The SaaS world has “discovered” a something new to drive revenue growth. They’ve labeled this innovative approach, “product led growth.” This has led to gems of “wisdom,”
“PLG is an end user focused growth model that relies on the product itself as the primary driver of customer acquisition….
PLG companies are able to grow faster and more efficiently by leveraging their products to create a pipeline of active users that are converted to paying customers.”
Wow! What amazing insight! Imagine that, “hot products win!” What an amazing discovery!
As I read all the insights and discoveries around product led growth, I have this overwhelming sense of “deja vu” all over again. Business history is littered with the carcasses of companies founded around the hot product idea. In my career in technology products, we see companies like Digital Equipment (DEC), Wang, Compaq, Apollo, Osborne Computer, Sun Microsystems, Gateway and hundreds (if not 1000’s) of others. We see others that have morphed from product led companies to other business models, including Dell, EMC, SAP, Microsoft, and others.
There is nothing new, or innovative, about the concept of being product led. It’s a fantastic strategy, as long as it works. I’m not knocking it, I’ve personally benefited from working for/with companies who have stumbled upon the “hot product.” I’ve also seen the backside of that growth curve, where it’s no longer a hot product and the company has not changed their strategy or business model.
Product led growth is nothing new, it goes back decades, even centuries. It is not a unique discovery for SaaS or other software companies. Focusing on end users and designing compelling solutions for them is not new, in fact that’s fundamental to every business strategy. We’ve seen it in all domains, product/market categories. Some of the most consistent companies having a product led business model (though not exclusively) are fashion, music, and entertainment. (We see huge dominance in consumer focused products.)
Clearly, creating a market and strong pull for products by customers is powerful. Our marketing, sales, customer experience, and other customer engagement strategies change dramatically in a product led company. If we have strong product pull from customers who already know and want to use our products, our engagement strategies are simpler up front, but need to be make sure the customer gets what they expected.
Another advantage of PLG led strategies is that our customers become the biggest promoters of our products, so concept like demand gen, creating interest and engaging customers are different and simpler.
The advantage of a product led approach is that everything is about our product and maximizing the user experience with those product. We have a singular focus around which to drive our growth.
Some things about product led strategies:
- You have to have a hot product that engages customers imaginations and captures their interest. Proponents of PLG promote fantastic stories with companies that have become well known for their PLG approach. But, unfortunately, the number of companies that can develop truly hot products is very small. So the PLG strategy can’t be deployed as much as one would think.
- PLG strategies are very difficult to sustain. Competitors quickly develop similar products giving customers choice. As customers start looking at options, winning their business is driven by things other than the product.
- PLG strategies are seldom sustainable, based on our own strategies. We seek to get more share of customer, to expand our offerings, to grow within our current customers and to expand into different markets. We can seldom achieve our growth goals with a single product line, so we are driven to expand them and our markets. Now our strategies shift from PLG to more comprehensive solutions and value creation strategies.
- PLG have relatively short life spans. What is today’s “hot product,” is tomorrow’s also ran. Continuing to drive a product driven strategy becomes very difficult. How do we keep developing innovative new hot products as the world changes and our formerly hot products become cold?
Don’t get me wrong, where we have a PLG advantage, we should leverage it as much as possible. But the realities is few organizations can actually come up with that Killer Hot Product. And then even fewer organizations can sustain this singular focus over time.
If you have a Hot Product, by all means leverage the PLG strategy for as long as you can. But recognize Hot Products aren’t forever, and if we don’t want to become one of the carcasses of previous Hot Product companies, we have to recognize that our business models will have to change.
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