Product-Led Growth Is a Misleading Name
Everyone wants to be product-led these days. But does that mean that you are doing product-led growth? And speaking about growth, how strong is this promise? Here is a disambiguation guide to help you understand what product-led growth really means, and what it doesn’t.
When I started Infinify, I told the world I am shifting to product consulting. I knew what I really wanted to do, and the way I understood the term ‘product consulting’ described it quite well. The market, however, understood it differently.
Little did I know that consulting, unlike what I thought, means in many industries doing projects and freelance work. I really wanted to coach and mentor and help people think, not take hands-on projects upon myself. It took me time to understand that I need to present myself as a product leadership coach and product strategy expert rather than a consultant. But regardless of how I presented myself, that was something that I could easily explain once people approached me.
One other misunderstanding that was much harder for me to explain was related to how people understood the word ‘product’ in what I do. I have come to realize that people understand it very differently from the way I do (perhaps because they are not product experts?), and moreover, that the most common interpretation was not at all what I wanted to deal with, and definitely not where I believe (to date) most entrepreneurs need help.
As long as I talked about product consulting, even when people understood that I only coach them and did not do the work myself, they mostly wanted feedback on their deliverables — the actual screens, app, or capabilities the product had.
The way they understood the term ‘product’ was very straightforward — the actual bites of code that are released to the world for people to use. While that’s a very common interpretation, it’s not the only one, and one that will limit your ability to make a real impact, especially if you are a product leader.
I talk about it a lot when I speak about product strategy and in the CPO Bootcamp. But recently, I find myself clarifying this even further with the very confusing term product-led growth (PLG). It’s a great model but the name is quite misleading. That’s why I named my strategic product-led growth course ‘Unboxing PLG’. It’s not what people typically think it is, and much harder to succeed with if you don’t fully understand it. You must open the box and get to know what the inside of it really looks like. PLG under the hood.
Today I want to give you a sneak peek into this understanding, by talking about common misinterpretations of the name PLG, which could lead you to wrong expectations as to what you are entering yourself into.
Sales-Led vs. Product-Led
Many companies talk about moving from being sales-led to being product-led. Being product-led doesn’t yet mean that you are doing product-led growth (more on that later), but it’s a precondition and hence relevant here.
On the other hand, being product-led also doesn’t mean what most people hear in it, which is a matter of who (which department) takes the lead. This is based on another interpretation of the word ‘product’ — the product department of the company.
Being sales-led or product-led isn’t about the people. Like with the word ‘product’, ‘sales’ in sales-led isn’t the salespeople. Being sales-led or product-led is a strategic decision of the company, that goes all the way up to the very basic business model you are betting your success on.
With sales-led, which is also a bad name, the model means giving each customer exactly what they want and following the money. It works when each customer is extremely large, but there’s a caveat: you do a lot of dedicated development (which means expensive resources) for each and every customer.
When you are product-led, the company had decided that it is going to grow by selling the same product to each customer. You are going to invest a ton of money in developing the right product for the market (hence the importance of product-market fit), but once you have it, and you know how to sell it, you can scale exponentially. That’s the whole reason VCs invest in startups. They let you put this ton of money into learning and building the product and the sales process that the market really needs, and they expect it to grow exponentially and give them great ROI in the future.
It’s important to say that both models are valid ones, but you want to make an informed decision which one you are choosing since they would lead to very different companies.
These terms are often confused because when your product is still young, you truly need to develop new features to win contracts. There is a fine line between using this as market input and feedback, building the product that the market really needs, and becoming too sales-led to change later.
Product-Led vs. PLG
You have to be a product-led company in order to implement and succeed with PLG, but not every product-led company does PLG.
Unlike in the term product-led, where ‘product’ is the business model in which the company is going to make money, in product-led growth the word ‘product’ goes back to the most common interpretation I mentioned earlier — the actual deliverable that people are using.
In PLG, the product (deliverables) takes the heavy lifting of marketing and sales upon itself. It means that as a product leader, you must take these things into account when you lead the team to build the PLG product, and that’s only part of why it’s tricky.
PLG is a name for a very specific methodology — where B2B software is sold from the users up to management and not vice versa. Not all companies, even ones that are truly user-focused, sell this way. Not all markets want to buy this way.
While the promise of PLG is that you will build a product that sells itself, this is true in a very limited capacity, and for sure takes a long time to get there. Our Unboxing PLG course could help you navigate that journey to success.
A Word About Growth
Another source of confusion with product-led growth, and perhaps the most impactful one, is the use of the word ‘growth’ in the name. Here, too, there are multiple meanings. The right way to understand it is in very general terms — this is how we are planning to grow, from nothing to extreme success.
But when people hear the word ‘growth’ they rarely think of the beginning of the journey. They think about the growth stage of a company, one that comes after you have product-market fit. They think about growth hacking, which means removing barriers and bringing the value you already know people need to more people. They are all definitely part of the promise of PLG, but the journey to PLG doesn’t start there.
Any journey to PLG is by definition a journey to product-market fit. If you are only beginning, it’s clear why. But if you take a mature product, even a successful one, and want to convert it to PLG, you are shaking both ends of product-market fit. The market is usually not the same market (for example you have been selling to enterprises and now want to sell to startups, or you have been selling to security people and now want to sell through developers which means you must do PLG because developers wouldn’t buy any other way). And the product is also not the same product (even if they are packaged together as one), both because you change the actual deliverables and because the different market segment has different needs).
Add to that the fact that if you want to learn how to do PLG well, you are looking at companies who succeeded with PLG and trying to learn what they did. But success with PLG comes when you scale. Research shows that up until $10M ARR, it’s much easier to succeed without PLG than with it. After $10M ARR the opposite is true, and PLG wins big time. If only you could start at $10M ARR…
So you are looking to learn from companies that succeeded, and by definition, it means you see what they do in their growth stage. But if you still didn’t reach product-market fit with your PLG product (even if you have it with another product), the actions you will learn from successful companies are irrelevant. To succeed with PLG you need to learn what to do from the get-go, and most PLG advice out there won’t tell you that.
Of course, they will talk about actions and how to start — add a self-service option, remove friction from onboarding, but they won’t talk about how to strategize and how to get to product-market fit — which is the unseen product strategy that you need before you take any action.
With product-led growth, as product leaders, you have immense responsibility. It’s scary, but you don’t have to do it alone. We are here to help you.
Our free e-book “ Speed-Up the Journey to Product-Market Fit” — an executive’s guide to strategic product management is waiting for you at www.infinify.com/ebook
Originally published at https://infinify.com on June 14, 2023.
