Discover more from Kyle Poyar’s Growth Unhinged
Yes, you can pivot to Product Led Growth
I'll show you the receipts
Conventional wisdom says that you can't pivot an enterprise SaaS company to Product Led Growth.
I understand where that view comes from.
Don’t get me wrong: there are *plenty* of challenges in PLG-ifying a business. Doing so takes a strong commitment from the top and the patience to invest before seeing immediate results. Here are just a few potential stumbling blocks that might lie ahead.
Lack of internal DNA and skills: Enterprise-centered products thrive on complexity and product completeness; checking every requirement on the RFP. PLG is all about time to value and simplifying the product experience down to its core. The team that built your existing business might not be the team that can transform it.
Lack of internal buy-in: It’s hard to make the case to invest product & engineering resources into a self-service motion when the lion’s share of ARR comes from large enterprise customers whose requirements are too complex for a touchless purchase. Expect to see tensions between the PLG team and the rest of the org over website real estate, which leads can go to Sales, and much more.
Lack of immediate pay-off: Monetization doesn’t happen immediately. It can take multiple quarters if not years before a PLG motion generates a substantial revenue contribution. If you’re looking for quick revenue, look elsewhere.
But I’m here to tell you that PLG-ifying your business is worth the investment. And I’ve got plenty of success stories to share.
Next time someone tells you that it’s impossible to pivot to PLG, show them this.
More companies have made the PLG pivot than you might expect
Two years ago if you would have asked me which SaaS companies successfully pivoted to PLG, I would’ve been hard-pressed to think of an example besides HubSpot.
Now the examples are nearly limitless and I talk to more founders of PLG transformers every week. These companies span from developer to application software and from SMB to large Enterprise.
Enterprise SaaS: OutSystems, ServiceNow, Nutanix, Appian, Trifacta, Viewpoint
Midmarket SaaS: Vidyard, UserLeap, Vendasta, OpenSpace, Predictive Index
SMB SaaS: Zenefits, Zipwhip, RD Station, HubSpot
IT/Developer: Logz.io, New Relic, StackOverflow, Docker, Okta, Sauce Labs
Security: Axonius, Intezer, Expel, Auvik, Splunk
Let’s dive into three specific Enterprise PLG examples: Logz.io, StackOverflow, and Nutanix.
Do you have other favorite PLG transformation stories? If so, drop them in the comments!
Logz.io, a Series E SaaS company, sells complex products to Enterprise customers. But in 2019 they made a bet on PLG, self-service, and usage-based pricing.
It started small with only two engineers. Many folks couldn’t understand devoting resources to fund something that’s counter to what large Enterprises were demanding.
The first self-service launch was a true MVP. Everything outside of the basics, like using the Stripe plug-in to process credit cards, was done manually in the early days.
But getting self-service out allowed Logz.io to quickly iterate. The difference in scale of having the data from 400 to 500 signups each week versus 100 sales per quarter allowed them to optimize everything from marketing campaigns to onboarding flows to the entry price point.
One of their learnings was that offering a consumption-based or pay-as-you-go model helped reduce conversion friction. Customers were able to purchase Logz.io without needing to guess what their future usage needs might be. Instead they had the confidence that they’d only pay if they were successful with the product.
Fast forward to today. 50% of new customers come in via self-service, up from 0% in just a year. Self-service customers are much more valuable than expected and demonstrate 300% net dollar retention.
Importantly, self-service has not proved to be anti-sales. 10% of self-service sign-ups become enterprise opportunities, increasing pipeline for sales. This allows Logz.io to spend even more on marketing to create more awareness, knowing that the awareness will directly pay off via self-service revenue and eventually generate bonus enterprise upside.
“Ultimately, we are after the enterprise customer,” Co-Founder Asaf Yigal told me. “But if we increase spend to create more awareness, that awareness is going to bring in more enterprise customers alongside the self-service customers. And we know that it will be money well spent, because we’re basically increasing the spend without incurring any cost to the business. We know that if we spend another million, it will bring us much more.”
Stack Overflow secures an $85M Series E on the back of its PLG transformation
When Prashanth Chandrasekar took the reins as CEO of Stack Overflow in 2019, he vowed to lead the company on a product-led SaaS transformation. He’s since been sharing regular updates on their progress (January 2021 update, April 2021 update).
The transformation started with a focus on its Stack Overflow for Teams product line, their internal knowledge management system. At launch, the product was made available through a paid subscription or time-gated trial.
They’ve more recently introduced a perpetually free plan, available for up to 50 seats, to accelerate adoption. By all accounts, runaway success. Stack Overflow signed up more than 10,000 new teams in the first 30 days alone! By comparison, the company acquired only 1,500 new team customers in all of 2020 under their old model. (Below is an image shared in the CEO’s update.)
Importantly, in parallel with going freemium, Stack Overflow invested in “an easy path to self-serve upgrade to our Basic and Business tiers for companies who are looking for additional features (such as SSO and GitHub, Jira, and Okta integrations) as well as dedicated support.”
The self-service upgrade path allows Stack Overflow to seamlessly monetize this wave of free sign-ups, sales not necessarily required.
Nutanix pivots from hardware to software to PLG
You don’t get much more Enterprise than Nutanix, the maker of Enterprise Cloud solutions that help customers modernize their datacenters. The company has a run-rate ACV of $1.38 billion and counts 950 of the Global 2000 as customers.
Nutanix launched a Test Drive for prospective customers to “build your clouds your way in a few clicks." They're going down the route of "zero touch self-service for prospective customers."
This has fundamentally changed the way prospects experience Nutanix and has been used by thousands of people already. And an added bonus: conversion rates are up.
In Nutanix’s Q2 2021 earnings call, CEO Rajiv Ramaswami said that Test Drive “has proved to increase conversion rates, when compared to sales where test drive isn't used. We are encouraged by our momentum and we will continue to focus on overall go-to market efficiency.”
The team that built Nutanix’s PLG motion emphasizes that they experimented with everything. One major change was replacing a lengthy form with just an email address field. That simple switch boosted conversion rate on the page “by an overwhelming percentage.”
“Every single feature and design change that we added to the Test Drive experience started as an experiment… Turns out trial and error is not just a strategy but also a team muscle memory that keeps opening new avenues.” - Madhukar Kumar, VP Product and Solutions Marketing at Nutanix
How to get started on your PLG journey
All three of these companies had built-in advantages when it comes to going PLG. They each had a strong community presence and appealed to a tech-savvy audience that wants to jump straight into a product, no friction required.
You might come to PLG from a completely different angle. To get started, investigate where you have the biggest gaps or wasted resources in your current go-to-market approach. These wasted resources typically fall into one of four buckets:
Not enough leads: You spend a fortune on paid marketing and outbound sales only to see anemic growth. How can your product become a marketing engine?
Low conversion: On the flip side, you might find miniscule conversion from website visitor to closed won customer. How can a PLG approach both increase and accelerate your conversion rate?
High churn: Despite all of the best intentions of your Customer Success team, some businesses see high churn rates and don’t understand why. How can PLG lead to more sustained product engagement, and therefore better retention?
Poor upsell/cross-sell: You might find that you’ve built a number of monetizable products, but customers are stuck using only one or two. How can PLG drive trial and adoption of new capabilities?
By connecting your PLG efforts to your most important business priorities, you can gain more buy-in across the organization and generate quicker wins from your work. Doing so also narrows the scope of your PLG investments so that you can make incremental progress with only a lean team.
An executive sponsor is required in most cases. This ensures the PLG initiative gets visibility, access to resources, and a strong advocate when trade-off decisions are made. The executive sponsor could come from many different parts of the organization; it doesn’t necessarily need to just be a Product Leader. Sometimes this is the CEO, other times the CTO, CMO, or even CRO.
From there you’ll want to carve out a cross-functional team to own your PLG efforts. At a minimum this should usually include a Growth Product Manager, Product Marketer, Designer, and an Analyst.
Your PLG team will need to be scrappy in the early days, looking for experiments that can be shipped quickly even if they aren’t designed for scale. The goal is to generate learnings as fast as possible to help you steadily improve and make the most of a small team.
The value of patience cannot be overstated. In time, your hard work will eventually pay off as one successful experiment builds on top of another. But you cannot expect the results to automatically appear in the first two quarters.
Don’t lose faith or worry that embracing PLG a fool’s errand. The results speak for themselves.
Do you have other favorite PLG transformation stories? If so, drop them in the comments or join the conversation on LinkedIn!