The Underlying Story Behind Adobe’s Failed Mobile Strategy

Adobe-logo.gif The past weeks' events surrounding the new language in Apple's iPhone Developer Program License Agreement — which prohibits developers from using such software as Adobe's CS5 suite for converting Flash content for the iPhone — have exposed the San Jose software giant's shortcomings in the mobile space. Interestingly enough, these problems for Adobe didn't pop up overnight or come about simply due to Apple changing their licensing language. Yet, because of Apple, it's caused a lot of people to realize just how late to the mobile space Adobe has been.

Over the past few months, I've spent a lot of time talking to current and former Adobe executives off-the-record who have revealed to me details regarding plenty of red flags in Adobe's mobile strategy which were brought to the company's attention years earlier. Those I spoke with agreed that Adobe's recent shift in management style and insistence on staying the course rather than adapting resulted in their shortcomings in the mobile market.

For many years, Adobe's rise to the top of the software industry was the result of having a vision for its products, not just sales goals. Former Adobe engineers I spoke with attest to the "good old days" when co-founders John Warnock and Charles Geschke roamed the office halls, tested products first-hand, and chatted with team members who were developing the company's industry standard software. This type of vested interest and on-the-ground awareness instilled a sense of camaraderie and motivated engineering teams to ship products that were the best, not just "good enough." Adobe made software with a clear goal of fulfilling critical needs for their users, and the entire company — from the top-level execs to the engineers in the design labs — were in sync with this common objective.

But within the past few years, Adobe's focus shifted from being at the top of its class solely to growing its bottom line. Cost-cutting became the company's priority as each year brought no less than 10% in staff cuts. Naturally, the engineering teams became demoralized as they knew every Q4, after they shipped the product they were working on and after putting in long hours, their jobs could be shipped out as well. The executive team's quality-killing concentration on profits started adversely affecting not only the products that made Adobe what it is today, but also its design strategy and adaptability to the changing industry.

By 2005, Adobe had its sights set on Macromedia and their Flash technology. Macromedia previously had created a $1 billion mobile Flash Lite content market in Japan by licensing Flash Lite through various Japanese mobile carriers. When Adobe acquired Macromedia in December 2005, they sought to replicate Macromedia's Japan success in the European and American markets, but with one key difference. Along with licensing Flash Lite via a carrier, they would create a "Flash App Store" of sorts where users would pay to download supplemental Flash content for their phones, and Adobe would share in these profits.

Adobe decided on this strategy in 2006, after laying off all members of the original mobile business unit from Macromedia who had planned and spearheaded Flash Lite's billion-dollar success in Japan. Adobe's new mobile business unit bet all of its chips on feature phones while completely ignoring the looming smartphone market – most notably, the iPhone. The strategy backfired.

The version of Flash Lite that Adobe built specifically for feature phones failed to cultivate an ecosystem among developers because its content was not cross-compatible with the version of Flash Lite for more advanced phones (pre-iPhone) Still, the management in the mobile business unit would not budge. They insisted that feature phones were the way to go since, at the time, feature phones were outselling smartphones shortly after the iPhone's release. Yet, ironically enough, I'm told that half the members of the mobile business unit were personally using iPhones at this point.

Despite recommendations from members within the mobile business unit to overhaul Flash for the iPhone, Adobe decided not to invest in revamping Flash, perhaps the most detrimental consequence of its new focus on cost-cutting. By the time the first iPhone SDK was released by Apple, Adobe's mobile business unit was terminated. All of its remaining team members were deployed to other product teams; its most knowledgeable mobile engineers had already left the company or were in the process of leaving and Adobe had inadvertently committed self-sabotage by driving away all of its mobile engineering brainpower.

Adobe's ineptitude at responding to the changing industry is a byproduct of its increasingly multi-tiered management structure. Former Adobe employees complain of an excessively bureaucratic management process where progress is rendered minimal by an insistence on decisions by committee. Rather than entrusting important decisions to knowledgeable team managers, Adobe now relies on an elaborate web of middle managers who don't always have a close understanding of the matters they decide upon. Even worse, some of those managers have never even used the products that they are assigned to oversee, and their decisions are made not for the sake of the product but for the sake of keeping their own job in the face of Adobe's regular outsourcing of engineering positions.

Along with regular staff cuts has come an apprehension among employees to take responsibility for new ideas. Team members now are afraid to go against the bureaucratic grain by suggesting new ideas lest they get let go at the end of the year. The overly complicated decision-making process also is discouraging to team members hoping to see their ideas for the company come to fruition. Sometimes, a cut-throat attitude takes over as managers might shoot down a great idea from a team member only to turn around and present it as their own to the executives, which only further fragments the spirit of teamwork that traditionally enabled Adobe's engineers to create trailblazing products.

While some of these "jockeying for position" problems exist at all large companies, no one can debate that Adobe's been late to the game in the mobile market. The focus for Adobe has always been the desktop and only recently have they really stepped up their efforts in the mobile space. I believe that part of the problem, like the employees I spoke with, is a lack of vision by some in management. In 2008, Adobe's CEO went on record to say that Adobe has beat Microsoft in the video format space and that Microsoft could not catch up. As I wrote in a post entitled, "Adobe's CEO Underestimating Microsoft's Ability To Compete With Flash", that's a dangerous assumption to make. And as I pointed out in the post, the mobile space was an area that Adobe didn't have a big penetration in and wasn't exactly talking a lot about in 2008. Now, once again, we've seen that some at Adobe have underestimated another company in the space, this time Apple.

I learned a long time ago that's it's always better to talk about what you do well, as opposed to what your competition does poorly. Instead of Adobe dismissing Apple and shifting the focus of the discussion right away to a larger opportunity in the market, like Android, some executives at Adobe seemed to continue to want to fuel the fire with Apple. Android is a much larger opportunity in the long run for Adobe and it's good to see that today, Adobe has finally said it will stop any additional investments in CS5's iPhone feature to focus on platforms like Android.

For Adobe, it's the right move, but one that took them too long to make. From the beginning Adobe should have played down Apple's decision and at least turned the tables to show that supporting Flash on Apple devices was not a "technology" problem. Yet, I didn't see Adobe present any third party data to show Apple's real reason was a business decision and not a technology one. StreamingMedia.com did some testing and found that "Test Results Published Show Flash Is Not a "CPU Hog" Like Apple Claims" but Adobe should have been spearheading these efforts and decided that their overall mobile strategy is more important than just one device. That should have been their message from day one.

Today, Adobe is saying that, "the iPhone isn’t the only game in town", but now it has to convince us that they really believe it. Clearly management thought the iPhone was a big enough deal to their business that they felt compelled to file an 10Q saying how their business might suffer if Apple kept Flash off their devices. While Adobe has made some progress in that regard by having both Flash Player 10.1 and Adobe AIR 2.0 for Android available in beta for pre-release testing, we have to wait to see how Adobe executes in the market.

The mobile battle is not lost for Adobe as the market is really just starting to heat up. But one has to wonder how much further along Adobe would be right now if their vision had been better, if management encouraged smart thinking and if the culture was to change from that of a company that has a legacy of making box software, to one that can be quick and nimble to deploy web-based platforms. Only time will tell if Adobe can truly change the culture within the company but I think by the end of this year we're going to have a pretty good idea if Adobe is executing successfully in the mobile space. A lot of growth is coming to the mobile space and it's going to be fun to watch.

  • Mike

    Why doesn’t Adobe get off it’s butt and make a HTML5 player with all the functions that the current Flash Vars have with Java Script instead, along with a browser detector that switches to Flash for browsers that don’t support it?
    Obviously the videos would need to be H264 for cross compatibility.
    HTML5 browsers and Apple devices would play the videos just fine.
    Problem solved.

  • http://blog.schematic.com.au Matt Voerman

    Great post Dan – as an exAdobian I can concur with all of the points you raised – FWIW great minds think alike…I literally only yesterday posted a similar (lighter) story about FlashLite/FlashCast on my blog yesterday (http://blog.schematic.com.au/?p=108)

  • aristophrenia

    My god – what a shocking article – ridiculous. Symbian control well over – WELL OVER – 40% of the market. Flash Lite has combined with Ruby, Java, C etc for almost five years to deliver rich content on the symbian platform – along with flashlite in the browser – and is now available (along with flash lite 4.0) on every new phone – with flash 10.1 and AIR on high end phones – so – flash is available – basically – on every single phone in the market. I can develop for every phone, every platform, every interface and every browser with flash – EXCEPT iPHONE —–…..
    Stupid, stupid, stupid article.

  • flashlite?

    @aristophrenia: what world are you living in? flashlite has been a complete failure. this article is absolutely dead on.

  • Sam S.

    “Along with regular staff cuts has come an apprehension among employees to take responsibility for new ideas. Team members now are afraid to go against the bureaucratic grain by suggesting new ideas lest they get let go at the end of the year. ”
    What a load of BS. Who’d you speak to, disgruntled ex-employees? Some of this article is correct,but much of it sounds like it’s from employees that were laid off. I work at Adobe, and in no way is this statement true with any of the people I work with.

  • Migsil

    @aristophrenia: Indeed, Flash is everywhere and yet no one is developing for it. IPhone has a very small share of the market yet commands a disproportionate amount of total content consumption and growing like crazy. Which strategy was the right one?

  • Kevin

    LOL Dan the replies from aristophrenia and Sam S are what you get for posting this to the losers on the Yahoo Finance boards. LOL

  • Felix

    Curious article. Flash has been available within the Safari Browser on the iPhone since 2008, just not to the general public. Flash 10.1 is or soon will be available on seven major mobile platforms. It is orders of magnitude easier to develop games, media apps, etc in Flash than on virtually every native platform. Trust me on this I developed TV apps for many of them. Flash wasn’t designed to be the de-facto media player on the web for books, audio, and video, it’s just a so bloody useful it can do these things better than the competition; it’s a very rich tool kit that works almost everywhere, even on console gaming platforms and in the upcoming best-of-CES Boxee device. It wasn’t killed by SVG in 1999-2000 and it won’t keel over in the next few years as HTML5 starts begins to not suck so much. Perhaps Apple will change their tune when they find themselves at a strategic disadvantage in two to three months, and all major mobile browsers render nytimes.com audio and video content correctly, offer people a real choice about where they can purchase their media, and play the most popular games in the world. Kevin Lynch and his team have done absolutely commendable work with this product and they have not slowed down their relentless pace of innovation. Hats off to them.

  • daganev

    Two years ago, I would of agreed with this article 100%. Maybe even last year. However in the past year I have witnessed Adobe making lots of changes, becoming very open with it’s users and giving me convidence again in thier ability to create solid software. CS4 was a joke, and everything else adobe did during that time period. CS5 however is the new adobe, and it is complimented by the amazing changes made in 10.1

  • http://www.jochenbast.de Jochen Bast

    @Felix: I think there’s a point that people keep missing here. iPhone, Touch, and iPad are not really meant to be used for browsing the web. You don’t need to render the nytimes website correctly if you have an app for that. iPhone users live in an AppWeb not the old fashioned Internet. It just like Jobs said when he presented OS4: People behave differently when they are using the Internet on a mobile device. It’s Apps they use, not a regular browser.

  • http://mdowney.posterous.com Mike Downey

    I agree with @Same S – I don’t think there’s apprehension among Adobe employees that if they stick their neck out they will get laid off. Quite the opposite. Adobe has always been a place where pushing new ideas with passion and tenacity is at least respected if not rewarded.
    Like all big companies, Adobe has other big problems, but I don’t think this is one of them.

  • Rudy

    There is a lot in this article that is true, but there is a lot that is not true or an exaggeration. Adobe US employees do have apprehension about their jobs being shipped off to India, and can be frustrated by decision by committee (problems with the decision making process are definitely true). But it remains a place where new ideas are pushed all the time, without fear of repercussion, without fear of ideas being stolen (though I bet you found a rare example of that in whoever you interviewed?). I’m not sure why you felt the need to go overboard. It diminishes your message considerably.

  • http://www.BusinessOfVideo.com Dan Rayburn

    “I’m not sure why you felt the need to go overboard.”
    I spoke to more than six current and former employees. When both ex-employees and current employees tell me the same thing, I’m simply reporting what I’m hearing. I would not consider that “going overboard”.

  • Rudy

    @Dan Like I said, there’s a lot correct in what you wrote. Parts of paragraph 9 and 10 are where you most specifically go overboard. Though you do qualify some of your words with “some of” and “don’t always”, you don’t do this quite often enough. And the general color you paint is somewhat bleaker then reality, IMHO.

  • Peter Olejnik

    Great article! I suspect corporate raiders have taken over Adobe HQ.
    Had Adobe continued its long standing passion for innovation and technology, it would have designed, and developed its own “iPhone” running an AIR based framework. This would have opened the flood gates to a true web/smart phone experience — not to mention helped in their bottom line.
    Such a shame!
    Now, with HTML5, ActionScript developers better ramp up their JavaScript skills again, cause at this rate, I don’t believe Adobe’s got a grip anymore.

  • Nacho

    There is no need for adobe in an HTML5 player, the browser will have that integrated.
    The real problem will be support for the h.264 codec, firefox won’t touch it because it isn’t open source so we’ll always have to do at least two things.
    Apple isn’t just messing with Adobe, they have closed the system so they can control it completely, which they can do, the problem is as they move into the tablet space, they’ll have to compete with Dell and HP which are more experienced in those markets and can provider a better in-between product. the iPhone has its place, but for true mobile computing, a bigger screen does not make it a tablet.

  • mike

    “Why doesn’t Adobe get off it’s butt and make a HTML5 player with all the functions that the current Flash Vars have with Java Script instead, along with a browser detector that switches to Flash for browsers that don’t support it?”
    They can’t lock you into their product so what’s in it for them? It’s easy to do now and plenty of people are doing exactly that already:
    http://jilion.com/sublime/video/
    http://www.html5video.org/
    http://www.mediafront.org/project/osmplayer
    Like always, open standards make it easy for everyone to participate.

  • http://broadcast.oreilly.com/brian-lesser/ Brian Lesser

    Hi Dan,
    I don’t have enough experience to comment on Adobe’s internal business but I’d like to say a little something about their mobile strategy. Yesterday I watched the Adobe Keynote at the FITC conference/festival here in Toronto. Adobe showed video running in Flash Player 10.1 on a Motorola Droid and a Nexus One. The video played fine on the Nexus but was choppy on the Droid. At Jim Corbett’s talk on Flash Player internals Jim talked frankly about how the Flash player was, until recently, designed for the more memory and cpu rich desktop. A lot of those assumptions had to change to get the full Flash player to work on a mobile device that has the computing power of desktop machines from a decade ago. If Flash light was based on a player that was not fully optimized for mobile you can imagine it would have challenges.
    Adobe announced the Open Screen project two years ago. It’s taken them that long to do the hard work of re-engineering the Flash player to work reasonably well on mobile devices. So they made a big bet on mobile and we’ll see over the next year or so how that turned out. Right now it looks like two (or more) years ago when they were planning the open screen project they made the right bet. In other words as smart phones become more powerful and the player becomes more efficient, at some point Adobe will be able to deliver the full Flash experience.
    I haven’t experienced the demoralized company you describe. Maybe it’s there but when I get the chance to talk to Adobe’s engineers I don’t see it.
    Finally, I said it before but I think you’ve misread Shantanu Narayen’s comment on the NFL changing over to Flash. He meant the NFL and not NBC. But the proof of complacency would be that Adobe is ignoring the mobile and enterprise marketplaces. Obviously they aren’t. In the enterprise space they are introducing IP and P2P based multicast and will support most of the other streaming technologies people have asked for.
    Adobe isn’t without its challenges. See for example:
    http://www.flashcomguru.com/index.cfm/2009/6/19/vendor-lock-out
    but I hope one of them isn’t the kind of internal disaster you’ve described. If what you’ve described is true, I’m glad I haven’t had to experience it directly.
    Yours truly,
    -Brian

  • driver198

    OK, simple fact:
    The convert-to-i-app that Adobe is/was rolling out with CS5 would produce apps that are compliant with the Mac OS platform, and would run the same as if they were created using Apple’s SDK.
    What is comes down to is Apple not wanting an available flash app for which it cannot control/profit from it’s store.
    Why the heavy emphasis of recreating everything flash can already do in a new environment that is neither close to done or as yet cross-browser functional?
    Flash, love it or hate it already has a huge place in the market – not just in silly animated banners, or well-streamed video; but in interactive content areas of news, education, quizzing, distance learning, and games.
    If Google (Android) and other mobile device manufacturers are seeking to implement flash, as they might any other highly useful ‘app’; Apple may be looking at another pile of ‘Newtons’ down the line.

  • Bobby

    You mention in 1996, the mobile strategy to concentrate on feature phones over smart phones. In June 2007, the first iPhone was released. Also, the first iPhone didn’t have native apps.
    Also, didn’t Adobe/Macromedia work with Nokia with their “smart phones” at the time. There was also a Flash Player for Windows Mobile and even Microsoft Pocket PCs back in the early days.

  • ex-Adobe

    For folks who have pushed back on whether the fear of new ideas concern is real, note that Dan said he talked to former “executives”.
    As a former Adobe manager, not part of Flash mobile so with some objectivity, I think this article is spot on re: a centralized and layered management structure where any “challenge” to the top layer of management is likely to be a fatal move, career-wise. And, by “challenge” I mean as little as being other than a follower, e.g. an expectation of a degree of autonomy appropriate to one’s sphere of responsibility.
    But, idea generation amongst individual contributors or first-line managers is not seen as a challenge to the top, and since the main criterion in moving jobs offshore is routine-ness, creative spark at that level may actually be a job saver. As well, the ranks have been pruned such that a goodly number of the “idea” folks left at the company are Kevin Lynch acolytes, who by definition are following him not challenging him.
    In mobile, we will see how things play out. But the fact that Adobe has not yet even shipped 10.1 – which iPhone competitors like Google and HTC have been desperately waiting for, and was promised at MWC 2009 to be in phones by the end of last year – makes some of their complaints about Apple ring hollow.

  • bonelyfish

    If not there were not a number of websites still rely on Flash for navigation, I would be eager to uninstall it. As a user, there isn’t much reason I want Flash other than video streaming. Otherwise, javascript and CSS can do just fine. Its 2010 not 2005. If Flash disappeared today, the most signficant impact would be the Flash designers lose their jobs.

  • P Kady

    As a former employee of the mobile unit at Adobe covering the period described in this article, I can say that at least 50% of the information in this article is complete rubish.
    Had you bothered to do some real research you could have easily gotten the correct information that was driving Adobe’s strategy.
    Many of the posted comments have already pointed out the failings of the article and have given better information.
    Also, as a former employee who was laid off, I will add that I have no hard feelings for the company. Were there some unfortunate decisions that didn’t work out in the end? Certainly. Nobody gets it right all the time, and when it become clear that your strategy isn’t working, you have to change it, or you run the risk of going out of business or becoming a take over target. This is what drives the Adobe CEOs, both Chizen and Narayan because when Chizen took over from Geschke and Warnock, their inability to let anybody go had put Adobe into a weak financial position such that they were a take-over target, and Bruce took the hard decisions to make sure that they never got into that position again. And Bruce drilled it into the management culture to be proactive about it and not to let things deteriorate to that point again, ever. Perhaps now they are a bit too aggressive about it, but that’s debatable. Yeah, it sucks for those of us who got laid off at one point or another, but if a company does not look after their bottom line, then there eventually will not be jobs for anybody at the company.

  • Adobe…

    I’m a former employee and Dan is right. This is what it was like when I was there. I hate to say I agree with it, but you have to be honest with yourself and this is accurate. Of course, we are not all going to agree, but many former Adobe employees would agree with this.

  • MobileFlash

    Well, perhaps it’s time for both Chizen and Narayan to step out of their comfort-zone, and REALLY look after their bottom line by finally bringing Flash into the mobile market, instead of firing their operation.
    After all, there’s a lot to be said for a company that’s operating their business model on the defensive; it’s time to man up.

  • Mobile Database

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  • Lazer

    I have witnessed Adobe making lots of changes, becoming very open with it’s users and giving me convidence again in thier ability to create solid software.