure out what the right price is for your most loyal customers, so they don’t feel like you’re gouging them, and that to me sets the top of the bar for what your pricing is going to look like. When you’re going through changes like this, I think it’s important to set a price that you can hold for quite some time, so people don’t feel like you laid out a strategy and then all of a sudden started raising prices. We basically told people we would not raise prices for a long time, and we didn’t for a very long time, and when we did raise prices ultimately we tied it to incredibly new, exciting features in the SaaS model that we could say, “Look, we’re raising the price. But look what you get with that price increase.”

I was so transparent that some of the executive team was worried I was giving away too much information, but it made everybody comfortable. They understood what we were doing, why we were doing it, and what it was going to look like. Share on X

Robbie Baxter: it’s good advice. Treat your loyal customers the best. It is such an important point, and it’s sometimes counterintuitive because I think many organizations say, “Well, the most loyal ones aren’t going to go anywhere, so we can do whatever we want to them. They won’t move.” And if your business depends on long-term relationships, you want to do just the opposite.

Mark Garrett: Exactly. And you know you mentioned Snowflake. For the longest time the move from this perpetual model to a SaaS model was the right way to go. And I still think for a lot of companies it is. But personally, I feel like the future of software is going to be a consumption model, because even with SaaS, if you don’t use the product that much, you’re paying for something that maybe you don’t need as much, and you’d rather pay for what you use. And I think Snowflake and some other companies that are now moving to a consumption model, probably the future of software, that will be the next evolution, if you will.

Robbie Baxter: One of my earlier guests on the show, Marco Bertini, professor of marketing at Esade and a visiting professor at Harvard Business School, wrote a book called The Ends Game, which is all about how the best businesses align their pricing with the outcome that the customer desires.

I think subscriptions, consumption-based pricing, and several other models that we’ve looked at, even the show is called Subscription Stories, they are ultimately the best way to go, and for me the biggest guiding principle is and why I call it the Membership Economy, and not the subscription economy, or the consumption-based pricing economy is because for me, it starts with treating your customers as if they’re going to be around as members for a long time, and then optimizing exactly outcomes.

Mark Garrett: Exactly. So. I have the new book for you ready to go, Robbie. It’s going to be The Consumption Model is Next.

Robbie Baxter: The Consumption Model is Next. I love it.

I love to end my episodes with a speed round. Are you up for that?

Mark Garrett: Sure. Give it a shot.

Robbie Baxter: Okay, that first subscription you ever had?

Mark Garrett: Wow. Probably Sports Illustrated. The Magazine.

Robbie Baxter: Favorite subscription you’re using today? .

Mark Garrett: I have to say Creative Suite and Adobe Acrobat. I subscribe to Apple Music which I use quite a bit. So I think Apple’s done a terrific job with their music offering and their product set.

Robbie Baxter: The best learning you had from your organizational behavior-oriented MBA?

Drive change. Complacency is a terrible word. That's something that we kind of pounded hard through the company. At Adobe, complacency is not a good place to be. Share on X

Mark Garrett: Drive change. Complacency is a terrible word. That’s something that we kind of pounded hard through the company. At Adobe, complacency is not a good place to be. That’s what I mean by driving change. No matter how well you’re doing and how good things feel right now, don’t be complacent about it, because somebody’s going to come along and change before you.

Just look at Kodak or Blockbuster. There are hundreds of examples of companies that didn’t change, and they were forced out.

Robbie Baxter: Mark Garrett, thank you so much for being a guest on Subscription Stories.

Mark Garrett: Thank you, Robbie. It’s fun.

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That was Mark Garrett, former CFO of Adobe, sharing the inside scoop on Adobe’s bold transformation from selling packaged software to a full-fledged subscription model. For more about Adobe, go to adobe.com, and for more about Subscription Stories, go to www.RobbieKellmanBaxter.com/podcast.

Also, I have a favor to ask. If you liked what you heard, please take a minute to go over to Apple Podcasts or Apple iTunes and leave a review. Mention Mark in this episode if you especially enjoyed it. Reviews are how listeners find our podcast and we appreciate each one.

Thanks for your support. And thanks for listening to Subscription Stories.

—

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About Mark Garrett

Mark serves as Chair of the Audit Committee for the Board of Directors of Cisco, GoDaddy, and Snowflake and is a strategic advisor to Permira. Mark was on the Board of Directors and Audit Chair at Pure Storage from July 2015 to December 2021.

With more than 30 years of financial management experience in the technology sector, Mr. Garrett has worked with many of the industry’s leading companies.

Most recently, Mr. Garrett served as Executive Vice President and Chief Financial Officer of Adobe from February 2007 to April 2018. During his tenure he helped lead Adobe’s Digital Media business unit transformation from a physical, shrink-wrapped product with a perpetual license model, to a full subscription model.

Prior to joining Adobe, Mr. Garrett served as Senior Vice President and Chief Financial Officer of the Software Group of EMC Corporation. Prior to EMC, he was Executive Vice President and Chief Financial Officer of Documentum, Inc. including throughout its acquisition by EMC in December 2003. Previous accounting and finance management positions include tenures at IBM and Cadence Design Systems.

Mr. Garrett earned BS degrees in Accounting and Marketing from Boston University, and an MBA from Marist College.

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A Behind-The-Scenes Look at Adobe’s Journey to Subscriptions with Mark Garrett, the CFO Who Architected That Transformation

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A Behind-The-Scenes Look at Adobe’s Journey to Subscriptions with Mark Garrett, the CFO Who Architected That Transformation

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About Mark Garrett

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