How Nike and Adobe revolutionized their business models | Rita McGrath

How Nike and Adobe revolutionized their business models | Rita McGrath

One of the things that digital I think in
particular has created that’s new for a lot of people is it’s both opened up new
possibilities but it’s also made older business models less relevant. And so one of the things you see established
organizations having to do is fundamentally change their business models. Now some people call that pivot so some of
my colleagues over at Accenture actually call Pivot to the Future. It’s a big book that they’ve just written
which I think is pretty smart. What they’re looking at is as a company
how do you take advantage of trapped value where there’s something you could be doing
that adds more value to your customers or that allows your customers to respond in a
way competitors really can’t match. So if you think about companies that have
fundamentally changed their business model this is hard. This is really not easy. One of my favorite examples and I’ll give
you a couple of companies that positioned themselves appropriate to see an inflection
point. And I should also mention this isn’t a case
of being prescient or making predictions. It’s a case of taking early investments
so that when something changes you’re there and you’re aware of it. And typically these are at the edges of your
environment. So, one example of a company that was pretty
courageous in how they went about this was Adobe and Adobe picked up on this notion that
we were all changing our behavior in terms of how we consume software in particular. We were going from a world where everybody
bought shrink wrapped software and upgraded every couple of years to a world where people
kind of paid for software as you need it. So the software as a service model. And Adobe made the incredibly bold decision
to shift from the one business model to the other. This was not easy and their customers didn’t
like it either. I mean 5,000 of Adobe’s customers signed
a petition saying please don’t do this to us because they really didn’t
like the idea of the new model. But as we see now that turned out to be pretty
smart because that opened the door to all kinds of new customers for Adobe. So you can be an Adobe customer now for $9
a month and it’s very inexpensive. They had one set of key metrics, one set of
ways of rewarding people, one set of things that drove success. When you switch to selling software as a service
now you’ve got a whole different set of metrics. And, in fact, their CFO who I give enormous
credit to spent months basically training Adobe’s analysts in how they should be looking
at this different business model. He said look, you’ve got to understand we’re
going from a world where we get all the money upfront and that’s our income for 7 to 12
months versus a world where we’re going to get little bits of income every month. And what you should be looking at is things
like how many users stay with us and what’s monthly recurring revenue. They did this long before this became widely
understood among the analyst community. And I think they did that because it’s so
hard for people to reconsider what their key metrics are when you’ve gone through one
of these big inflection points. Another company that I think has been slowly
and carefully taking advantage of an inflection point is Nike and Nike started what we today
call the direct-to-consumer or D2C market years and years ago when they first started
partnering with technology companies like Apple. You remember the Nike+ Plus iPod campaign
that ran years and years ago. Well that was really a first baby step toward
what we now realize is a revolution in the way consumers are interacting with retailers. And today we talk a lot about companies like
Bonobos and Dollar Shave Club and Harry’s. But Nike really but ahead of that curve in
a big way but they did it slowly and carefully. Today about 29 percent of all of Nike sales
go through their direct-to-consumer channels.

3 thoughts on “How Nike and Adobe revolutionized their business models | Rita McGrath”

  1. Nike, Adobe, together with Apple are brands I trust.
    I don't spend millions on them, but when I have to buy products that they DO sell, I usually go to them first.

  2. Big think and YouTube need to pivot to the Future instead of catering to the social Conformity of the past. Both are far too conservative. Conformity just means that you're enabling a bunch of intellectually dishonest cowardly suckers of the status quo cock.

    oh no, did I make a degenerate sexual reference in order to make a point? You don't like my sense of humor? It's not appropriate? Sounds like a bunch of arbitrary conformist cowardly fucking nonsense excuses to me. Sounds like you're vilifying my culture and it's just another form of discrimination at Best of conservative fascist pieces of shit, to me.

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