Early in the year, I was interviewed by Blake Bartlett for the season 5 of the OpenView Labs podcast (check it out, its excellent). Here is an edited transcript of that session. Publishing on my medium because I think its good and can help some people out there.
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For a SaaS company striving to take things to the next level, there are few game plans more efficient and effective than combining a product led growth (PLG) go-to-market strategy with an inherently viral product. Even on their own, each of these elements is a powerful way to put your entire user audience to work helping you grow your company. Together, they can create unstoppable momentum.
I have had the good fortune to work at a number of high-caliber companies, including several that taught me a great deal about how to harness the power of PLG and virality. But first, a quick step back: I am an engineer who wasn’t the 90th percentile software developer; I instead sought out a career as a product manager because I found that I was more gifted at understanding what customers wanted, generating ideas to solve those problems and leading the team building the solution.
I honed my skills in this role at Microsoft, Bridgewater, my own startup, and Atlassian. Most recently, I joined Calendly as VP of Product, leading the product, design and customer content strategy teams. Calendly is a company that has found a tremendous product-market fit and is growing really fast. I came on board because the product was amazing and the founding team is exceptional; and this is a particularly exciting chapter in the company’s growth story.
Calendly is an automated scheduling tool that helps millions of people save time by eliminating the scheduling dance of where and when to meet. We pair calendar integrations with a beautiful booking page and a number of optional workflows; Calendly makes setting meetings and related tasks easy for professionals, small business owners, entrepreneurs, doctors, lawyers, hairdressers, consultants, salespeople and anyone else who might need to book a meeting.
Calendly is also a great example of a product that has used PLG and virality to great advantage.
Product-market Fit: A Non-negotiable Starting Point
Before diving into PLG, it’s essential to back up for a minute and acknowledge the importance of having a strong product-market fit. In a sense, it’s the combination of a strong product-market fit with a PLG strategy that provides the right conditions for virality to take hold.
There are three elements to product-market fit: the product, distribution and customers. Product-market fit is achieved when you have a product with a clear value proposition that resonates with customers whom you know how to reach and convert. In other words, build a great product that solves a real problem and make sure you have a way to get it to the people who need it.
It sounds simple, but simple doesn’t always mean easy. There is no universal model for finding product-market fit because the number of variables makes each case unique. There are, however, plenty of common pitfalls including the lack of a market, a sub-par product, broken distribution systems, and any general misalignment between the three elements.
The bottom line is that finding product-market fit is not optional if you want to adopt a PLG approach. You’ve got to get it right.
Product Led Growth: An All-in Affair
Once you’ve nailed your product-market fit, then you can start thinking about how PLG can help drive growth. At its core, PLG is value-driven growth. It’s focusing on customer value and building that as carefully and methodically as possible. PLG works only when every feature — what it does, how it does it and how it’s delivered — solves a real problem for your customers and makes them so happy that they are more likely to adopt your solution over the alternatives. Again, it sounds simple, but there’s more to taking away customers’ pain than meets the eye.
In addition to the problem-solving element, PLG also means that you don’t engage in any high-pressure sales tactics. Instead, the product sells itself. In fact, with a true PLG approach, the first interaction with your company or product is typically through the product itself. For most of your customers, sales and marketing don’t even come into play until after that initial interaction.
In my opinion, PLG really is the most efficient way to build a company, but there are plenty of ways it can go wrong. To keep things on track, there are three key ideas to keep in mind:
Set yourself up for success with total alignment.
For PLG to work, everyone in the organization needs to recognize that the company is taking a product-led (versus a sales-led or marketing-led) approach. There has to be real alignment. It’s imperative that every functional group is clear on their roles and responsibilities. Product becomes the center of gravity, so to speak, as everyone aligns around supporting the product team to help the entire company grow. Each member of the team has to believe that PLG is the best approach and will ultimately benefit everyone and the growth of the entire company.
Start with the customer’s pain.
Since PLG is all about creating value for the customer, it makes sense that the first thing you need to do is talk with your customers. It’s amazing to me how many companies fail to invest time in this critical step. At Calendly, we have a weekly process in which we collect almost every piece of customer input and triage it to zero; with a key focus on taking action on what we can as soon as we can. This is a painstaking process, but we’ve learned how to do it at scale so that we can stay on top of customer pain points and absorb all the new ideas for how to deal with that pain. It’s important to remember that this isn’t a one-and-done task. Always be talking to your customers. Uncover the pain, solve the problem and then build on-ramps that allow customers to share more of their pain so you can repeat the cycle. Note that I don’t mean ask customers what features will satisfy them — that’s an endless and thankless dark path. Instead, focus on core needs and use the team’s ingenuity to find solutions consistent with your vision.
Adapt your growth tactics based on context.
Who owns the growth function in a PLG company can be a tricky question. My rule of thumb when working with a viral product is to use a growth team when there’s a lot of unoptimized upside for virality and network effects, and then — once that opportunity has been exhausted — take a more decentralized approach in which everyone in the company is tasked with looking for and exploiting growth opportunities. It’s a matter of aligning your efforts around the most attainable prize. When viral opportunities give you a clear path to growth, take advantage of that. And when those have plateaued and opportunities are less clear, work toward a different kind of growth culture by investing in training and refining the product processes so that even people at the edges of your growth effort can help you spot your next best move.
Virality: An Often Misunderstood Term
“Going viral” has become something of a buzz phrase that has taken on multiple meanings over time. To be able to identify and cultivate a viral effect within your own product, you first have to be clear about what “virality” is, and what it isn’t.
The most common point of confusion is thinking that a viral loop and a network effect are the same things. While many people use these terms interchangeably, they are actually two different phenomena. A truly viral product has intrinsic virality, meaning that it’s designed around something that naturally involves other people, things that create two-sided benefit. My to-do list, for instance, isn’t viral; but if it became a team to-do list, that has the potential to become viral. In general, virality is essentially about creating channels that exposes your product to more and more customers in the product design itself. A truly viral product does its best to remove any barriers to joining and gaining benefit.
The network effect, on the other hand, is about value; specifically compounding value. When a customer who has already joined, gains incremental benefit from the latest person who became a customer, without any additional investment; you have network effects. A good example is Facebook: the more people join, the more people who COULD be your friend; thus the internal logic for growth is self sustainable. Another good example of different kinds of network effects (inside a company) are products like Slack and Hipchat. These are both micro social networks inside a company. They have a strong network effect because the more people who use them within an organization, the more likely it is that even more people within that organization will join. But, they aren’t really purpose designed to integrate users from outside the organization’s network (Slack has a few features but they’re hard to configure), so there’s no extra-company network effects built in.
Sometimes, what people refer to as virality is really just savvy marketing. Slack is also a good example of this scenario. Slack definitely takes advantage of the network effect to land and expand within an enterprise, but it does not intrinsically have the ability to jump from organization to organization. It does, however, have the benefit of a very smart marketing team with good media relationships. In Slack’s case, virality is really just very effective word of mouth.
There are also cases in which the viral element of a product is the result of the product attaching itself to an external viral medium. When I built a micro social network called Intermingl, we pushed certain pieces of content to Facebook. This is a bootstrapping technique that can help create the illusion of product virality.
Calendly is a truly viral product. There is no single user version of engagement with Calendly; it’s only relevant when there are at least two people involved — the meeting planner and the meeting invitee. The product is inherently collaborative. Each time someone sends an invite via Calendly, they are also automatically promoting the product and starting a viral loop. The invite recipient experiences the product first hand and can immediately see that it can solve their pain around scheduling meetings with other people. They sign up and start using the product to book their own meetings, perpetuating the viral loop of value, which is what drives our growth. And because we are a global open network that solves a universal problem, there are almost no barriers to entry.
The Long-term Plan: Optimizing Your Viral Factor
Once you’ve established that your product has a bona fide viral loop, you’ll want to think about how to build on and optimize that asset. This means measuring virality so you can improve on it. At Calendly, we use a standard K-factor that reflects the number of invitations sent. Each time someone uses Calendly, they are essentially inviting other people into our space and gives us an opportunity to ask them if we can solve the same problem for them. We see a huge number of people convert in this way. We also look at the ratio of people who accept those invitations. Looking at the number of invitations sent, how many are accepted, and how many invitees are turning into actual users gives us a pretty complete picture of our overall conversion rate. It also gives us multiple ways to optimize because while these elements are related, we can actually optimize on them separately to achieve different objectives.
There are a number of tactics you can employ to improve the outcomes of a viral loop. To begin with, it’s very beneficial to get a deep understanding of what makes the user say yes. What makes them convert? Is it the value itself, or the way the value is presented? Really looking at things from the user’s perspective is critical.
You can also work on building network effects. We’ve established the difference between virality and the network effect, but that doesn’t mean that they can’t work together. If you’re already a viral product and can create a situation in which there’s mutual benefit in having large numbers of people join your network, you should definitely take advantage of that opportunity.
Sometimes, there are also opportunities to “consumerize” the enterprise. In many ways, Calendly and other PLG companies like it, that use viral and network effects are really just targeting consumers inside an enterprise. Many tactics similar to those used on consumers in general can be applied to good effect.
Finally, to keep on track with both PLG and virality, you need to stay focused on your core product. As your user base expands and your company evolves, it can be tempting to divert resources to various efforts to build more virality, exposure and searchability. None of these efforts is a bad thing, as long as you aren’t cannibalizing the energy you put into your core product and how it solves customer problems. That’s where you’re primary value is. Everything else is an add on.
The Bottom Line: It’s All About Solving Problems
There may be all kinds of complex strategies and tactics rolled up under PLG: good product-market fit, viral loops and more; but at the end of the day it all boils down to one simple core idea: solve your customer’s problems. This means listening to your customers, understanding their pain, building a product that takes that pain away, and then aligning your entire organization around supporting that product and its mission so that your users fall in love with your solution and want to share it with everyone they know.