Remember how big of an event a software launch would be 15 to 20 year ago? And the boxes, CDs and all that documentation that came with every software purchase? Every major release or update would be an event in its own right. We don’t have those anymore. ‘Product release’ as we knew it seems to be dead. Today, subsequent versions of a software product are rolled out in a more seamless and sometimes completely unnoticeable fashion. This is the age of continuous integration (CI) and continuous deployment (CD). What changed?
A new approach to software development has emerged in the last decade or so with the proliferation of SaaS (software-as-a-service) companies. Capitalizing on the capabilities offered by cloud-based systems and built on principles of Agile project management, this new approach is characterized by shorter and faster iterations, constant path corrections informed by heavy utilization of usage data, continuous integration and more frequent deployments. It emphasizes customer experience over product features, not because that is the cool thing to do but because it makes perfect business sense:
Research by Forrester shows that every dollar spent for customer experience generates 100 dollars in return.
Improved customer experience is the way to achieve higher customer retention rates and reduce the cost of customer acquisition. The idea to use the product as an engine for acquiring and retaining customers and driving growth, in short making the product the experience itself, has simply come to be known as “product-led growth” and inspired quite a bit of literature lately.
Product-led growth envisions an evolutionary approach to product development. At the centre of this strategy is the product manager who plans, guides and oversees the effort to develop the right product in light of the usage data gathered from customers. This month’s book, The Product-led Organization, is, in a sense, a handbook for product managers who are willing to pursue a product-led strategy for their SaaS companies. The book makes a good job of laying out which metrics a product-led organization should keep an eye on, explains how to combine hard data with customer feedback, and describes the composition of a good product team.
The author of the book, Todd Olson, is the CEO and co-founder of Pendo, “a platform that accelerates and deepens software product adoption,” which has so far raised $356 million worth of funding. Pendo is valued at $2.6 billion as of the time of the writing and currently boasts an annual recurring revenue of more than $100 million. So, it is safe to assume that Olson knows a thing or two about being a product manager. Having also had his fair share of failures in his career, he sets out in his book to find an answer to the question “Is it possible to build a sticky product right from the start?” He quotes from the Standish Group that “nearly 84 percent of projects will either fail or go over budget,” and that “most features are rarely or never used.”
There is something fundamentally wrong with the way most projects are developed and Olson’s data-driven approach aims to fix that. What guides his philosophy is the famous maxim by Peter Drucker, the management guru: “You can’t manage what you can’t measure.” Olson’s ‘north star’ metrics in his quest to develop better products are the ones that show product adoption and usage. Throughout his book, Olson endorses giving up the old way of innovation, which mostly depended on unvalidated assumptions and gut feeling, and suggests instead taking advantage of cloud-based platforms that can provide a product team with more data about the users than they can handle.
A product-led team, according to Olson, should focus on minimizing the friction a customer experiences once he enters the funnel. The idea is to make him discover value as soon as possible. In this model, interactive in-app help replaces old-school documentation and a customer success team is at work to make sure that problems are tackled before they become widespread. Every action taken within the organization is geared towards the goal of giving the customer the best possible experience.
Olson is quite shrewd in the way he gives reasons why product development at a software company today has to be product-led. He reminds the reader that shipping features without paying attention to what customers want can ruin the whole customer experience, and brings up the case of Wall Street traders and investors who saw their productivity plunge when the keyboards at the Bloomberg terminals they used were replaced with mouses. The gist of the story is, it is not an improvement if the customer does not want it.
The Product-led Organization is a lot like Hooked, the book we reviewed last month, in that they both focus on how to form customer habits. However, Olson’s book goes about it in a more data-driven and quantitative way, while Hooked follows a more descriptive and qualitative path. The two complement each other rather well, with The Product-led Organization demonstrating how to leverage data to make sure that every decision made is data-informed, and Hooked delving into the psychological mechanisms that bear on those decisions.
The Product-led Organization offers a reality check to anybody dreaming of founding the next SaaS unicorn. It sheds light on the challenges of building the right type of software the customers will love using, one that nails the product-market fit. Having read it, one automatically gains a different perspective on why some firms are able to grow at a stunning pace without any problems attracting investment, while others fizzle out. Todd Olson knows how to overcome the challenges of a SaaS business, as he did more than once in his career, and provides product managers and entrepreneurs with a blueprint for success in this particular sector. You would be well-advised to read his book before spending a dime or writing a single line of code for your next project.