Week 36, 2020
The PLG Flywheel: Feedback Loops, Customer Acquisition, and Growth Framework
Each week I share three ideas for how to make work better. And this week, that means (another) look at Product-Led Growth.
Why am I writing about this? I came across an internal memo that Stewart Butterfield (CEO of Slack amongst other things) shared with his team in 2013 — two weeks before Slack first launched. It’s a fascinating read, not least because it so perfectly illustrates the mentality and approach that has since become known as Product-Led Growth or PLG. Slack has become somewhat of a poster child for PLG and I wrote a brief introduction to the concept a few weeks ago (see w262020). Today, I thought I’d dig a bit deeper and (try to) explain how companies like Slack have been able to achieve product-led growth.
Let’s dig in.
1. Feedback Loops
Long-term readers will be familiar with Jim Collins’ Flywheel Effect — the compound effect enjoyed by companies such as Uber and Amazon who build self-reinforcing feedback loops into their business models. Collins introduced the concept in his 2011 best-seller Good to Great, and then further expanded on the idea in Turning the Flywheel, released in 2019: “Good to great comes about by a cumulative process — step by step, action by action, decision by decision, turn by turn of the flywheel — that adds up to sustained and spectacular results.”
2. Customer Acquisition
The Flywheel Effect has been around for a long time, but it has gotten new life under PLG. At least in part. Because while Collins’ flywheel is about business modeling, the PLG Flywheel (pictured on top) is more narrowly focused on customer acquisition. Specifically, it provides a framework with which to turn prospective customers (Evaluators) into raving fans (Champions) who, in turn, introduces the product to a new cohort of Evaluators, thus restarting the cycle. And with each turn of the PLG Flywheel, we (hopefully) build momentum by adding more and more Champions to our roster.
3. Growth Framework
Product-Led Growth shifts responsibility of customer acquisition away from sales and marketing and towards product. Sales and marketing is still important, but it’s the product itself that becomes the primary driver for growth. It’s up to the product to activate Evaluators and get them to try; it’s up to the product to convince Beginners to adopt more advanced features; it’s up to the product to delight Regulars and build an emotional connection, and it’s up to the product to provide Champions with a platform with which to advocate and spread the good word.
It supposedly took Slack 8 months to reach unicorn status and a $1B market cap. Eight months! And this was long before PLG ever became a thing. But no matter. As Butterfield makes clear in the memo mentioned above, he was already thinking in PLG terms. He wrote: “[T]he product itself and the way people use it should suggest new ways of articulating the value — and refinements to how we communicate the value should lead to principles which clarify decision-making around product features and design.”
PLG FTW.
And the rest is history, so to speak.
There’s more to it, of course. Your product won’t become the next Slack just because you adopt PLG. You first have to build a superb product. Then and only then can PLG help you spin the flywheel and build up a roster of Champions that can speak on your behalf. But it is an important piece of the puzzle. And I guess it should come as no surprise that Product-Led Growth starts with a great product.
That’s all for this week.
Until next time, stay calm.
/Andreas
