How to Eat an Elephant, One Atomic Concept at a Time

How Figma and Canva are taking on Adobe—and winning

In 2010, Photoshop was ubiquitous. Whether you were editing a photo, making a poster, or designing a website, it happened in Photoshop.

Today, Adobe looks incredibly strong. They’ve had spectacular stock performance, thanks to clear-eyed management who’ve made bold bets that have paid off. Their transition to SaaS has been seamless, for which the public markets have rewarded them handsomely. And they’re historically one of the best companies at M&A; their product lineup is a testament to their ability to acquire new product lines and integrate them well into their multi-product ecosystem. Perhaps most importantly and least appreciated, they have dramatically sped up the cadence of their internal product development process and feedback loop. Like Microsoft, they have successfully shifted from a legacy company operating on an annual (or longer) release schedule to a truly cloud company shipping updates at a sub-weekly pace.

Nevertheless, there are a few segments of design where they’re no longer the market leader. Companies like Figma, Sketch, and Canva are examples of products that have been able to become top products despite Adobe’s ubiquity in all things design. Figma showed up in Adobe’s annual report for the first time in 2019. They reprised in 2020, and I’m not uncertain they will continue to be in it going forward.

How should we understand these market transitions and why these young companies are able to thrive, even against a strong incumbent like Adobe?

These companies have distinct atomic concepts from Adobe. The primitives that their products are built around are fundamentally different from those of Adobe’s product lineup. It’s these different fundamental atomic concepts that turn Adobe’s advantage of an established product and existing userbase into a weakness that hinders their ability to counter these upstarts. The opportunity for these new atomic concepts to thrive is driven by the new use cases and types of users unearthed during market transitions.

Understanding the phases of market transition and what drives them is a universal process worth examining.

New use cases: designing for digital

For most markets, there are advantages to being an incumbent. Markets converge as companies arrive at the preference frontier of customers. This leaves little potential energy for new startups to take advantage of.

Market entropy is good for new entrants.

It’s not impossible to break into a market by brute force, but it’s hard. Very hard. Most successful companies, especially startups, have found tailwinds to harness that help pull them forward.

Changing customer needs are the largest source of entropy in markets. When customer needs rapidly change, there is less advantage in being an incumbent. Instead, legacy companies are left with all the overhead and a product that no longer is what customers want.

There are many causes of changing customer needs. Often there are new and growing segments of customers with different use cases. Existing products may work for them, but they aren’t ideal. The features they care about and how they value them are very different from the customers the legacy company is used to. Companies resist changing core parts of their product for every new use case since it’s costly in work, money, and attention. But every once in a while, what was once a small use case grows into one large enough to support its own company.

Other times the scale or dynamics of a market shift enough to make a product no longer work despite having been a great fit. Companies are often caught flat-footed by these situations because what they have done successfully for years suddenly starts to falter—and they aren’t sure why. Ebay is a good example of this. Their decentralized auction model was very good in a nascent internet economy when there was a scarcity of items being sold online. Once ecommerce became commonplace, price and speed became much more important factors and Ebay’s decentralized model was at a disadvantage. Amazon was much better at building economies of scale in this post-liquidity ecosystem.

Another source is when the customers themselves change. Often the function of a tool remains the same, but the type of user changes. These new types of customers often have different things they care about and resulting product needs.

The internet drove entirely new design use cases. Photoshop was built for editing photos and images. It’s a powerful tool that operates at the pixel level. However, many of these new uses weren’t about image manipulation. Images were a component—not the essence—of the job users were trying to accomplish.

For some users, this was designing digital products. Designers at software companies or any company with a website wanted to create the websites and software products they worked on. This is less about image manipulation and more about designing the UI and UX of these digital products. Vectors are more important than raster graphics. The complexity and process of designing these high-value designs also got increasingly more sophisticated. These designers worked with teams of other designers and non-designers. Their designs are part of a larger product development process and what mattered wasn’t just making a design, but how that the entire process could be improved to make collaboration easier and handoff of designs better. Iteratively.

The complexity of the designs and the components in the resulting code became more complex, too. The need for their tools to have a higher-level understanding of the components and variants became more important. It’s increasingly useful for designs to understand the same concepts and abstraction levels as the HTML and CSS in the resulting end product.

For some users, this was designing content for social platforms, digital ads, or even wedding invitations. These were often made in Photoshop, but again, pixels are the wrong abstraction level. Images are not the sole component; they are just past of a larger design that includes graphics, text, and more. Similarly, the customers are very different. Many of the people now doing what is, in essence, design work don’t think of themselves as designers. They just have a very specific thing they want to create, with the least friction possible.

The internet dramatically scales up the volume and type of new use cases for design. In many ways, this helps Adobe. With platforms like Instagram, the number of people editing photos has expanded by many orders of magnitude. While editing on platforms like Instagram may have increased significantly, Adobe has been a huge beneficiary of the internet and the shift to cloud—and their stock price is a testament to this.

[KK Note: Platforms like Instagram strapping editors onto their social platforms and eating into Lightroom from the bottom up is well worth its own discussion. And perhaps someone will convince Mike Krieger to do the definitive piece on that.]

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Software may be eating the world. But it’s also building new worlds? I’m going to need a refresher on remembering the Andreessen Horowitz talking points

This is even more true in video. There are orders of magnitude more video creators as the ability to record video has become ubiquitous and the platforms where video is the default format have grown. Even more striking, many of the dominant video platforms—like Youtube—are purely distribution focused. They don’t even have any editing capabilities. Instead, companies like Adobe end up being large beneficiaries of this need.

[KK Note: Platforms like Youtube still having not built any semblance of an editor into their platform is *also* well worth its own discussion. I’d say we’ll never know what could be, but then I look at TikTok and all is right with the world.]

But Adobe hasn’t captured it all. And in many of these new emergent use cases and customer types, Adobe has lost the lead to new startups.

Tapping into the right level of abstraction

The best products map to how customers think about their workflow. They match the abstraction level of their customers: not too high that it’s unusable, but not too low that it’s hard to use easily or extend in more complex ways.

They choose the right atomic concepts.

These are the core concepts around which the entire product is built. They not only align with how customers think of their workflow, but often crystallizes for customers how they ought to. Great atomic concepts are honed and then extended and built upon in more complex compounds that…well for lack of a better word…compound.

Similar companies often have slightly different atomic concepts that end up making them meaningfully distinct. Photoshop is focused on pixels and images. Its focus is on editing images and pictures. And its functions operate by transforming them on a pixel level.

Illustrator is similar, but it operates on vectors, not pixels. This is a higher level abstraction. Neither is better or worse, they are just more suited to different use cases. Photoshop is better for modifying images, while illustrator is built for designs where scale-free vectors are best.

Sketch, like Illustrator, is vector based. But is designed for building digital products which means things like operating at a project level. It is not individual designs, but crafting entire products and user interfaces—and the needs for repeatability and consistency inherent to that.

Figma builds on Sketch’s approach, but also includes a greater focus on not just projects but the entire collaborative process as the relevant scope. Similarly, it also treats higher level abstractions like plugins, community, and more as equally important concepts.

Canva is similar to Photoshop and Illustrator, but its users aren’t designers who care about low level tools. Instead Canva’s core atomic concepts are around the different templates and components to help them easily accomplish the job they are doing. And the designs they are working on are not quite at the project level of making a digital product. They are canvases that include images and design.

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There are many more axes, but they don’t fit in this stupid 2D chart

Atomic concepts are fundamentally linked to the core loops of a company. Expanding or changing these loops often involves adding to a company’s vocabulary of atomic concepts or adding them together in more complex ways.

Emergent use cases and new customer types lead to new ideal atomic concepts. These new workflows and different customers have different priorities than existing customers. How they think about their problems and weight possible solutions is different, even if often the end output has similarities. Of course, astute readers will pick up that causality is reversed here. New types of customers are a good proxy for where to pay attention. But it is actually the changed atomic concepts that are what make startups a compelling contender against incumbents in the space.

Customers don’t care about your technical architecture or internal org structure. When these no longer align with the job they are trying to do, then all the sprawl of the company becomes harmful, not helpful. These are the core bedrock that are much more difficult for a company to change mid-flight. Everything that makes an established company strong is built on top of this foundation and will fight back against changing them. Take Blockbuster and its reliance on physical stores and late fees. People often fall into the easy narrative that incumbents are asleep at the wheel. That they are too stupid to see the coming threat. This can be true but it isn’t the most common reason. Contrary to popular belief, many execs at Blockbuster not only saw the threat Netflix posed, but also the opportunity for Blockbuster to have claimed the mantle Netflix now holds. They even spun up a team to take Netflix head on. But what made retail stores and late fees so powerful and profitable for Blockbuster is also what made them so hard to displace. Every move to prepare Blockbuster’s core for a digital future was resisted by execs who generated more revenue, store operators who were livid at being cut out, and Wall Street investors uncomfortable with turning a consistent business into a high risk venture.

Rare is the company that can change its core atomic concepts. It’s why companies like Amazon are so impressive and so daunting. Startups thrive by finding asymmetric angles on incumbents that they are unable to follow. What is safe from a company with no sacred cows?

Understanding the core abstraction levels of a company is hard to understand from a distance. Which is why looking for emergent customer types with different needs is a useful substitute.

Figma bet on collaborative product design

Sketch was the company to first understand the market opportunity in designing digital products. Launched in 2010, Sketch was built entirely for designing the UI and UX of these products. Its atomic concepts were those best for digital products: vectors and projects. These were also what made it hard for Adobe to compete with their pre-existing product line.

In a classic innovator’s dilemma, Sketch’s best feature against Adobe was that it dropped everything that wasn’t best for making digital products. This allowed it to focus only on creating the best experience for vector-based digital design. Unlike Photoshop, it was vector based. And unlike Illustrator it was built with larger complex projects as the focus rather than specific isolated designs.

In retrospect, Sketch stopped at a half measure. Designers creating digital products did need vector-based design tools. And Sketch also understood that they were working on more complex projects vs one off designs that needed better project-first features. But these designers were also often working on teams—both with other designers and, more importantly, with non-designers. They weren’t designing in isolation, but as part of a larger process.

Sketch, like Adobe before it, lacked in this area. Everything from Sketch’s technical architecture and desktop based product to its pricing model and platform structure were a poor fit for this collaboration. The demand for these features could be seen in the messy ways that companies hacked together solutions to this and the many products that sprung up to fill these holes. Companies like Zeplin, Sympli, and Invision grew out of designers’ needs for better ways to coordinate with the other designers, PMs, and engineers they worked with. Sketch’s plugin system, like Adobe’s, felt more bolted on than core to the platform.

When Figma first started, it was more directly a Photoshop competitor. Over its first two years, though, they shifted their focus specifically to designers working on the UI and UX of digital products as they talked to more potential users. Building out the product to enable collaboration uniquely was key to these designers. Doing this was non-trivial. The technical challenges to do so were very hard, though Figma was well set up due to Evan Wallace’s technical prowess and specific knowledge in new technologies like WebGL. Building for collaboration to its fullest extent has led Figma to rethink almost all of the company—leading to new pricing models, distribution models, and sharing form factors.

For those interested in reading more on Figma, I have a prior post that can be found here so will avoid rehashing many of the same observations. Figma’s success came as it honed in on this growing use case of complex digital products built by larger teams of designers and non-designers—and in finding the atomic concepts that were uniquely needed for this new skew of users.

As discussed in Why Figma Wins, over the last few years this is most visible in their expansion into larger enterprise customers. Large companies have the same (if not greater) need for design tools that are built for the collaboration in their org as small startups or smaller teams within them. However, the set of features and tools they need around this look very different from a small team. When Figma started, it found its fit first with small teams, but as entire large companies started to look at it seriously it needed to understand how to think about collaboration and building a design tool not just at a team level—but at the scale of an entire company.

Canva bet on marketing design by non-designers

With the rise of digital platforms like Facebook, Instagram, and Youtube, marketing and advertising have increasingly shifted online. Online advertising has many differences from traditional advertising. Most notably, it is much faster paced—and often more targeted. Companies now do many small variations on the same campaign: testing which versions do best, making personalized versions for different customer cohorts, and adjusting them to the different required form factors of each ad platform. The traditional process of having a few large campaigns each year looks increasingly archaic. The cadence was a function of the primary channels being areas like TV and print, where campaigns are costly so only a few large campaigns can be run a year. As the channels shift, the campaigns, tools, and teams adjust to match the new dynamics.

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The fast and the furious

Increasingly, marketing teams don’t need whole design teams working on each campaign. Rather, they want tools that made it easy for them to adjust their marketing designs in small ways—like being able to format it for both their instagram ad as well as their Youtube banner. The background of the person needed to do this changes, too. Instead of hiring design agencies, companies bring this work in house, both because more of the work can be done by non-designers and because the pace of iterations makes working with an external agency too slow.

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Once again I am asking you to be impressed by my multimedia use of graphics, drawings, and logos

Marketers and people posting on Instagram don’t think of the design work they want to do in terms of pixels. It’s the wrong abstraction level. They aren’t trying to directly edit the photos themselves. The photos are just an aspect of the specific goal they have in mind. They think of it in terms of the aesthetics and purpose of the design—not just the images but also the text and graphics and more.

Photoshop can do everything they want, but it is too low level. Photoshop’s atomic concepts are images and pixels. Editing at the pixel level is perfect for photos and image manipulation. Canva operates at a higher abstraction level—the one its users care about. Canva designs start with their purpose in mind, whether that’s designing a pitch deck, an Instagram post, or a wedding invitation. Canva has templates and layouts built for that specific purpose, while making it easy for users to add their own creativity, whether by putting in their own photos or using any of the many graphics and components made by the community.

This need is even more felt by SMBs and teams who can’t have a full design team work on every project. Canva’s lightweight editing with easy templates and process for making many small changes like formatting for different social platforms made it ideal for these customers.

This also allows Canva to extend its platform around these molecular levels. Canva’s distribution is driven in large part by their SEO. Unsurprisingly, the very same use cases people use Canva for are what people looking for design tools want to do and search Google for. With their product and templates built around these use cases, it’s easy for Canva to expose that externally and have lots of templates and examples ready to go for potential new users looking to do a specific design. Everything about their user acquisition and onboarding is built around the specific use cases people have and Canva’s atomic concepts. They are built around the functional workflows people have, whether that’s making a Twitter background photo, a wedding invite, or a keynote presentation. And Canva is committed to making that as easy as possible.

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There is something very illuminati about this pyramid and sun. You heard it here first

Defensibility through becoming a platform

As they’ve grown, Canva has expanded their ecosystem by creating marketplaces and communities around templates, layouts, fonts, and more. Most users don’t want to build from scratch. With Canva’s marketplaces there is an entire ecosystem of pre-built components they can use, both free and paid.

Canva having this strong ecosystem of add-ons is very powerful. Add-ons allow Canva to address the huge scale and varied needs of all its customers, far more than one company could ever do on its own. This makes it possible for each customer to use Canva in a way that will be personalized for exactly the use case and aesthetic they care about.

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I did not repurpose the first chart. No one will believe you. shhhhh

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There is nothing sadder than the fact that no one will build a Procreate x Figma integration JUST. FOR. ME.

Creating free and paid add-ons have long been a staple for most design tools. However, they haven’t been tightly integrated into the product, adding friction for users. In contrast, Canva builds add-ons seamlessly and directly into the product, making it easy for users to access them directly and leading to higher usage. Treating these marketplaces as first parties has a number of additional benefits. Beyond increasing the value of the product, it also cements platform network effects for Canva. A growing community of creators monetizes by selling add-ons for Canva; this reinforces Canva as the tool to use with the most robust ecosystem.

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There is entire category of ecosystem loops that no one seems to talk about. Ecosystem loops deserve love too

This is just one example of how companies can use platform network effects to extend and defend their beachhead. There are few sources of defensibility stronger than the cross-side network effects of platforms. It makes it hard for any new competitors to get traction. Without a large enough user base, a new platform can’t attract developers to build on top of it. As a result, new competitors also lack the ecosystem of add-ons to meet all the needs of and attract users. This is why platforms are so enduring. They allow companies to scale the needs they meet beyond what’s possible for a single company and they create chicken and egg problems for any competitor hoping to follow.

Extending this playbook to other spaces

Design isn’t unique among fields. All these same factors that are driving new and large use cases in demand are similarly arriving in most fields, especially in all forms of digital content. It’s inevitable we will see many of these same changes happen to video as they have in design and photography, though the specific use cases and needs that emerge will look different.

The most active area obviously undergoing this market transition right now is the broader productivity space. Over the last few years, many of these new companies (Airtable, Notion, Coda, Roam, Retool, Webflow, and Loom, to name a few) have seen remarkable early traction. But it’s also hard to delineate what the exact spaces are within productivity and collaboration and which companies cluster together in which buckets. Many of the companies have lots of product roadmap overlap as they each navigate the amorphous high-dimensional space of customer types and needs.

Even for those companies with early success, many have yet to crisply define the atomic concepts they’re betting on and to position themselves accordingly. Which are competitors with which? Who are their customers and which use cases will be the most important workflows to build around? What factors will determine which companies succeed and centralize their markets?

Companies have trouble navigating these questions because customers themselves don’t think precisely about what they really want. These companies have the opportunity to change how customers think about their own workflows. The best companies introduce better atomic concepts and help push their customers forward. Strong enough products will have ecosystems around them whether or not the companies actively manage it. The best companies don’t just benefit from these ecosystems, they build their platforms to enable and direct these ecosystems in ways that empower their customers more.

Figma is beginning to expand its scope with new initiatives like plugins and communities. These are not the only ones I expect we’ll see (and there’s one that I’m particularly excited to see how they tackle) but they are core ones. As discussed more in Why Figma Wins, if these work they help expand the ecosystems around Figma, enabling users with new abilities and ways to engage with each other. An ecosystem also creates both defensibility and extensibility for Figma.

Beyond design and productivity, many companies today are right at the crux of these decisions. Getting a product’s core loop to work is a tremendous effort and very rare. For those who do, they are then faced with the question of what comes next.

These companies can (and have) comfortably gotten to single digit billions in valuation on their core products. If they want to go public or be acquired, they can do that. But they are also at the point where they can catch their breath, take a step back, and think about what the next decade of their trajectory looks like and what would be next in their roadmap’s sequencing if they were ambitious. For most of them, it will involve fundamental expansions of their atomic concepts. Going multi-product or becoming a platform is the key to compounding into significantly more meaningful companies.

For all the discussion on strategy, running an actual startup is often more a test of tactics and execution than strategy. One of the few exceptions to this is when companies are making new additions to their most core loops. Pre-product market fit is the most common of these moments. But the transition from a single product to a platform (or multi-product) is another common one that most successful companies experience.

Figma and Canva are examples of companies going through this expansion, but they are far from alone. Across the industry you can see a cohort of tech companies at this stage. Companies like Notion, Airtable, and Flexport are all beginning their explorations of the next major expansion of their products and platforms. While not done, they have been successful in building out their core product. As they think about their ambitions for the next decade, they will have to extend their product in fundamental ways.

Final thoughts

Often the smell test of a company is how easily it can be dimensionally reduced. It’s like some variant of Kolmogorov complexity. How few core elements can maximally explain it? People fairly push back that companies are intrinsically messy and cannot be compressed in this way. It is often true that VCs and outsiders simplify their view of companies in ways that are easier to remember but useless in practice. The flaws in this dimensionality reduction aren’t reasons to ignore it—they are the reason it is important.

As a founder, nobody is going to understand the full nuance of your company like you will. Everyone else does see a simplified, compressed, and sadly imperfect shadow of your company. Founders repeatedly underestimate the degree to which their products are complex and opaque to outsiders, because they have it fully loaded in cache. They have seen every iteration and revision and imagined in painful detail all the alternate lives their product could have lived.

Most users never talk to someone at a company. Even if they do, the vast majority of their interactions with a company are with the product. Your users know nothing about how your company operates. They don’t see all the late night whiteboarding sessions and careful deliberations that led to the specifics of each feature they use or the many iterations that were tested and rolled back and refined. They often only understand half of how your product can be used, much less your vision for how it should be used as it matures. And your future potential users don’t even know you exist.

As product becomes the driver of most interactions with a company, external gatekeepers and proselytizers like journalists and bankers become less important. Instead, it’s the clarity of a company’s product and product—and founder—driven distribution that become most key. We’re still early on in companies internalizing this.

This clarity is not just for users. It’s even more important for employees. They are the people who build complex compounds around these atomic concepts, and their misunderstandings are the root of future deviations and issues that arise. Founders get advice to repeat what matters more regularly than they think they need to. Repetition may help employees remember what’s important, but it pales in comparison to the clarity that comes from having strong atomic concepts to begin with. Like memes, simplicity is what makes them so transmissible.

One exercise I’ve often found useful for CEOs to do with their co-founders and team is to ask an important question about the company—and see how much everyone’s answers differ. People are always shocked at how much they differ from even their co-founder. It’s natural to have differences and that doesn’t even mean either person is wrong. But these unexpected differences in how to think about the company are the underlying faultlines that make it difficult to synchronize as a company on what matters and to have a common framework by which to discuss and debate important decisions.

All of this shouldn’t be misinterpreted. Very few companies come out of the womb with crisp atomic concepts. The nature of building a company is messy and complicated. Critics are right to say that many analyses over-simplify and give post hoc explanations of how to think about companies (yours truly included).

But the process of examining that complexity and finding the most lossless ways to dimensionality reduce is not the province of armchair analysts. It’s essential for founders and companies themselves to regularly do this refactoring. Just as companies build up technical debt, so too do they build up narrative debt.

Typically fundraising is a natural fitness function for doing this refactoring. For top companies this is increasingly no longer true—but the importance of this clean up has not shrunk. Whether for the sake of their users and employees—or so they can expand into becoming more complex platforms—companies must grapple with who they truly are, before they can go after who they want to be.

Appendix: Figma’s ecosystem and open source

There is a lot more that can be discussed on the platform ecosystem chart that is out of scope of this essay. This is a highly simplified chart, but it is one that comes to mind often when talking with founders of companies that are beginning to think through sequencing from single product companies to platforms. And are seeking a framework to think about their ecosystems (or analyze others) in a more structured way.

These charts can look very distinct for different companies. And even for the same company it moves over time as their user base shifts and they shape their ecosystem. Companies make intentional choices that have large impacts on what their platforms look like.

Figma is a good example of this. Unlike many platforms, Figma’s plugins and community initiatives put a large focus on being accessible to individual designers building out solutions to their own problems, whether just for themselves or to share freely with others. This focus is at odds with many other platforms that are mainly meant to be used by third party companies building products to be sold to users on top of the platform.

One impact of this is a bet on the importance of the long tail of niche use cases in Figma as seen below. There are many use cases that often are too niche to be supported as products to purchase that never are addressed in most platforms. But by making it easy for individuals or companies to build their own plugins, Figma hopes to see even these be addressed—and then shared out with the community in the way we see it often in the open source developer ecosystem.

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Perfectly balanced, as all things should be

Acknowledgements

Many thanks to Keila Fong and Eugene Wei for the many discussions about this topic and help with this piece.

Additionally, thanks to Casey Winters for the many discussions about Figma and Canva. And our discussions for many years on these very topics.

Thanks also to Fareed Mosavat and Brian Balfour at Reforge. The Advanced Growth Strategy course was the origin of many conversations about Figma’s loops. And I still teach the Figma case study every semester. If interested in many of the areas in this piece, Reforge is the best place to learn them but also from people who’ve spent far more time actually putting them to practice in companies than me.

All graphics in this piece were created with Procreate and Figma. Procreate is a fantastic drawing app for iPad. If you have made it all the way through this essay and don’t know what Figma is then I don’t know what to tell you. Once again will put out into the world how much I want an integration between these two. What is the point of Figma’s platform solving for long tail niche use cases, if not to solve primarily for my long tail niche use cases.