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Blair Reeves

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Adobe and Transformation

I’ve written a bunch lately about enterprise software and why its future looks bright. (Check out Tech Has Grown Up and Enterprise Software and the Deployment Age if you’re interested.) I’m gonna continue with that theme in this post, in which I’m going to hit a pet interest of mine: Adobe.

I think Adobe is one of the best-executing tech companies out there today. Its transformation over ten years from a license-based professional packaged software company for creatives into a first-in-class, multi-segment enterprise SaaS solutions vendor is singularly impressive. The pace of their innovation, to say nothing of their rocketship business results, are almost unparalleled. I’m not just talking about the stock price – when you actually understand what they had to do as a company to get where they are today, you have to be astonished. Neither the tech nor HBR-reading chattering classes seem to give Adobe the recognition it deserves for this turnaround. The latter group of graybeards mostly doesn’t understand the magnitude of what this transformation entailed, and the former is too in thrall to the GAFA glitz to care.

Here’s a look at what this transformation into a cloud vendor looks like:

Adobe full-year segment revenue (all figures in $MM)
2012 2013 2014 2015 2016
Creative Cloud $117 $472 $1,268 $2,265 $3,370
Marketing Cloud $556 $663 $798 $937 $1,180

I’m going to give my own high-level view here of how this transformation took place, why it’s so remarkable, and why anyone in enterprise software has a lot to learn from it. This post wound up being longer than I intended, and there’s still so much to say. But here goes.

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Resources I’d recommend to new Product Managers

I get asked from time to time what resources I’d recommend a new-ish product manager consult to prepare for the job and level up quickly. I thought about it. Ben, my co-author on Make It So, and I have discussed this a few times. Here’s what I came up with.

Part of the reason why we wrote Make It So was, honestly, because there was really nothing out there we thought fit very well for the challenges enterprise product managers face. So check out the book when it comes out! But in the meantime, here’s some other stuff that will probably help too.

  • Product Management in Practice by Matt LeMay. I was a reviewer for Matt’s book, and can attest that this is an outstanding practical guide to what product management is and day-to-day skills that PMs need to master.
  • The Innovator’s Dilemma by Clayton Christensen. An obvious classic. This is not really PM specific, but key background and foundational stuff to understand.
  • Crossing the Chasm by Geoffrey Moore. Ditto the above, plus this offers a really valuable framework for thinking about types of users and customers to target.
  • The Hard Thing About Hard Things by Ben Horowitz. This gets into the business management/leadership stuff, but I found it extremely readable and informative.
  • Product Management for the Enterprise – this is a video course that I recorded for O’Reilly. (Disclosure: I get paid a little when you watch this whole course.) It’s aimed at people working in product management for enterprise software. I hit on some of the themes from the book in a more encapsulated format, though not all. I think I sound funny.

There is no shortage of leadership/management-y books out there in our space, including many better known than some of these. I’ve read a bunch of them, but personally have found many to be lacking in applicability to what we do, either in terms of not being terribly enterprise-relevant or being hyperfocused on the startup life, which I’m not in. But your mileage may vary.

If I think of more, I’ll add them!

An update on the book

So it’s been a little over a month since I published The Second Transit. I had little or no expectations for how the book would do, so the fact that anyone has read it at all is really amazing for me. My first foray into book self-publishing has given me an up-close look at the tradeoffs of this amazing democratizing platform, so I thought I’d share them.

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Enterprise Software and the Deployment Age

In “Tech Has Grown Up,” I wrote about how we’re moving into a new stage of the tech industry’s development. A lot of the bigwig tech people around today made their careers (and/or fortunes) in the 2000-2008 GAFA mega-growth cycle, and as a result, over-learned lessons from that period. Since 2008, GAFA has only increased its dominance over the consumer web. As they say, it’s easier than ever to start a consumer-facing company, and perhaps even to advertise for it; but harder than ever to profitably grow.

I mentioned in that post that I’ve been re-reading this talk by Jerry Neumann called The Deployment Age. It’s really excellent. The gist is that cycles of technological progress tend to look like surges of innovation followed by longer periods of adaptation and – you guessed it – deployment. Multiple strands of technological innovation combine to form productive “systems:” think of how steam engines, metallurgy, industrial production and precision machining all had to come together to make railroads possible. It’s pretty clear that similar productive systems using new tech are forming today – indeed, many are already here.

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A year at the shelter

When we moved to NYC last year, I had a hard time adjusting to life in the big city. Soon after we got here, I discovered a homeless shelter that was reasonably easy to get to (right down the 6 off Canal Street), and began volunteering there for a few hours every week. It’s now been a little over a year since I started, and the New York Rescue Mission has become one of the two or three things besides our little apartment and work that I most associate with NYC. It’s a part of my life here now. I want to say a few things about it.

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Tech has grown up

I see this tweet and many variations on it from time to time:

The point the author is trying to make here is something like, “look at how rapid and innovative the tech industry is!” But I take away something quite different from this list.

Frankly, I’m pretty unimpressed. There are some sustaining innovations (Square, WhatsApp) on this list, digital toys, two stubbornly private companies whose real value is still highly controversial, and one – Bitcoin – whose reputedly revolutionary potential has begun to sound a little like cold fusion – forever just around the corner. (Shout out to Josh Cincinnati, a deeply knowledgeable buddy of mine who has helped me understand crypto just a little a bit. You should follow him.)

The transition to an industrial, oil-based economy led to the formation and then consolidation of the oil giants, particularly Standard Oil, whose descendants (post-breakup) include ExxonMobil (both of them), Chevron and a big part of BP. Likewise, the rise of the automobile economy led to the big car companies like Ford, GM and Chrysler. These firms all still dominate their sectors, and continue to rank among the biggest companies by revenue in America. Since 2000, a few big pharma firms and health insurers have joined that list, as well as Walmart, CVS and Apple.

Those of us who grew up experiencing tech’s ascendant rise from the 90s into the late aughts (learning to code QBASIC on a Gateway 2000 – anyone else?) got to witness something quite rare: the formation of a wholly new type of industry. A lot of people, including new types of investors and lots of early (mostly very lucky) employees got extremely rich. Indeed, a large crop of today’s tech VC wealth stems from the IPOs of this ’00s tech cycle. A lot of careers were made, and perhaps accordingly, many lessons were over-learned from this era.

By contrast, in the cycle since the ’08 crash, the leaders of the last one – Google, Apple, Facebook and Amazon – have only strengthened their dominance. Through both acquisition and internal development, they have broadened their grip over the digital landscape: search, advertising, social, commerce, media, more. Everyone points to IBM and Microsoft’s dominance in their heydays as proof that this kind of success is fleeting, but I think that’s wrong; instead, I look at ExxonMobil, Ford and JP Morgan. Success can be sustained over time. Tech is not special that way.

Most investors are smart, and I think they realize that GAFA are here to stay and pre-2008 cycles of mega-growth are unlikely to be replicated. Instead, the path to liquid 100x returns (on which the VC model is based) is to push for an acquisition or, barring that, an IPO. In either case, as I alluded to in “Mercenaries,” tech investors have gotten smarter about ensuring that investors capture more of the upside, regardless of what happens to the share price or, in most cases, employees. This leads to companies prioritizing sheer growth over all other concerns, including profitability. Growth in an attractive market segment makes you an acquisition target by a GAFA, or better yet, a fat-cat non-tech firm looking for a shot in the arm. Ergo, the tediously earnest discussions we see in tech circles of “growth strategies” (growth hacking, hypergrowth, etc) and manipulating CAC vs LTV instead of basic P&L. As a friend put it the other day, there are a lot fewer people working in tech today than you’d think, especially on the consumer side, who have ever had to worry about managing a business to profitability.

My hunch is that most tech-sector venture funds in the post-2008 cycle will not make great returns, relative to the overall market. The VCs will still get paid, of course, and there will be a lucky few outperformers; but in a tech cycle characterized less by innovation than baubles and distractions, returns will be modest.

Someone is going to tweet me to offer Tesla as a counterexample to my generalizations here. This is partially fair, though I await to see how the Model 3 rollout actually goes. Nevertheless, the truly revolutionary stuff Musk spouts off about – massive home-based solar, the PowerWall, tunneling under cities – are still mostly theoretical. I’m not yet a believer, but hope to be proven wrong.

The other area of revolutionary technology that still seems genuinely early-days to me are drones, and drone software. I am honestly fascinated by the potential in this area. (Battery tech, too, but I think that will be mostly dominated by major industrial firms.)

Yet today, what I hear tech VCs chatting about is a new high-end frozen yogurt gadget. One can’t help but think of the $120 million that Juicero raised. World changing innovation, right?

The frothy tech startup scene has mostly had its day. I expect that Silicon Valley has built its last 5,000+ person company (where would you even house that many today?), and that increasingly in the future, the really important stuff happening in tech will come from the majors, not startups. It may be easier than ever to start a company today, but it is harder than ever to scale one. I am re-reading this classic piece, The Deployment Age by Jerry Neumann, with increasing interest. Maybe I’ll write about that later.

You should be paying attention to North Carolina

Here’s something I believe that most people don’t: North Carolina is one of the most important, and certainly interesting, places in America right now.

There are certain stories and trends that the national media routinely misses because it’s so hyperfocused on what’s happening in the big coastal metros. This isn’t an “elite mainstream media” criticism – it’s just a function of where their readership is concentrated and where most of their reporters and correspondents are based. North Carolina’s evolution is one of these stories.

North Carolina has now sustained for many years one of the country’s fastest economic and population growth rates. Job growth is high, and like a lot of places, unemployment is today at a 16-year low. North Carolina, South Carolina, Georgia and Florida are growing faster than anywhere East of Texas right now. In fact, throughout the East, the arc from Raleigh to Atlanta is the biggest major growth story happening. The northeast is stagnant or emptying out, the Rust Belt is hollowing, and those big western states seeing lots of growth, like Utah, Nevada and Idaho, are starting from a much smaller base. If NC, SC and GA were one state, it’d be the California of the East, and it would be growing faster than the real one.

You may have heard about how the Old North State is sort of a mess, politically speaking, right now. I’ll get to that here in a second, but for now, the important thing to remember is this: the North Carolina General Assembly as seated today does not reflect the will of the electorate. The General Assembly is currently deeply skewed by a partisan and racial gerrymander compounded by deliberate legislative action designed explicitly to disenfranchise poor and minority voters and over-represent rural whites. What’s more, these are all fairly recent developments, not legacy stuff. Here’s how it went down:

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Mercenaries

A frequent theme you hear among a certain set of tech VC and executive is distinguishing between so-called “mercenary” and “missionary” employees. The latter joins a firm because they just believe so strongly in your “mission,” and find their self-actualization in helping you evangelize it; the former’s interests are merely base, pedestrian concerns like compensation. You want those “missionaries,” they say, and should avoid “mercenary” employees at all costs.

Frankly, this kind of greed-shaming of frontline employees is garbage. It is insulting and hypocritical for wealthy investors to complain about employees demanding a bigger share of the pie. (I considered pasting in relevant tweet quotes here, but skewering individuals isn’t my goal.) Instead, let me lay out an alternative case: tech workers should be more “mercenary.” Much more.

Let me pause and make a charitable concession: I’m sure that most of the VCs who say this stuff don’t actually mean it to be as insulting as it sounds. What they mean is: hire people who believe in the potential of your business, especially early in a company’s life. If your people believe in the fundamental promise of a company and have a stake in that success, they’re more likely to do their best work and put in the effort required. That much is common sense.

But even people who believe in a company’s potential need to be paid. You can’t eat, support a family or pay rent or student loans with options. When investors and executives make company equity a big part of their standard compensation package, they’re asking employees to take a big leap of faith in order to make the cash flow statement look better. If you work for Amazon, perhaps this isn’t such a big deal. But if you work for a no-name small or mid-sized firm, it’s a big concession for employees to make. And if you’re at a startup? Well, startup options are like lottery tickets – they are usually worthless. This doesn’t stop some slimy founders (and VCs) from hyping their potential value to younger and less-experienced job candidates. That’s life in the big city, I guess.

The tech industry has no shortage of investment capital, but a distinct and well-remarked-upon shortage of people with experience and know-how. (Note: this is different from an overall “talent shortage,” which is a myth I don’t put much stock in.) Good employees are really valuable, and as good capitalists, should accordingly demand a bigger share of the wealth that they are relied upon to create. This will sometimes entail pushing back on what executives and even investors are initially offering, because no matter how well-intentioned those parties are, they are counterparties, not your friends, and your interests are not fully aligned. All big boys and girls should clearly understand this.

It is, of course, highly ironic for venture capitalists to accuse employees who actually do the work of being greedy. VCs certainly aren’t “missionaries” – they’re out to make a buck. The whole VC business model is premised on seeking out outlier mega-returns, which results in pressuring many companies to pursue growth at all costs. Always remember: investors and executives routinely ensure that employees are the very last ones in line when a big exit arrives. Preferred stock classes, ratchet clauses, and various other accounting tricks that non-specialists aren’t privy to make sure of that. So the irony of venture capitalists shaming tech employees for negotiating for better compensation is pretty… rich. (See what I did there? 😄)

Look – I want to underline that I’m not demonizing all VCs here. There are many, especially outside the SV bubble, who have developed great reputations as being fair, helpful and trustworthy partners who look out for us frontline guys. I know several. But accounts to the contrary are also legion, and like it or not, the VC industry has developed a bad reputation for good reason. Tech employees need to be careful, and they also shouldn’t be afraid to exercise their own market power.

I won’t name the specific VC(s) whose recent mercenary/missionary nonsense elicited this rant, but I checked into his recent investments. They include a photo stickers app, yet another social media spam tool and call center software. Not exactly inspiring, world-changing stuff, but probably worthwhile investments. I wonder if this VC would have us believe that early employees in these firms signed on because they saw themselves as evangelists for these companies’ “missions.” Frankly, I doubt it. I’m guessing they got paid, in cash and well, and hopefully got a great options package too.

Tech workers of the world, unite! You have nothing to lose but your upside.

I’m restarting my email list

A few years ago, I ran a weekly email newsletter on stuff I found interesting in marketing technology. It was fun for a while, and I garnered a few hundred subscribers pretty quickly. But the newsletter space got really noisy, real fast, and eventually I just didn’t feel like I was still adding value. So I killed the newsletter.

But now I’m bringing it back – sort of. I’m not doing another newsletter. Instead, I’m going to send out a very occasional email – probably monthly, but biweekly at the most frequent, and only when I have something I really think is worth sharing. I get a lot of dumb email, and I know y’all do too, so I promise I won’t send any.

The first email went out on Sunday before Game of Thrones, and you can check it out here. I also invite you to sign up if you’re interested. Thanks!

Retirement is dead

The majority of Americans have little or nothing saved for retirement. This should terrify you.

Let’s lay out some facts first. Among working-age families (ages 32-61), as of 2013, only 53% participated in any kind of retirement plan – most of those are some form of defined-contribution plan (like a 401k), and about half as many have a defined-benefit plan (like a pension). That’s down from 60% in 2001, and probably a few points lower by now. So even as the Boomers are approaching retirement, we have not seen a trend towards saving more. That’s troubling by itself.

But here’s the really crazytown part. Because of egregious wealth inequality, mean figures about American retirement trends are less meaningful. If you look at the median, families that would’ve once been on the verge of retirement (aged 56-61) have a whopping $17,000 saved. Nearly half have literally nothing.

(This is from a great report from the Economic Policy Institute.)

Basically, what has happened here is that employers have mostly done away with pensions and shifted employees to defined-contribution plans (401ks), which puts the onus on employees to save for themselves. (“Pensions” are something of a joke now among millennials bitter that Boomers mostly don’t appreciate how the economic landscape has changed.) 401ks have turned out to be highly unequally distributed, which will surprise no one who lives in the world.

Keep in mind that the median Social Security annual benefit is around $14,000, and the real horror of this situation really comes into focus. As the Boomers age further into retirement, most simply can’t afford to retire. Forget puttering, seeing the grandkids and golf – retirement for most people is going to involve any work they can get and hold on to for as long as possible to pay for mounting medical costs. Prepare to see lots of people hanging on to their jobs into their 80s, especially low-impact, prestige-type gigs. (Think that plum professorship or director role is going to open up when the 60-something currently there retires? Don’t be so sure.)

So picture this: it’s the mid-2020s, and the Boomers are now between 65 and 79. 80% of them are in some sort of crisis. Their medical care and prescriptions are stressing Medicare to its breaking point, probably requiring many billions in additional taxpayer support. You have millions who need assisted living care. Dementia, enormously expensive to treat and care for, is rampant. You’ll have a widespread trend of their millennial children, now raising kids of their own, stretching to either take in or care for mom and dad. Oh, and they have little or no savings, and Social Security is in its own slow-motion crisis of solvency, meaning that their kids (again, us) or, in direct and indirect ways, the public sector will wind up footing many bills.

(Side note: I did an informal poll of some of my millennial peers a while back about how much they expect to get back from Social Security in our old age. Most answers were “none” or 50-ish percent. I personally think Social Security will stick around, but there will definitely come a political movement to abolish it, which I hope fails.)

Honestly, the economic ramifications of this not-so-distant crisis deeply trouble me – let alone the havoc it will cause in American society between a generation that has done little or nothing to prepare for, let alone fix, the mistakes it has caused, and the ones who will have to deal with them (us).

tl;dr: You should start saving a lot more for retirement.