The outsourced software development industry has existed for well over half a century, originally dominated by the Mainframe founders (IBM, Honeywell, Cray, et al).  They owned the computing industry, hardware and software, much like AT&T monopolistically owned all of networking; and back in the day they all seemed destined to be indomitable forever. 

 

The old saying was: No one ever got fired for buying IBM and AT&T.  Yet by the 1980’s, that was not to be case much longer.

 

Entirely new generations of technology were soon to unfold.  Mainframes gave way to mini-computers, to the Client-Server era, to Desktop computing, to the migration from On-Premise infrastructure to SaaS, to today’s untethered device era of laptops, tablets, and smartphones.

 

In parallel, this evolution was happening much the same in Networking.  Dedicated circuitry gave way to hubs, switches and routers, to ultimately the advent of the TCP/IP-based Internet, and then the completely wireless technologies of WiFi, Satellite, and 5G.

 

And yet, within this metamorphosis of technology, business decision-making also evolved.

 

In the mainframe era, C-Level executives made all the major decisions on technology, applications, and workflows.  As distributed computing moved away from tightly-controlled centralization, computing and automation decisions fanned out to more division- and departmental-level executives and managers, who were more attuned to their organization’s specific needs and priorities.  Today, things have changed yet again.  An entirely new era of decision-making has emerged.

 

The fastest growing companies in technology today are being driven, not by a small group of clever insiders, or even a single visionary individual; but rather, by the users of the systems themselves.  It’s a novel phenomenon known as Product Led Growth (PLG).

 

Those organizations who have pioneered and mastered PLG are exponentially flourishing, while their legacy competition, still driven by internal opinion leaders and “managers who know best” are relatively stagnant or inching forward slowly by comparison.

 

This evolutionary reality is also forcing a change in the sales models for technology vendors.  Today, calling on  the CIO might be the long-route to making a substantial sale.  Even key executives and managers don’t know for certain what their customers really need and want.  How could they know?  They couldn’t until the advent of PLG.

 

 

So what is PLG?

 

To be clear, Product Led Growth, in a nutshell, is a form of crowd-sourcing critical information (data), if you will, from the people who are actually using the technology products and services that, in turn, direct future product development.

 

Everyone should have seen this coming.

 

The migration from Waterfall Dev to the Agile development model solidified the philosophy of working from User Stories and Use Cases in an incrementally measured and continuously adjusted manner to produce more of what the customer really wants.  Later, DevOps was layered on top of the Agile process to provide an operational feedback loop for Continuous Improvement and Continuous Development (CI/CD).  The missing piece (or weak link) of the Agile/Dev-Ops puzzle was in still building everything to the whims and wishes of a “Product Owner”, who could be a single individual or a small group.  And they could be wrong.

 

Where PLG goes to the next level of increasing user productivity is in getting input from ALL the users. 

 

But how is that physically possible?  Can you survey every single user across an entire organization, and do it on a regular basis?  No – that is logistically and practically impossible.  Instead, you just need to continuously monitor user behavior at a very granular level via automation.

 

And that key function requires software development!

 

This new layer of software development is the fruit of “tagging” every function in a software application, that then continuously reports its activity to a specific data store.  That data is then subject to sophisticated analytics, driven by Artificial Intelligence (AI) and Machine Learning (ML).  The end result is a system that learns what functions are the most useful and produce the best ROI for the users.

 

Historical Flashback:  Agile development philosophy came out of the realization that back in the Waterfall Dev days, most products and systems were produced with over 60% of their features never used by the actual users – thus representing a massive waste of time, money, and energy.  Everyone intuitively understands this concept.  If you own any piece of technology, from your TV or Stereo to your smartphone, to your washing machine, you know you have equipment with a vast array of features you’ve never used, nor may even know exist.

 

Agile helped address this issue in a big way, but not 100%.

 

All of those products and systems built by small groups or individuals who establish all the specifications, to a large extent, still have directional development influence based on their opinions of what is important and what isn’t.  Most of the time, maybe they get it right.  But in reality, in any system today with more than one function, some things are found to be more useful than others by the people who actually use it.  And sometimes, clever users find ways of using things that the system’s creators didn’t even realize was important.

 

And that’s what PLG is really all about.  Users these days are much more autonomous about what tools they choose to make their work more efficient, productive, and intuitively easier to do.  And the organizations that recognize that fact, more often than not, then wisely find their success by “Building in the Path of Progress.”

 

This is why so many companies these days offer their customers (users) tiered levels of services, typically in a SaaS infrastructure model, starting with a completely FREE introductory level.  It’s not a limited-time trial or demo, but a free, full use version of their system within a confined set of functions.  The sales and marketing challenge from that point is to then upsell the free-level users to their premium features.  But, of course, that’s easier said than done.

 

Another success key is built-in Integrations.

 

There are very few systems out there that can “do it all”, even if they want to and try to, and none of them that can do everything well.  Yet once more users elect to take various “best of breed” solutions and subsequently figure out how to integrate multiple products into more comprehensive solution sets.  The vendors who provide built-in integrations, APIs, etc. are winning the battles.

 

 

So what does all this knowledge have to do with outsourced software engineering companies?

 

Simple – the software development organizations who can provide PLG “from the ground up” will have a very distinct competitive advantage over those who can’t, and especially over those who don’t even realize it’s important.

 

That is, most software outsourcing firms tend to be reactive.  They build what their clients ask them to build, and trust their clients to know what they want.  The vendors may have a few good suggestions now and then on better ways of achieving a project’s goals, or perhaps making some technical improvements here and there.  But the truth is, the vast majority of software product companies today are still new to the party when it comes to PLG.

 

Those companies with existing products – if they experience the epiphany of PLG’s ability to explode their product adoption rates – then face the non-trivial challenge of going back into their code base and adding all of the tagging capability to every function;  plus, then figuring out how to add the analytics angle on the back-end so they can then glean the user-driven behavior data of what’s important and what’s not to their customer base.

 

For the startup or new product development of an existing company, it is much easier and less expensive to build PLG in from the beginning, instead of adding it later.  This process needs to be consultatively explained to new sales prospects in the pre-sales phase, preferably not in the sustaining engineering phase.  But for existing products and systems, there really is no alternative other than adding the tagging and analytics capability after-the-fact.

 

What this means from a Sales and Marketing perspective is that the conversation can then change from the latest technical capabilities and innovations to enabling market velocity for a client business.

 

The CEO of HubSpot, Brian Halligan (one of those companies who understand PLG very well), coined the idea of the “Flywheel”.

 

 

Essentially, this idea is simply a renaming of Marketing (Attract), Sales (Engage), and Customer Success (Delight).  But Brian’s train of thought here does have a few new wrinkles of note.

 

The main takeaways are that Delighted Customers (as opposed to just the satisfied and not complaining ones) tend to generate much more positive Word-of-Mouth/Buzz and therefore referrals.  Secondly, the best way to delight a customer is to show a client’s users specific ways to be more productive and to learn easier and simpler ways to get their jobs done.

 

Another major contrast of the Flywheel is in comparison to the “Funnel” concept – i.e. the Sales Funnel, or Sales Pipeline. 

 

 

The imagery couldn’t be more clear:  The Top of the Funnel (the attracting by Marketing) has the largest breadth.  Without leads, there isn’t much selling going on, right?  But always, of the available leads, the actual Sales (the engagement part) at the Middle of the Funnel is a subset.  And then the fully onboarded clients at the Bottom of the Funnel who are the actual revenue producers, are those that you hope to keep happy and not leaving, thus containment of churn.  Visually speaking, the Funnel portrays Customer Success at the bottom and seemingly of least importance.  The complete opposite is true.

 

It is the negative desire for “Containment of Churn” mindset that is the problem.  For it typically becomes a self-fulfilling prophecy, as most deep-seated fears are realized in one form of another.  By contrast, the “Delight your Customer” mindset of a true Customer Success organization is not only what helps minimize, if not eliminate, churn, but actually becomes a revenue builder in terms of upsell/cross-sell, positive references/reviews, and revenue-producing referrals.

 

From a pure sales team perspective, the emphasis thus moves to showing/educating clients on how to do new and different things – which, of course, can then involve upselling and cross-selling.

 

And to come full circle here, your client’s own sales teams will only know what features to push and highlight based on all that analytical data produced by feature tagging activity of all their users.

 

 

So how does this all translate to a software development vendors own marketing and sales functions?

 

Granted, the Marketing function of “Attracting” new prospects from scratch still needs to be done.  But now Content Marketing and messaging can be crafted with a focus on how to accelerate the velocity of a client’s business, not merely on a vendor’s technical capabilities – which most prospects are not likely to have clue of how those capabilities can directly benefit them.  The mission therefore becomes the enablement of Revenue Acceleration, not just functional IT performance.

 

This mindset goes to the heart of the core sales fundamental of “Don’t focus on selling products and services; those are but a means to an end. The successful end, is delivering the Desire Outcomes the customer really wants that the products and services enable.”  And to succeed in one’s business is always the ultimate objective.

 

Another direct benefit of a PLG strategy for a software development company’s clients is to directly enable “The Warm Puppy Close.”

 

Specifically, in most software implementations these days, the actual users of an App/System have to go through an integration period, usually at a hard-dollar cost, before they can even know whether or not the system they are looking to purchase will meet their needs.  Often this “buy before you try” becomes a show-stopper.

 

“Why do I have to invest $5K – $10K and take six week of installation and configuration time before I can know if this is really I what I want?”

 

In contrast, take a look at Apps/Systems like Zoom or Slack.  A user can download them and start using them in a matter of minutes – for free.  From there a user can then decide over time whether or not the App is sufficiently user friendly, and if it does what they want it to do; and best of all, they can usually do it without anyone else’s permission (unless an IT department has specifically forbidden such Apps from use behind a firewall).

 

And that’s how Apps like Zoom and Slack have rapidly spread across large enterprises so quickly.  And not just the free versions, but the upgraded premium versions.  An organization starts using one of these Apps (the warm puppy), who uses it and likes it (falls in love with the puppy) then gets their colleagues to do likewise, and before you know it, it’s a de facto standard throughout the company.  Thus, it isn’t hard for a Zoom or Slack sales person to contact that company using their free version and let them know what additional functions their users could benefit from for one of their higher tier packages.  That’s the PLG model.

 

The client then asks: But will Zoom and/or Slack also talk to my Salesforce/HubSpot CRM?  Yes, they are fully integrated – for a small additional fee.

 

That’s how the strongest winners these days are winning.  Thus, the software development outsourcing company that becomes the leader in helping their existing and future software product companies implement the PLG strategy from the foundation up, could in turn, end up dominating the third-party software development space.

 

But admittedly, that, too, is easier said than done.

 

For a traditional Staff-Augmentation and Project-based software engineering vendor, that strategy would require significant enhancement of the entire organization, from Marketing and Sales to Delivery. And such enhancement is never free, and would necessitate some degree of internal investment.

 

As previously noted, Marketing would need to refocus their messaging.  Sales must become more consultative and helping facilitate the “ground up voice of the users.”  On the fulfillment side, engineering is going to need to both understand and be able to produce the Data Scientists, the Analytics, and the AI and ML expertise in order to actually deliver a fully-functional PLG App/System.

 

Let’s put all this in context.  A buzz-phrase in common usage today is: Digital Transformation.

 

However, if you asked 10 people to define what that really means, do you honestly think you’d get a succinct, common answer?  Of course not.  It just sounds good.  It’s the digital age!  We want to be part of that…even if we have no idea what it actually means.  It’s much more than just task and workflow automation.

 

Product Led Growth From the Ground Up (PLG-FGU) is true digital transformation in every sense of those words.  The software development organization that leads this type of transformation will undoubtedly win all the marbles, while the rest of the vendors out there keep desperately hunting for new projects and trying to compete on lowest-common-denominator pricing within a severely commoditized and ruthlessly competitive market.

 

Admittedly, a skeptic might understandably ask: Okay, this is all very interesting, but I can’t believe that PLG is the end-all be-all.  And that person would be right.  It’s not the end-all, be-all, standing alone by itself.  No, it’s the next level of software development’s evolution, building on everything that came before it.  And it’s also true that this strategy doesn’t mean that everything we’ve done from a sales and marketing perspective all goes out the window either.  No, we build on that foundation.

 

 

For in reality, in the standard technology adoption curve, pictured above, there are still five flavors of companies out there that everyone has an opportunity to sell to.

 

Indeed, within the Late Majority and Laggards sectors, you are definitely still going to find decision-makers still harboring the Mainframe-era mentality where the CEO/CIO calls all the shots.  Likewise, the vast majority of SaaS providers these days still feature decision-makers in the Director/Manager level of divisions and departments for specifications on what their systems need to do.  It really is the visionaries, early adopters, and “unicorns” of the new Early Majorities (like HubSpot and Slack) who are blazing the new trails and leaving their respective competitors behind.  They are the sweet spot.

 

That isn’t to say that all those other existing software product vendors can’t be ripe targets, in the sense of perhaps wanting to incorporate PLG moving forward as part of their business strategy.  They can also be helped – even if it means having to go back and upgrade legacy code.

 

Thus, when it comes to defining a market penetration strategy for a third-party software development and engineering organization – with the stipulated understanding that marketing and sales bandwidth is always in finite quantity and requires focus to achieve depth of penetration – where would it seem most prudent to invest those resources?

 

Yes, right in the path of progress – as an enabling, critical path element of PLG.  And that can be true on a small scale as well as on a large scale and everything in between.

 

Can a Mobile App benefit from PLG?  Of course.  If it’s got users using it, and the App has more than one function, preferably premium features that can be monetized, then it’s applicable.

 

To Summarize:

 

• Agile brought to Software Development an interactive feedback loop between the Vendor the Client on specifying functional requirements and delivering working code faster and with higher quality
• DevOps brought to Software Development an interactive feedback loop between Operations and Sustaining Engineering Development to achieve Continuous Improvement of operational functionality
• PLG now brings to Software Development an interactive feedback loop between the End Users and Software Development to help reveal what the Users truly need and want to use

 

Best of all: Most software development shops need help to implement PLG.

 

Think about it: of these three service provisions from outsourced software vendors, most of them can offer Agile, some offer integrated DevOps, but few if any can also offer PLG – as a normal layer of ongoing product development.

 

True vendor differentiation begins by having a truly good answer to a sales prospect for their most important question they always want to know: “What can you do for me and my business that everyone else can’t do?”

 

Now you know the answer to that question.