width=180John Warnock's sense of aesthetics -- his love of visual design and fine typography -- is evident as soon you step inside his home. In the entryway is an elegant stone carving of the Latin alphabet. A page from an illuminated manuscript is displayed in the corner of the living room. That sense of aesthetics, combined with a strong belief in doing things right technically, has driven Adobe Systems -- the company Warnock founded with Charles Chuck Geshcke -- throughout much of its history.

This passion convinced Warnock to focus on the company's Acrobat product line even though the market initially showed little interest and Adobe's own board of directors sought to kill the product. Warnock's instincts proved accurate in this instance. After years of floundering, Acrobat later grew to become one of Adobe's most profitable products.

Yet that vision of what is technically and aesthetically right has also blinded the company to some of the major shifts in technology. During the rise of the web, Adobe sat on the sidelines longer than most companies partly because, as Warnock characterizes it, early versions of HTML -- from a design point of view -- were awful.

Given these steadfast views, it is perhaps surprising that much of Adobe's competitive strategy has long depended on a delicate balance between publicly documenting its intellectual property and gaining a competitive advantage through proprietary software. This approach has led the company to establish several of the key standards for print and interactive publishing: the PostScript printer language, Acrobat's Portable Document Format (PDF), and the Flash format the company gained from its acquisition of Macromedia in 2005. Adobe has generated significant revenue by selling software tools to create and modify these openly published file formats.

Knowledge@Wharton recently met with Adobe Systems co-founder and co-chairman John Warnock in his home in Los Altos, Calif., to talk about the company's history and its business strategy, as well as topics like why he avoids using Microsoft software and why he believes Apple CEO Steve Jobs should re-engage a partnership with Adobe and make Flash available on the iPhone. An edited version of that conversation follows.

Knowledge@Wharton: How did you first meet [Adobe co-founder] Chuck Geschke?

Warnock: I was working for [computer graphics firm] Evans & Sutherland in the Bay Area and they wanted to give me a promotion and move me back to Salt Lake [City]. My wife and I decided we didn't want to do that. I had a friend, William Newman, at Xerox PARC [Palo Alto Research Center]. He [asked around] and Chuck's name came up as starting a new endeavor at the PARC. So, Chuck and I met on a [job] interview.

He was about to start a lab called the Imaging Sciences Laboratory. They built the first version of a personal computer in the [Xerox] Alto and had the beginnings of graphic user interfaces. They were going to the next generation machine and all of the stuff they had done was very machine-specific. I was chartered with building the device-independent data representation for dealing with graphics.

Knowledge@Wharton: Was this for the screen or for hardcopy?

Warnock: Both. They had started using laser printers and [Xerox's] printing protocols were not terribly flexible -- they had very, very specific bitmaps [fixed resolution images] that they used for fonts. They were okay for producing letters and reports, but they could not deal with sophisticated graphics.

At Evans & Sutherland John Gaffney and I developed a language called the Design System that ran on [Digital Equipment Corp.] PDP-11s. It was an interpretive language and had the same syntax and structure that PostScript ended up having. I decided that I needed an interactive interpretive tool bench at PARC to do my experiments. So I re-implemented the Design System with Martin Newell. We added all the graphic operators so we could do graphics and test out ideas on screens and different medium. We called it JaM for John and Martin.

Xerox was then starting development with the Star [computer workstation] and they needed a printer protocol. I proposed using JaM as a framework for a printer protocol. We got five designers into the process: Butler Lampson, Bob Sproull, Jerry Mendelson, Chuck and myself. Over a two-year period we designed [the Xerox printer protocol] InterPress.

Knowledge@Wharton: Why did you and Geschke decide to leave Xerox PARC to form your own company?

Warnock: We sold InterPress throughout the Xerox organization for two years. They said, Oh, we love it. We'll make it a standard. We are going to put the locks on it and wait until all of our printers can do this before we release it. Chuck and I found this totally unacceptable [and realized,] That will never happen in our lifetime.

The only way to make standards is to get them out and just compete. I went into Chuck's office one day and said, Chuck, we [can stay at] a very cushy, wonderful job here. Or we could try to get something done. Why don't I get on an airplane, go talk to Dave Evans, my old thesis adviser, and get some advice from him. [Evans] introduced us to [investment banker] Bill Hambrecht who said, Sure, let's go for it.

We founded Adobe on December 2, [1982] -- 27 years ago.

Knowledge@Wharton: You mentioned making PostScript a standard. Was that a practical need -- because you needed software to support your printer? Or was it a strategic business decision?

Warnock: We felt that if we wanted this broadly adopted that we had to do exactly the opposite of what Xerox wanted to do. We had to publish it. We had to make it very, very open -- because the trick was to get both [software] application developers and operating system developers to support it. Without documentation that was never going to happen.

Knowledge@Wharton: You said that your goal was to make PostScript very, very open. There was one aspect of it that wasn't so open: PostScript's Type 1 font format was initially a proprietary secret.

Warnock: Yes.

Knowledge@Wharton: What drove the decision to keep that secret -- was it a requirement of your font vendors, or was it to give you a competitive edge?

Warnock: There were two major technological developments that made PostScript successful.

The first was [that] this was the first time a full programming language had been [used] to control a printer. There was a very strategic reason to do that. Most [software] application programs have their own model of how they work, and typically it's not the way that the printer wants to work. This was true with Apple. Apple had [the Macintosh graphics system] QuickDraw, and they had their own model for how QuickDraw worked.

The strategy was to write a program that would interpret QuickDraw but load the program into the printer as a PostScript program and let the printer do the work of transforming [the QuickDraw graphics] into the image. That way, all the QuickDraw applications could work out of the gate. The same was true with some of the early word processors.

The second [technological development] was the font problem.

The highest resolution printers at that time were 300 spots to the inch. If you represented characters as outlines the obvious [way], the fonts looked terrible. The sampling artifacts [the side effects of digitization] were horrendous. We knew that no publication or office environment would live with that.

We had to solve the font problem. [Stanford University computer scientist] Don Knuth worked on it for years and years and years, trying to get good looking fonts for TeX [digital typesetting software] and he never succeeded.

I had a sort of backward idea of how to do it. If you put down the outline of the character [on a low resolution device] the rasters [the lines the device is able to render] don't line up -- you will get some staffs that are 2-pixels wide and some that are 3. It makes the fonts look horrible.

The very simple idea is: Rather than figuring out what dots to turn on, you stretch the characters so that they line up with the rasters. So if you had the left side of the [letter] 'n' and the right side of the 'n' -- all you have to do is make sure that they are in phase with the frequency of the rasters and then cache that character. That guarantees that all the staffs are uniform thickness and all the x-heights hit at the right place. It turned awful looking fonts into incredible looking fonts.

We never published it because it is such a simple idea that if you applied for a patent, everyone could figure a workaround.

Knowledge@Wharton: Why not document this feature as you did the rest of the PostScript language?

Warnock: Because then everyone could do what we could do.

Knowledge@Wharton: So you saw this as a strategic advantage?

Warnock: Oh, yes. This was kept as a company trade secret [for years].

Knowledge@Wharton: Keeping it a secret worked for a while. Then, in September of 1989, two of your biggest competitors, Microsoft and Apple, teamed up to create an alternate font format -- what later became TrueType -- as well as market a PostScript clone printer. How did you first hear of this plan?

Warnock: It all transpired within about two weeks before [the September 1989] Seybold [conference].

We found out from Jean-Louis Gassée at Apple. Jean-Louis wanted his imprint on Apple and he wanted to remove all imprints of Steve [Jobs]. Steve was very closely associated with PostScript and the LaserWriter. In some sense, Jean-Louis wanted to reinvent all of that. From my point of view, it was totally an ego thing.

He got together with Microsoft. We talked to Bill [Gates] and said, This is totally stupid. We will open up [the details of the font format]. Microsoft at that point perceived us as a threat. They said, No, we're going to compete with you.

We essentially just out-invented them. We got ATM [Adobe Type Manager] working for screen resolutions. [PostScript's Type 1 fonts have] always been, in my opinion, a better solution than TrueType.

At one point we had 22 PostScript competitors. There were 22 clones out there that were trying to undercut us in the market. And as far as I know, not one of them succeeded -- including Microsoft's. I think they produced exactly one printer, of which they sold zero. It was a disaster.

Knowledge@Wharton: With PostScript such a success, why did Adobe then move into desktop software?

Warnock: PostScript was an enormously profitable product. It was growing like crazy. But during its maximum growth, I said, You know, if we don't start doing other products, we are going to be a one-product company. We are going to diversify. As painful this is, we are going to take intellectual resources off of PostScript and put them on things like Illustrator. So we started the Illustrator project.

Then we got approached by [John and Thomas] Knoll in 1989, and we licensed Photoshop -- [which ran on a] a 512k Mac and a 20MB disk.

I knew that machines would get faster and memory would get cheaper, but I had no idea that it would go to the extent that it has. I said, Look, I know that photography is going to become important. So I made the decision to license Photoshop.

In the mid-1990s, the Knoll brothers said, Photoshop is going to run out of gas. We offered to buy it and gave them a lump sum payment to buy Photoshop. Little did they know that Photoshop would continue to blossom and grow.

Knowledge@Wharton: How did the idea for PDF [Adobe Acrobat's Portable Document Format] emerge?

Warnock: In the early 1990s, we were starting to use local area networks more. Sending PostScript files around was not terribly compelling. So I started to think about the problem.

There is a property of PostScript that made Acrobat possible: Every one of the operators [PostScript's basic commands] can be redefined. If you take all the graphic operators and define them so that they output just the parameters, you get a static file of all the graphics that are in a PostScript file -- but the pages have all been delimited. Everything is now a data structure as opposed to a program. In other words, we flatten out the program to make a very simple file. That program is also very, very efficient; all the computing has been distilled out of it -- hence the [name of the Acrobat creation tool] Distiller.

I first used this trick with PostScript when Steve Jobs had this tax form that he wanted to use as a demo. It used to take two minutes to print on the classic LaserWriter because there was so much computing involved. I wrote a basic version of the Distiller in the early 1980s that would flatten the file and make it an efficient PostScript file, which got the execution down from a couple of minutes to 20 seconds. Steve was delighted, because he could now demo this thing.

I said, Let's take this basic idea and write out a file and see if it works on the screen with a reasonable performance. And it did.

The piece of code that they used you would never use to build a product. We got our best architects and said, We need to build this into a file format that really has legs under it. If video or other media types come along, we want this format to stand the test of time and be really extensible. So we got our best engineers to design the PDF file format.

The other problem we had to solve was font substitution. We didn't have all the licenses to ship fonts [with the electronic document]. If the receiver [of the document] didn't have the right font, you still wanted the layout to be exactly right. So I invented a variation of the type solution so that you could vary the widths of the typefaces with these specially designed fonts to make substitution fonts. If I had Times Roman I could import the widths table of Times Roman and generate characters so that they would fit exactly the same way Times Roman did. We put that into the early versions of PDF.

Knowledge@Wharton: Acrobat didn't take off at first.

Warnock: When Acrobat was announced, the world didn't get it. They didn't understand how important sending documents around electronically was going to be.

We met with [someone from] the Gartner Group, who said, This is the dumbest idea I've ever heard in my life. But I said, No, people have been trying to figure out universal document formats for decades, and no one has succeeded. The reason we can succeed is that we don't have to ask anybody's permission. No one has to do any development. We can capture the PostScript files and convert any PostScript file into a PDF file. And no one has to say this is a good idea or a bad idea. We can just make it a fait accompli.

When I described Acrobat to IBM executives, I said, There is a trick you can use to capture all the printout and make it into a device independent thing that you can ship around networks. They absolutely didn't get it.

They were into [the semantic markup languages] SGML and XML and those levels of abstraction. In some sense, the Gartner Group was in the SGML world [where] you need to have this differentiation between the rendition and the semantic intent. I said, It's easy to add that afterwards if you have the page. It is much easier to start with something that actually works, and back out into the applications, than it is to get applications to change.

Knowledge@Wharton: In some ways that tension between presentation and structure persisted throughout much of Adobe's history.

Warnock: Absolutely. And that was a battle that I was always happy to take on.

Knowledge@Wharton: Despite this sluggish start, you continued to support Acrobat.

Warnock: [Adobe's] board wanted to kill it. I said, There's just no way. This is solving an important problem, and we are going to hang in there until it works.

Knowledge@Wharton: Acrobat Reader 1.0 cost between $35 and $50 a seat depending on volume. By version 2, it was free. Was that a difficult choice to make inside the company?

Warnock: Very risky choice -- because we then had to rely on the creation process for any revenue stream. But it was the right decision.

Knowledge@Wharton: Around this time, the web started to take off. Adobe took a while to get on board with the rise of the web. Why do you think that was?

Warnock: We had a lot invested in doing things right. The early versions of HTML -- from a design point of view -- were awful. There was nothing beautiful about it. You had different browsers [that displayed web pages differently]. Adobe always prided itself on making software that ran the same way on a PC, the Mac or any other operating system.

We didn't plunge into: Well, here is what the web is -- let's just go get it. [Instead,] we were always searching for: How can we do this right? How can we build a better infrastructure?

Knowledge@Wharton: Shortly afterwards, you made a couple of major acquisitions with Aldus and later FrameMaker. What drove those?

Warnock: In the case of Aldus, it was just getting a jumpstart into document production. In the case with FrameMaker, the FrameMaker architecture was infinitely better -- infinitely better -- than the Aldus architecture. I could never get anybody except the ex-Frame employees at Adobe to understand that the architecture was fundamentally more sound in FrameMaker than in Aldus. The Aldus side won, essentially, with [the development of Adobe's page layout product] InDesign. We're still trying to catch up to FrameMaker.

Knowledge@Wharton: In the summer of 1998 when most technology companies were booming, Adobe went through a difficult period. Your sales stalled, your stock price slumped, and one of your major competitors -- Quark -- tried to acquire you. What happened?

Warnock: I think the cause was we didn't have a good story on the web. Our customers and everybody wondered what the relationship of Adobe was going to be with the web. We really didn't have our act together.

Unfortunately, Chuck and I had talked about: At some point we have to retire, so we should hire some management that could be potential successors -- which was the worst decision. It was the stupidest thing.

We had an executive team that wouldn't work together. No matter how many times we pounded the table saying, You have to cooperate, they built their little political silos and power empires within their own groups.

We had to fire the whole bunch of them. At one point, we fired everybody. We promoted Bruce [Chizen]. We said, Look, we just have to have a whole different view of how we interact with [Wall Street], how we interact with each other. We have to be perfectly candid about what we are going to accomplish and do it -- and announce it to the street ahead of time.

We changed our strategy. We said [what we were we were going to do] over the next year and we executed on it. The company completely changed. Bruce was very, very good. He had come up inside of Adobe and he was very good at working with the various groups. We essentially cleaned house.

Knowledge@Wharton: What drove your decision to step down from the CEO role in 2001?

Warnock: Bruce [Chizen] was a very strong candidate. I was getting on. I had to retire at some point. I wanted to travel and enjoy some of the success and do other things.

Being a CEO of a company that is over $1 billion is not all it is cracked up to be.

The thing I really enjoy is the invention process. I enjoy figuring out how to do things other people don't know how to do. [As CEO,] you're dealing with employment suits and with reporting to the IRS and the early parts of Sarbanes-Oxley. And, you know, life is too short.

Knowledge@Wharton: How actively involved were you in the acquisition of Macromedia in 2005?

Warnock: Bruce really wanted to do that. He saw a strategic fit, and I concurred. It was really one of the best acquisitions we have done. We got in the process [Adobe chief technology officer] Kevin Lynch, who is a pure inventor -- great guy, very visionary.

Knowledge@Wharton: Adobe has now introduced cloud-based services such as BuzzWord and Photoshop.com, which are available for free. What motivated these?

Warnock: The monetization strategy is changing.

For the longest time, you tried to get Adobe to look at different business models. Getting companies to change when they know how to do something really well [is difficult]. Adobe was sort of a well-oiled machine in this software arena. And getting them to think about doing business differently [was challenging]

We have a saying around Adobe that the antibodies will kill off any new idea. Companies build antibodies. They build resistance to change. They get comfort zones where they want to work, and employees don't want to try something new for fear that they are going to fail. So they reject ideas.

One of the hardest things about keeping a company innovative is killing off the antibodies and forcing change.

Knowledge@Wharton: Speaking of change, it was reported that you were actively involved in the recent Omniture acquisition.

Warnock: Yes. We tracked it, and Chuck and I met with Josh [James], who was head of Omniture.

I use the web. I use all the products everyday. I build websites. I try things from Google [like] AdSense. I try to look at the world from a customer point of view, [in terms] of what you need to solve your problems. Most of the time, there isn't something out there. So this is a market opportunity.

Knowledge@Wharton: What problem is Omniture solving?

Warnock: When you have a website, one of the things you really want to know is how people interact with that website. Where do they go? What do they find interesting? What gets them from one point to another?

Adobe now makes almost all the tools everybody uses to build their websites. If in that website building process you got automatic tooling for measuring things, then you could find out all of the interactions that people have with the website. If they are changing the color of a T-shirt, do they change it more to orange or do they change it more to navy blue? What do they do when they interact with the images? You want to know that information because that makes you figure out better products.

Knowledge@Wharton: Over the years, Adobe's strategy seems to be trying to strike a balance between open source initiatives and proprietary software. Adobe has a history of being somewhere in the middle by having open file formats around which you develop proprietary software.

Warnock: Yes.

Knowledge@Wharton: Was this a conscious choice?

Warnock: It was a conscious choice. I guess we were egoistic enough to believe that we knew how to implement things better than other people.

Adobe has [participated] in standards bodies. Standards bodies are horrible, horrible, horrible things. They design by committee. The things that come out of them are a hodgepodge of stuff. If you look at HTML -- oh, man!

Knowledge@Wharton: Over the years, Microsoft has been a frequent and intense competitor of yours. But in most markets it hasn't succeeded.

Warnock: No.

Knowledge@Wharton: Why not?

Warnock: You know, I've always believed that Microsoft has never had good taste. I try to avoid using their software whenever possible because I find it jarring to the sensibilities.

Knowledge@Wharton: And you think that has hurt them competitively?

Warnock: Yes. They have attempted in their ads to represent [themselves as] cool, but they aren't. It's just not cool stuff.

Knowledge@Wharton: Have you looked at [Microsoft's] Silverlight and how it compares to Flash?

Warnock: Yes, we looked at Silverlight. On paper it looked like it would probably be a competitive threat, but I don't think they have executed well.

Flash now finally has topography in it. It's got all the things that now make it a real Adobe product that has the depth that it needs.

And I think the new strategy with AIR [the Adobe Integrated Runtime cross-platform software application platform] is right on. Cloud computing is fine -- except if you are dealing with large stuff and with compute-intensive things like graphics. AIR gives you an application that is on your desktop, but it has full access to the web and full access to the file system -- which is actually the best of all possible worlds, in my opinion.

Knowledge@Wharton: Another company that you have interacted with a long time is Apple. That relationship seems to have ebbed and flowed over the years. They were originally a very close partner -- one of your first OEMs [original equipment manufacturers].

Warnock: Yes.

Knowledge@Wharton: But now there is a lot of contention around getting Flash on the iPhone.

Warnock: Oh, yes.

Knowledge@Wharton: Have you talked to Steve Jobs about that?

Warnock: No, I haven't.

Knowledge@Wharton: Have you thought about calling him?

Warnock: I've thought about calling him and saying, Steve, you know, at this point you want might to engage the partnership again. Because I think otherwise he is going to get some competitive pressures from outside that he is not going to like.

He has never been great at hitting that middle ground [between] openness and proprietary [products]. He has always seemed to lean to the proprietary side, to want to own everything. I think this is one case where he probably would do better if he didn't do that.

Knowledge@Wharton: Yet the vertical integration between the iPhone, the Mac and the iTunes Store has been key to Apple's success. But you think that, long term, that will run out of steam?

Warnock: Well, he will keep inventing. Steve is great. Steve is one of the truly great innovators who sees a path, goes to the path, and does it with great taste. I love his phone.

Knowledge@Wharton: But you would love it more if it had Flash?

Warnock: Well, you could go to more websites and you could do more things. And he could get more applications -- not that he needs them.

Knowledge@Wharton: Looking back over your entire career, what are you most proud of?

Warnock: From a technical side -- PostScript and Acrobat.

Knowledge@Wharton: What surprised you most about the evolution of these technologies -- PostScript and PDF?

Warnock: The fact that there was this whole cult group that fell in love with PostScript and making PostScript programs. That was a little surprising. It's a write once language. It's not terribly self-documenting. It is very hard to figure out what is going on.

Knowledge@Wharton: Is there anything you would do differently if you could?

Warnock: I think if we did anything differently we would have missed one of those magic paths. And from a stock point of view, Adobe is the most successful stock I have ever owned. I don't know that I would have done anything differently.

I wish I would have had some of the insight about where you find people to manage your company. I wish I had that insight earlier.

Knowledge@Wharton: Now that you've stepped down from the CEO role, how do you spend your time?

Warnock: I am on the boards of little companies, trying to help them. I'm programming. And I build websites. I try to do things with the products that nobody has done before.

Knowledge@Wharton: Some of the boards you have been on are publishing and media companies: Knight-Ridder, Salon, the American Film Institute and Sundance.

Warnock: I wanted to find out about the media space so I joined the Knight-Ridder board to find out how that works, how they see the world. I joined the American Film Institute and Sundance to try to understand the world of the movies.

Knowledge@Wharton: These are areas facing a number of difficulties.

Warnock: At the first board meeting at Knight-Ridder, I said, You guys need to decide whether you are in the communication business or in the newspaper business. And I said, If you decide that you are in the newspaper business, you're toast.

Knowledge@Wharton: What does it mean for them to be a communications company versus a newspaper company?

Warnock: It means that they are doing the same thing but they have to go through a drastic monetary model change, a drastic business model change.

Newspapers and magazines are capital-intensive businesses that buy a lot of newsprint, buy a lot of paper, buy a lot of presses. Those big capital investments protected them from competition. In the world of the Internet, that is not what protects you from competition. Being light on your feet, being innovative, being new into a space is what is going to win, because the whole economic model is gone.

Knowledge@Wharton: The fear is there is no economic model on the other side of the fence, either.

Warnock: But, you know, at some point you have to make a leap of faith that either there is one, or you are going to be out of business no matter what. You can't cling to the past.