Adobe's CFO on driving business growth through technology
- 18 February, 2013 09:30
Mark Garrett, CFO of Adobe.
There’s no doubt technology is playing a major part in the way organisations are conducting their businesses, and CFOs need to get involved in this if they want to help drive growth. However, getting on-board with the latest technology trends and opportunities is easier said than done.
Adobe CFO Mark Garrett, who appeared at the launch of the Australian Adobe office on 14 February, sat down with CFO World Australia to talk about how financial chiefs can engage more in technology, as well as how new technology trends are changing Adobe’s corporate course and revenue model.
There’s no sense in trying to drive business growth through technology if you don’t even have a good understanding of how technology works in your organisation, Garrett points out. Without some insight, there is a danger of not being able to effectively manage revenue and the cost structure within the organisation if you don’t understand technology’s influence.
“It is important to understand the technology enough so you understand how many resources a product team might need or what development schedules look like, because they affect revenue and the cost structure of the company,” he says.
For example, if a CFO doesn’t know how many people it takes for a product or service to be launched, they won’t be able to adequately weigh up what is appropriate when R&D teams ask for access to resources. This in turn can impact the company’s cost structure.
“If you don’t understand what the timelines are for the product and why the timelines are what they are, you’re not going to understand how that flows into revenue for the company,” Garrett continues. “It’s critically important to have enough understanding so you can manage the investment profile of the business.”
In addition, by getting a good grip on the lead/quote to cash system within an organisation, Garrett says CFOs are able to better identify areas for improvement in the technology to drive business efficiency and cut down on costs.
“If you can drive efficiencies in that cycle through technology that the CIO is going to help implement, it saves the company a lot of money,” he says. “Ultimately, when you get that lead and flow it all the way through to an invoice to a customer, that has to be a better experience for the customer. But frankly, it’s not as easy as it sounds as there are a tonne of steps in there.”
Working with the CIO
Recognising the role technology operates in a business may not be an easy task for many CFOs who come from a finance background, and Garrett admits he found this a challenge as he worked his way up inside technology companies such as EMC, Documentum and IBM. He encouraged CFOs to expose themselves to technologies and systems by improving their relationship with the CIO and IT teams to gain a better understanding of how it all works.
“I was at a company called Cadence Design Systems that did software design for chip manufacturers and I really struggled trying to understand exactly what the software did,” he explained. “It takes exposure and talking about what the product does and how it helps solve customer problems.”
Knowing your customers
Given the strategic push for companies to reorchestrate around a customer-centric model, Garrett says CFOs shouldn’t underestimate the importance of getting more in touch with customers’ technology needs when driving business growth. This could be as simple as taking the time to speak directly to customers, or encouraging more dynamic feedback to help create better business models that reflect customer expectations.
“Every time we conduct a business review around the world, the head of sales, the CEO and I go see a lot of customers,” Garrett says. “In speaking to customers you really get a sense of what’s important to them, what technology trends they are trying to adopt, what they are worried about, what their problems are, and how we can help solve them.
“Then when we talk to the R&D teams and the product teams inside the company, we have a much better foundation because we have talked to customers [directly]. I think there are plenty of CFOs who do that, but I also think there are some who don’t do enough of it.”
One rising technology trend with the power to impact the top and bottom line of any CFO’s balance sheet is software-as-a-service (SaaS). Like many software providers, Adobe has embraced this new model of delivering technology by rolling out Creative Cloud, an online subscription service for its products, in April 2012.
Garrett claims the move to a SaaS model has actually resulted in a more predictable revenue stream.
“With subscription and SaaS models you recognise revenue monthly, whereas with a perpetual model you recognise revenue all upfront. It’s much more dependent on product cycles on the perpetual side,” he says.
“What we are looking at now with the Creative Cloud is how many subscribers we are adding every single week. We also look at churn, how many people are cancelling and why are they cancelling. It’s a very different business model to the old perpetual one where we sell someone a piece of software and from the customer’s perspective disappear until the new version comes out.”
Another game-changer for Adobe was its decision to ‘double down’ on investment in creating digital media and digital marketing offerings, in November 2011. Garrett claims the move has paid off and points out more dollars are spent in marketing online in Australia and New Zealand than any other countries across the region.
“Australia has a great digital economy, one of the highest digital economies in Asia,” he comments. “The bulk of our US$3 billion spending is all going towards digital media and digital marketing. Seventy-five per cent of our marketing dollars are spent online as a company, which is much higher than most companies and we are driving more and more of our marketing dollars online.”
Garrett concludes the strategy will remain in play for some time, with all R&D and sales and marketing dollars are focused on those two growth opportunities.
With such market insights as these and disruptive technologies like SaaS coming into play, isn’t it well worth getting your own technology and customer credentials in order?