Since 1990, the way we sell software has significantly changed. Technology is now inexpensive to create and users demand to try your product before they buy. As a result, modern SaaS companies like Slack, Atlassian, and Calendly are selling to users, not your typical executive buyer. In this presentation, you'll learn why the user is of rising importance.
Blake Bartlett:
Hey everyone. I'm Blake Bartlett. I'm a partner here at OpenView, and I'm here to talk about product-led growth at the product-led summit. No surprise. I think a lot of the questions that I get about product-led growth personally are, first off, why is this happening? What's behind this? And is this something that I need to respond to, or is this something that I have an option, and what do I do about it? And then if I want to do something about it, what exactly is it? How do I do it? I know it when I see it, but how do I practice this? And so that's what we're going to talk about today. I think product-led growth it's how to build a SaaS company in the end-user era. So let's dive into that.
Blake Bartlett:
First question is how did you adopt Slack? Think about this for your organization, and while I don't know your company, I would say that it's probably something like this, right? Jane heard about it from somebody that she knew. Jane's team started using Slack for their daily meetings or their stand-ups or whatever it may be. Pretty soon everyone was using Slack. And you know what? We love Slack. Right? Sounds pretty familiar.
Blake Bartlett:
If you ask more traditional questions about the sales process, like who sponsored it? Which executive sponsored this? When did you guys start paying for Slack? You're going to get confused looks. People are going to say, "I don't know. We love Slack. Why are you asking me all these dumb questions? This stuff doesn't matter." Which leads me to this realization that it used to be hard to adopt new software. It used to take a long sales process. It used to have this complex implementation where there was systems integrators coming on [inaudible 00:01:33] to my organization, and it took a long time. And then it was training and certification, oftentimes in a classroom. Sometimes they needed a badge, to actually say that I was certified to use this software before I would get access to it in my organization.
Blake Bartlett:
But that's not really the way that it works today. It just shows up today in your organization. All of these products and many others just pop up inside the company. And really the best thing that we can see is that end users are finding these products, they're bringing them to work, and then they're telling their boss which ones to buy. So the end-user era is really kind of the best way to describe this. End users are in charge, they're telling their boss, they're calling the shots, what software should be used. The end-user era is here. And I think the best companies really recognize this.
Blake Bartlett:
These are just a couple of quotes from the S-1 filings when these companies went public. So we see that Atlassian said that we recognized that users drive the adoption, proliferation of our products. That Dropbox says that bottom-up adoption within organizations has been critical to our success as users increasingly choose their own tools at work. And Zoom said that we grow through viral demand driven by individual users. So these guys are all figuring this out that these end users are in charge. They've adapted to the end-user era.
Blake Bartlett:
Why exactly is this happening, though? What's driving it? I think first and foremost, it's cloud evolution. There's a handful of factors, but it all starts with the cloud evolution. Back in the 1990s, software used to live in the data center, or at least in a server rack inside your office. Then in the 2000s it moved to the cloud, we all know about this. Then today, it still lives in the cloud. But I think that there's a new thing that's happening with the cloud. It's kind of an abstraction layer or set of abstraction layers on top of the cloud. When you think about marketplaces, when you think about APIs connecting software together where you can access an entire software library just through a single line of code, when you think about being able to discover software inside other software products, when you think about browser extensions, and the list goes on. There's a different era on software where you don't just type in the URL, and that's how you discover the software, and that's how you access it. Software's living inside software. And again, there's this abstraction layer on top of the cloud. That's something different today.
Blake Bartlett:
This whole evolution has led to a price evolution, as well. And back in the day, it used to be extremely expensive, both to build software and to buy software. And this was because software lived in an appliance. It had to be installed in the data room, in the data center, I should say, and every decision was a full Stack IT decision. It was a CapEx decision, and it was extremely expensive. At least six figures, if not seven figures.
Blake Bartlett:
Then in the 2000s and the cloud era, we moved from buying software, CapEx decisions, to renting software, OPEX decisions. It was more affordable to build software. Single instance, multi-tenant, bill it once, and then sort of everybody gets the same version of the software. So servicing costs went down, selling costs went down, and you had this high-margin recurring revenue stream when you were renting software. That also made it more accessible and more affordable for people to buy, because you didn't have to have seven figures of CapEx budget set aside at the beginning of the year. You could rent this software from your team's budget. And the entry point was no longer minimum six figures, it was now a minimum five figures, right, for an annual subscription or something like that.
Blake Bartlett:
Then today, in this era of the connected cloud, this abstraction layer that I described before, software is extremely affordable to build, because the developer resources available to us are extremely robust. It's also extremely cheap to start using the software and to get value out of the software. Usually, it's free, these days. It's not, extremely inexpensive, right?
Blake Bartlett:
These dynamics have led to a buyer evolution, as well. Factor number three. In the 1990s, back when software had to go into the data center and had to be installed, the CIO ruled the roost, right? These software buying decisions were full stack IT buying decisions. It had to be compatible with my current stack. It had to be compatible with my current environment, from a security standpoint, from a networking standpoint, from a hardware standpoint, you name it. The CIO was in charge. And again, it was extremely expensive.
Blake Bartlett:
So then it moves to the cloud. And again, software is being rented, not being purchased. So software's no longer really being purchased based off of IT-compatibility concerns. Now, software's being purchased based off of really what's the value it's going to drive to my team. It's no longer the CIO making the decisions. Now, if I'm looking for, say, a CRM solution, it's going to be the VP of sales, because that's something that helps them get a competitive edge. So it's extremely important that the VP of sales makes the software decision that is going to make her team the most successful. And so there's the executive, the business line executive really becomes the software purchaser. And it's all about ROI and features and functionality to my team.
Blake Bartlett:
Then we move into an era where, today, the end user is in charge, right? People are making personal productivity decisions because they're getting stuck, or because they're in a repetitive process and tasks that's incredibly draining to them, and they want a way out of it. So they look for software to help automate that. So end users now, and they have access to this software, right? They can find it in this connected cloud, they can find it as a Chrome extension, they could find it as an app on the app store, whatever it may be. It's extremely affordable. It's extremely accessible. And the end user is in charge.
Blake Bartlett:
All of these factors are connected. So the CIO era is driven by the data center where software lives, and the expense that's associated with it. The executive era is driven by the cloud, and the ability to rent software instead of buying software now. And then the end user is driven by the fact that software lives in this connected cloud. And that it's extremely affordable to build software, and often free to initially adopt software.
Blake Bartlett:
The distribution follows this, right? So back in the CIO era, when things are really expensive, you have field-based sales reps, carrying a bag, carrying a quota, going to visit the customer site. And they're supported probably by field marketing, events and collateral that I bring to the meeting with me. I call this sales-led growth. And it's the natural distribution model that works for the CIO era.
Blake Bartlett:
Then the executive era. That's where we hear about inside sales and inbound marketing, right? Inbound marketing feeds inside sales. We have our SQLs that convert to, ultimately [inaudible 00:08:29] ones, right? And this was what we primarily hear about when we go to SaaS conferences today, when we read SaaS content. When we think about SaaS metrics, it's all about optimizing this inbound marketing and inside sales funnel. B.
Blake Bartlett:
ut there's a newer model, and this is the model of the end-user era. And as software has become extremely accessible and extremely affordable to end users and users are now in the buyer's chair and in the driver's seat, we see that software is being distributed a lot more like e-commerce products and e-commerce services are being distributed because, again, it's targeting end users acting as individuals. And so this is what I call product-led growth. This is what we call product-led growth. This is why we're all here today at the product-led summit.
Blake Bartlett:
So the end-user era is here. Product-led growth is how you adapt, but the question then becomes, so what exactly is product-led growth? Okay, I'm with you. The end-user era is here. I'm going to adapt, but how? I think there's two main factors you have to take into account here. First, you have to build the product for end users. Then you have to distribute the product to end users, as well. It's really about consistency to the end user. So on building the product, if we unpack that a little bit. Two steps there. Design is not enough, point one. And point two, you have to solve end-user pain.
Blake Bartlett:
So talking about design first. Five years ago plus, everybody was talking about the consumerization of IT. And it created design revolution. So the logic or the fact pattern with something like this is that legacy software was terrible to use. It was extremely clunky, a bunch of clicks and just looked bad, too. We were all using software personally; websites, whether it's Facebook, or whether it's Gmail, or whatever it may be. We're using software every single day. And it's much better in terms of design, it's much easier to use, it's much more slick, it's much faster, much more responsive. We just are getting used to that and saying, "Why doesn't the software that I use at work look like the software that I use all day on my personal computer, or increasingly on my smartphone? And why doesn't it look like Facebook or whatever it may be?"
Blake Bartlett:
So then we saw product design become a thing, right? Now, we're in a world where product design is no longer a differentiator. Product design is, and good design, is table stakes, which is a good thing. However, if it's table stakes, then it's not enough, right? And you can also have a product that's built for an executive, or that's built for a CIO that has pretty design, but still isn't exactly serving the end user. So design is necessary, but insufficient as a way to adapt to the end-user era.
Blake Bartlett:
You need to solve end-user pain. That's the second, most important point. Start with design, but really build for the end user. End-user pain is different from team pain. I think a lot of times people will think of, well, I'm just serving the finance team, or I'm serving the sales team. And they'll think, "Well, that's everybody who's on that team, they all need the same thing, right?" They're all thinking about the same problems, but the executive is looking for solutions to different problems the end user is looking for. Here's a great example, right? So end-user pain. They might say something like, "I hate internal emails. They're so annoying. It's such a waste of time. I get lost in all the threads." And well, there's products for that, right? Slack. And that's what you would get if you had that problem.
Blake Bartlett:
Now, if you have a team pain issue, and this is a great example of that, would be, say, for example, on the sales team, we need to manage our sales pipeline. That'd be the VP of sales that's saying that, and so therefore you get Salesforce, right? And these two things are fundamentally, possibly adapting, or solving different pain and offering different value to different people on the team, right? On Salesforce, we always hear that classic quote that VPs of sales love Salesforce, but actually the sales reps and AEs do not like Salesforce because they just view it as a data entry task, and an extra step that stands between them and closing. So you see this element coming through a little bit, but just because he VP loves it doesn't mean an end user's going to love it and vice versa. So it's important to understand that there's two different kinds of pain.
Blake Bartlett:
Now, to bring this into clearer focus, you can even be in the same exact market, selling the same exact product, relatively speaking, and have a different pain orientation. So this is in the expense reporting market. On the left, you would have the end-user pain flavor and on the right, you would have the finance team pain flavor that may be the CFO would care about. So on the left you would say, "I'm an end user. I hate expense reports. They're so annoying. It's such a waste of time, right?" Nobody's ever said that they love expense reports. And then on the right, you have, again, what the CFO or perhaps the controller would say, which is that we spend a lot of money on travel and entertainment, and it's so expensive. So this is how the pain is being expressed from one constituent to the next.
Blake Bartlett:
Then there's different products that are built for those different pain orientation. So on the left for the end user, you get Expensify. And Expensify's tagline says it all, "You weren't born to do expenses." And then on the right, for the finance team serving the CFO, you get Concur. And Concur's tagline says it all as well. "Simplify expense, travel, and invoice for greater visibility." Same product generally speaking in terms of it helps with expense management, completely different orientation, which leads to completely different products because they're really solving different end user constituents.
Blake Bartlett:
End users often express pain more as annoyance rather than ROI. So a lot of times we think through on building business software. So therefore it has to have this hard dollar ROI, but a lot of times these products are actually going after that annoyance factor that end users have, because there's a lot of end users. So if you solve the pain of a large population of end users, there can be big business associated with that, right? And so there's an argument to be made, the end-user era is actually, it's the annoyance economy. Find the annoyance of end users, build for it, right? So here's a bunch of examples. So Slack might say that I hate internal emails. They're so annoying. Well, Slack exists for that reason. You might say, I hate expense reports or I hate local file storage. And those lead to Expensify, those lead to Dropbox, and so on and so forth. So look for the annoyance, look for the pain that might not be expressed as hard dollar ROI, but lean into that.
Blake Bartlett:
You've got to build a product for end users. Now, once you've built that product for end users, now the next step is to distribute the product to the same end users that you built it for. The way that you do that is through four steps. First, you have to distribute where they live. Second, you have to make it easy to get started. Third, you have to deliver value before the paywall. And fourth, you need a hire sales last.
Blake Bartlett:
So first on distributing where they live, your users are living in one of these systems or one of many similar systems, right? So perhaps they live in the browser all day long and they're living in Chrome, or perhaps they're living in Slack all day, or perhaps they're a G Suite shop, or an Office 360 shop. Whatever it is, find out where they live. Where do they spend most time? Then you distribute your product in the same place where they live. So if they live in Salesforce, then you distribute primarily, first and foremost through the Salesforce app exchange, because that's where they're living. That's where they're looking for solutions to problems. And that's the easiest way to sort of onboard them and catch them at that moment of pain.
Blake Bartlett:
Now that they've discovered the software, and you've distributed to them where they live, it needs to be extremely easy for them to get started. So software that had things that looked like the left, which requires humans from the software company in order for me, the end user, to use it, I hate that as an end-user, you hate that as an end user. It would be like if Amazon, you had to actually sign a contract every time you bought a product from Amazon, or you had to talk to a sales rep and they actually had to put the thing in the cart for you and press checkout. You would use Amazon a lot less, right? So use that same mindset to say, what is so annoying, what would be completely untenable for me as a user, as a consumer, and then build your software exactly that same way. Because again, we're building brand users.
Blake Bartlett:
So the call to action has request a demo, talk to sales. Immediately, not okay. You have to build self-serve. And then if the next step is all right, well, I want to start using the software, but I have to agree to a contract and get legal involved, or I have to fill out an order form. Even if it has DocuSign, it still is a pain in the butt, and the end users don't want to do it. And then if I move from great, now I'm using the software to, I have to configure the software, I have to get it implemented. It's going to require a customer success person because it's hard software to use. It's hard software to set up. Again, that's not friendly to end-users, and they're just not going to give you the time of day. No matter how great your customer success people are they don't have patience for it, and they're going to move on.
Blake Bartlett:
Then if after I get the thing set up, I asked to get trained. Then if I have issues, I have support tickets. All of these things are just friction, they're time, and people want something smooth and a fast path to the solution that they're looking for. So that's where you get the things on the right where the call to action looks a lot more like sign up. Or you might even have a single sign-on solution where, Hey, you use G suite. One-click. Now you're using this new product. You're in the Chrome web store. One click. Now you've installed the Chrome extension, and you're developing, or now you're utilizing new enterprise software, right? Extremely fast, extremely different. You're just accepting terms and conditions. You're not negotiating your contract. One click versus a back and forth that involves legal. Automated onboarding, whether that's built into your product natively, or you leverage a third-party platform to guide users through and help them get up the maturity curve.
Blake Bartlett:
Then once I'm digging deeper and trying to learn and understand, then there's documentation. That's really robust. There's a knowledge base that helps me. And if I have issues, and if I get stuck, then there's a community that I can lean on. Or there's in-app chat. Even if there's a person on the other side, it's native and it's directly in line, real-time asynchronous to my usage of the product. And maybe even some of that's being automated through a bot, right? So all of this stuff on the right, extremely friendly to end-users. All the stuff on the left, extremely unfriendly to end users.
Blake Bartlett:
So now that they've discovered the software has been distributed, where they live, it's been easy to get up and running and started. Now you actually have to deliver value to them before they hit the paywall. So again, if you have the paywall where you request a credit card or whatever it is before they have an aha moment where they've experienced value in the product, you're going to kill conversion rate and nobody's going to sign up for your product. Nobody's going to stay on for your product and sign up for the paid version of it. If you had to paywall after the aha moment, after that magic moment where I get value, then great, of course, I'm going to swipe the credit card.
Blake Bartlett:
It's very similar to, again, because we're end users, think about yourself when you download an app, personally, from the app store. How often do you download a 99 cent app where you have to pay for it upfront? Even though it's 99 cents, that's just a hurdle where you're like, "I'm not going to pay for it unless I get value out of it." So end-users of enterprise software are very, very similar. They want to see the value first before you ask them to pay. And if you do add value, then they'll happily swipe their credit card, and they'll stay on the platform for a long time. They'll promote you to all their friends, but you have to have that value delivery through the aha moment first, before they hit the paywall.
Blake Bartlett:
And then lastly, sales does have a role in product-led growth. Product-led growth is not anti sales. You just have to hire sales last. Everything starts with the product, as we see here, and then the product starts building and you get users. And then what do users need? I have an individual problem that maybe I wasn't able to get answered through the community, or maybe I wasn't able to get answered through the documentation. Well, I'm going to write, again, perhaps it is a support ticket at this point, because it's more complicated, or perhaps it's an in-app chat. But you're going to need support people who are going to help me with my issues. Then once the users expand to being teams, now those teams are going to need help and going to need to be enabled, which success tends to be the right role in order to enable those teams.
Blake Bartlett:
Once those teams expand, say, small teams become departments, and the departments become organizations, now, this is a large sale, right? Just in terms of dollar amount. They've probably already made the decision that they want to work with you, and they want to use your product, not somebody else's, but they're trying to figure out how exactly do I go from the $10,000 I'm spending now or the $20,000 I'm spending now to $200,000? That's not going to go on a credit card.
Blake Bartlett:
Now, I do have to involve my boss. I'm telling them which product we're using, but I still have to involve my boss, right? And then the boss has to go through legal, and procurement, and negotiate, and all this stuff. They ultimately want the same thing that you want, which is they want to use your software and more of it. You want them to use your software and more of it. So you're actually on the same side of the table. It's now no longer this confrontational sales, I'm going to try to negotiate and try to win. It's like, we both want the same thing. How can I act more like a consultant? How can I act almost like a Sherpa to help you on this journey to buy more of the software and to land at that destination that we both want, that I want and that you want, to land at, which is using more of my product and getting more value out of it, right? And that's the role that sales plays. So product leads and sales follows. So you hire sales last. That's really the approach for distribution to end users.
Blake Bartlett:
So that's product-led growth. You build a product for end users. You distribute the product to end users. You have that consistency. You're not mixing and matching. And then it leads you to that question of if that's what product-led growth is, do you want to be like these companies? I think we look at the IPO's that all of these companies have had, we look at the way that they've performed both as businesses, as well as public companies. And everybody wants to emulate them. Everybody's writing about how amazing these companies are. So I think it's pretty obvious. Yes, of course. You want to be like these companies. And they're all in on product-led growth.
Blake Bartlett:
Here's some more quotes just to wrap it up from each of these companies S-1s. Atlassian says that employees are increasingly empowered to bring your own software, leading to user-driven viral adoption of new software products. Sounds a lot like product-led growth, right? Zoom says, "As free hosts realize the benefits of our platform, they often subscribe to a paid plan to gain access to additional functionality." And Shopify says that the Shopify platform provides merchants with an intuitive user experience that requires no upfront training to implement and use. Merchants can set up their shop in less than 15 minutes. Slack says that people love using Slack, and many become advocates for wider use inside of their organizations. Twilio says, "We put a commercial transaction after the customer is experiencing success with our products. We call this inverting the traditional sales model." Sounds a lot like deliver value first before they hit the paywall, right? And lastly, Dropbox says that individuals as individuals increasingly choose their own tools at work, purchasing has become more decentralized.
Blake Bartlett:
So all of this stuff, it's very clear that this is all talking about the rise of the end user, the end-user era, building for the end user distributing to the end user, recognizing the power and the role of the end user, and making software purchasing decisions today. The end-user era is here. It's very, very clear. We're all recognizing this. Product-led grows is the answer, and you need to adapt.
Blake Bartlett:
That's it. OpenView, we're the product-led growth venture capital firm. Our mission is to improve people's working lives. That's why we exist. That's what we do. And the way that we do that is by investing in the best software products, and then driving product-led growth in those businesses, businesses like you see on the left with Datadog, and Expensify, and Calendly, and many others. So thank you very much. Build for the end user, distribute to the end user, and embrace product-led growth.
