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What Adobe realised, however, is that the price-raising strategy is not sustainable in the longer-term. Raising the price (or adding more expensive pricing tiers) reflects the increasing value delivered by the product. In many scenarios it makes sense, particularly when products mature, gaining new powerful feature sets targeted to enterprise-level customers. In SaaS, price-raising is a common strategy for driving revenue growth that doesnвЂ™t actually require businesses to win new business.

вЂњWe were driving revenue growth by raising our average selling price-either through straight price increases or through moving people up the product ladder. Revenue growth through raising prices is not sustainable in the long term We offered, side by side, similar products under both a subscription model and our traditional perpetual-licensing model, and we observed what the uptake was.вЂќД¬reative Suite 6 (with its perpetual license) was launched in May 2012 alongside Creative Cloud (subscriptions), and was only recently retired in January 2017! For nearly 5 years, both options were available to consumers side-by-side. вЂњAt the time of these discussions, we were experimenting with subscription models overseas and in the United States. But what strikes me about how Adobe handled this transition is how they were able to test subscriptions on a smaller scale for a significant period of time before going all-in: When it comes to risk, it doesnвЂ™t get much bigger than throwing away your existing (successful) business model and shifting to a new unknown.

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Experiment with side-by-side models to understand potential traction of the full scale Yes, the scale and revenue involved is incomparable for 99% of SaaS businesses - but the philosophy and challenges encountered by the leadership is something that can be taken and applied to everyday decisions in companies of any size.Д«elow are theВ key points I learned from the full interview transcript, published by McKinsey. In an interview with McKinsey, Adobe CFO Mark Garrett and VP of Business Ops & Strategy Dan Cohen give insights that are arguably more insightful than the numbers and metrics. Pivots are hard at the best of times, and in many cases cause the kind of destruction thatвЂ™s irreversible. In many ways, whatвЂ™s more interesting about such a large-scale paradigm change for Adobe are the decision making and thought processes undertaken by the leadership and management teams. This chart by Tom Tunguz clearly shows the dramatic pace of AdobeвЂ™s revenue model switch (source: ) What we can learn

Q1 2017: $4.25B ARR, a quarter-over-quarter increase of $265M.

FY 2016: Over 30% of CC total subscribers were new to Adobe.

FY 2016: CC revenue was up 44% year-on-year to $733 million.

Q2 2013: CC subscriber numbers had reached almost 700,000.

( AdobeвЂ™s Subscription-Only CC Release Carries Obvious Upside But Big Ris k)ДЇast-forward five years to the present day, and the success of Creative Cloud (CC) and its impact on Adobe as a business is an overwhelming success.

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вЂњAdobe was seemingly caught flat-footed by the sheer volume and intensity of the criticism and had to spend the next several days after the announcement talking not about new software and service features, but dispelling inaccurate claims proliferating on user forums about terms and features of their Creative Cloud service.вЂќ Initial reception from users was mixed, raising some concern (and a little outrage) from loyal customers who didnвЂ™t want to buy into the subscription service: WhileВ Adobe continued to offer the CS6 perpetually-licensed software alongside this new cloud subscription, it was clear that the subscription model was their focus moving forward. вЂњa radical new way of providing tools and services that will change the game for creatives worldwide.вЂќ On April 23rd, 2012, the company announce d the release of Adobe Creative Cloudв„ў: It generated more than $3.4B in revenue with a gross margin of 97%. In 2011, AdobeвЂ™s Creative Suite was a cash co w by most measurements. But the numbers are not the aspect of this topic that weвЂ™ll learn from (even though they serve as good context). The sheer scale of the numbers here are impressive - itвЂ™s not often we see a business of such scale and success pull off a pivot to a different business model, and live to see another day.

While it makes sense to start with some facts, I donвЂ™t want to focus too much on the data. Much has been said about AdobeвЂ™s successful transition of its Creative Suite of apps to a subscription-based service - Creative Clou d.