In December 2007, Shantanu Narayen took over as the CEO of Adobe. The timing seemingly could not have been worse: Not only did Narayen and his team have to confront disruptive developments such as the rise of new platforms like the iPhone and the emergence of nimble software-as-a-service (SaaS) competitors, they had to do so in the midst of a financial crisis that upended markets around the globe.
But in the face of upheaval, Adobe launched a comprehensive transformation strategy. In 2008, Adobe tested a software-delivered model of Photoshop. A few years later, the company stopped producing packaged software and moved to a completely SaaS model, charging a monthly subscription fee to access its products online. In 2009, Adobe made the bold decision to purchase the web analytics and marketing company Omniture for approximately $1.8 billion, a price 40% lower than Omniture’s pre-crisis peak, but 2.5 times above its mid-crisis trough. That acquisition would serve as the cornerstone of Adobe’s efforts to build a new growth business related to advertising services and analytics. From 2009 to 2019, Adobe’s revenues tripled, and its stock price went up by 29% a year.
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The story of a company acting boldly in the face of tough times is not unique. Innosight research shows that financial downturns can be a great moment for “on-the-brink” disrupters that have laid a solid foundation but have not yet crossed $1 billion in revenue. Facebook, Alibaba, and LinkedIn, for example, all thrived during the Great Recession (Facebook crossed the $1 billion revenue line in 2010). New companies can start in downturns as well. Indeed, close to 100 unicorns were created between 2007 and 2009, including notable new businesses that responded to challenges surfaced by that period, including asset-sharing platforms Airbnb and Uber and financial services platforms Stripe and Square.
There will be ample opportunity for existing companies and aspiring entrepreneurs to create similar success stories in the months and years ahead. The turmoil of COVID-19 has catalyzed preexisting trends around the adoption of digital platforms and services as well as moves to decentralize health care via telemedicine and preventive solutions. Innovators can ride those trends to create growth, but doing so requires that leaders show the courage to consciously choose their futures.
Where Do You Want to Go?
One factor inhibiting incumbent response to disruptive change is that leaders predictably delude themselves — in less polite terms, they lie to themselves — and therefore underestimate the threat of disruption and overestimate the difficulty of successful response. Leaders convince themselves that current data shows that they are safe, even though that data lags behind the impact of in-process disruptions. Or they say that innovation is risky, where the real risk is not investing in innovation. Put another way, companies increase risk by not taking risks.
One of the most critical delusions that has been laid bare by the COVID-19 crisis is that now isn’t the right time to think about the future. It is natural for leaders to say these words in the face of significant short-term uncertainty and a seemingly never-ending list of near-term issues to address. However, somewhat paradoxically, short-term uncertainty makes it even more important to think about what’s next.
Consider the moment in Lewis Carroll’s classic Alice’s Adventures in Wonderland when Alice asks the Cheshire Cat for directions. “That depends a good deal on where you want to go,” the mischievous cat responds. Alice says she doesn’t know. “Then it doesn’t matter which way you go,” the cat says. After all, if you don’t know where you’re going, any road can take you there.
Of course, leaders must make sure they preserve the present and ensure that their employees are safe, their operations are effective, and they can manage their cash flow. But it is even more important in uncertain times to have a clear and compelling vision of the future. A clear vision highlights once-in-a-lifetime opportunities to double down on growth strategies while competitors are on their heels, to acquire assets that would otherwise be unaffordable, to strengthen capabilities required to create tomorrow’s business model, and to accelerate moves in new directions.
Move Forward With Courage
To think about how to frame the options in front of you now, consider how Amazon CEO Jeff Bezos has contrasted what he calls Type 1 and Type 2 decisions. Type 1 are irreversible. Type 2 are like “walking through a door,” meaning you can always go back. Many short-term choices executives make in a crisis are Type 1, such as exiting a market, significantly cutting or pausing investment in a function, or changing channel strategy. These decisions can be made quickly, but they are very difficult to unmake.
You need to pay attention to how you are approaching decisions that are difficult to unmake. You can unconsciously prioritize the past, making short-term choices that could unintentionally impair your ability to respond to the underlying forces at work in your industry. Or you can consciously consider the future when weighing such options and thoughtfully make short-term decisions that both preserve the present and increase your odds of moving in new and bold directions.
The default unconscious choice increases the odds that you wake up one day staring at an insurmountable gulf between where you are and where you ultimately want to be. The courageous conscious choice allows you to connect future-back thinking with present-forward thinking and emerge from the current crisis with increased resilience and adaptability.
History shows clearly that opportunities are present no matter how dark the times. The future starts tomorrow. Have the courage to consciously choose to navigate disruptive change. Own the future.