[00:00:00] Todd Olson: If you're not charging, you're asking someone for money, how the heck are you gonna understand if your product market fit well? You have to ask them something, and this whole concept of like, how sad would you be if you don't have something? It's a really, really good way of looking at it.

[00:00:21] Dan Saks: That was Todd Olson, co-founder and CEO of Pendo.

[00:00:25] A platform that

[00:00:26] Todd Olson: accelerates and deepens software at product

[00:00:28] Dan Saks: adoption. Todd Launch Pendo in October of 2013. The company has since raised over 200 million in venture capital. And landed more than 1500 customers. Pendo was also ranked number 26 on the inc 500 list. In 2020,

[00:00:45] Todd's passion for helping digital teams build great products, led him to write his first book in 2020, titled "The Product Led Organization: Drive Growth by Putting Product at the Center of Your Customer Experience". Keep listening to hear why companies can become much more efficient, communicative, and better at adopting to the ever changing digital landscape by focusing on product- led growth. This is Daniel Saks, president of App Direct. And it's time to decode product- led growth and optimize your customer experience by putting your product at the center.

[00:01:25] Welcome to Decoding Digital, a podcast for innovators looking to thrive in the digital economy. I'm your host, Daniel Saks, and I'll sit down with other founders, CEOs, and change makers to decode the trends that are transforming the way we work. Let's decode

[00:01:48] Todd, welcome to

[00:01:49] Todd Olson: decoding Digital. It's great to be here. Thanks for having

[00:01:51] Dan Saks: me. Let's jump in. I've been really excited to speak with you because we use Pendo as part of our product led journey and transformation, and it's really been indispensable for us to get more clarity on how our customers interact with our product and really help guide them along the journey.

[00:02:07] Would love to get a sense from you of what your founding vision was for Pendo and how you came about

[00:02:12] product-led growth.

[00:02:14] Todd Olson: Great, thank you. So Pendo came from my prior experience, the inspiration for it. Prior to this I was the head of product at a software service company. I myself wanted to get good insights to how people are using our product to guide future development and realized it was challenging.

[00:02:30] So the inspiration was, can we have a very easy to use solution that we drop in and it captures everything we need to know about our products to help inform whether people are getting value and then how to take things forward. The second key insight was I started realizing that people weren't taking advantage of everything we were building.

[00:02:47] So we started to find ways that we could communicate with users in product so that we could nudge them along, educate them, onboard them, and honestly, in a product led way, ensure we guide them to getting better outcomes. And that's essentially the inspiration for Pendo.

[00:03:04] Dan Saks: So let's start with your definition of product-led growth.

[00:03:08] Todd Olson: Well, first off, when I think about what it means to be product- led, I think about companies that put product at the center of the customer experience. The product- led growth is usually what I would define as like a subset of this concept of being product- led and product- led growth companies are ones where their go to market function, leverage the product to obtain and convert customers very, very simply.

[00:03:29] So it's all about everything from top of the funnel up through a conversion event. That's traditionally what's known as product- led growth, and you see a lot of frictionless sales cycles. Freemium models often are included within that, but that's kind of how we think about product- led growth.

[00:03:47] Dan Saks: What are some great examples that you saw that were just phenomenal examples of product led growth? Maybe before you started Pendo?

[00:03:55] Todd Olson: I mean, look, there's all these traditional ones of product- led growth that we think about, like the Dropboxes and the Boxes. And obviously on the consumer side, there's a lot of product- led growth being done on the consumer side. I think what I've been more passionate about is like, how do we work with B2B companies, specifically B2B SaaS companies to leverage product- led growth?

[00:04:14] And you know, even at my last company, we had a lightweight version of our product for 10 teams or less. And what you find is even selling to larger enterprises, you'd get four to five teams using a software product that weren't talking to each other. So that's an area where it's an interesting hybrid product like growth model because if you sign up a bunch of hybrid little teams and your sales team notices, wow, we've got six teams from this huge company using our product, it creates an opportunity or what we would now call a product qualified lead.

[00:04:47] To go in, talk to those five disparate teams and see there's an opportunity to upsell some organizational plan or subscription to them, consolidate billing, things like that. So I experienced it firsthand myself through my last company, but I think there's been a lot of companies. Zoom's another great example.

[00:05:02] MailChimp's a great example. There's a lot of great examples historically that have leveraged this technique to drive more growth.

[00:05:10] So I

[00:05:10] Dan Saks: know in your book the product led organization you speak to both the qualitative and the quantitative aspects of product led growth. Can you expand a little bit more on what some of the key metrics would be when you're kicking off a product- led growth initiative?

[00:05:24] Todd Olson: We think about quantitative and qualitative. I think the other nuance, I also pick on what's a leading indicator and what's a lagging indicator, right? So I mean obviously lagging indicators are like revenue, conversion. I think we all know what those are and you know, I think a lot of us know the conversion percentage.

[00:05:41] We can look at like top of funnel and like there's generally some sort of funnel that we're driving through our business through product-led growth. I think the more interesting data is what are some of the early indicators that are good signals for when a user and or a customer is a good candidate to convert, and how do we drive people to perform those behaviors?

[00:06:03] So how do we measure things like usage in certain areas, or maybe it's how many times they come back to the product, or maybe it's time in app that's an early indicator. But I think all of us in like growth lead function, we're searching for what are those aha moments or what are those signals to help us understand that this user and or customer is a good candidate to convert?

[00:06:26] Then once we figure that out, we can do a whole bunch of work to help drive people to that experience. And on the qualitative side, look, I think, you know, there's a lot of great polling techniques that people use. One of the ones that highlight the book, which I think it's worth noting here cause it's really popularized when this email app superhuman came out and is this concept.

[00:06:48] They didn't invent it, they just barred it from someone else as well. But it's like, how unhappy would you be if you parted ways with this product and it's a measurement. And then obviously if you don't care, that's not product market fit, but they, they kind of call this product market fit metric. And I think for early stage business, this is a really, really interesting qualitative measure where you're going specifically in advance of if you're charging.

[00:07:11] So if you're not charging, you're asking someone for money, how the heck are you gonna understand if you have product market fit? Well, you have to ask them something. And this whole concept of like, how sad would you be if you don't have something? It's a really, really good way of looking at it.

[00:07:25] Dan Saks: So let's start back at the top of the funnel.

[00:07:26] So you mentioned product qualified leads. In an organization that hasn't yet been product- led, they maybe had people going outbound or maybe they had a sales development team doing cold calling, or maybe they had some form of even inbound marketing. Where marketing could give more intelligence around what leads would be qualified.

[00:07:46] But what does an organization need to do differently in order to gauge a product qualified lead? And what does Pendo do to help that?

[00:07:55] Todd Olson: Well, product qualified leads are just a like next evolution of this whole concept of marketing qualified leads. You know, if you think about the concept, the concept is, an MQL is something where this prospect's engaging with your business, whether it's everything from going to webinars, you know, attending physical events, to reading white papers, et cetera, these are all basically buying signals.

[00:08:18] It's intent data, essentially. What's their intent to engage with you as a business? I think product qualified leads ups the ante a little bit more because one could argue it's a better signal of how interested someone is. The cool thing about, I think all of these areas, there's a spectrum, right? What I call like light to heavier on the product- led spectrum. Light would be, Hey, I have an online product demo or product tour.

[00:08:47] Think of this as like product- led sales engineer. You know? It's like you can have a sales engineer give you a demo or you can have some like real, when I say demo, I mean it's the real product. There's a whole bunch of startups being created in this space, like three or four, just off the top of my head.

[00:09:02] We use one, and it's again, a lighter PQL type. It's someone playing with our product, touching different buttons, going to areas of it, messing around with it. It's all faked data or dummy data as we call it, but it's a pretty decent signal of how interested someone is in our product and in a case like that, again, they're not in your actual product or on your website.

[00:09:25] They are traditional means like following up via email, drip campaigns, or even an SDR reaching out. It's pretty typical, and so it'd be treated more like an MQL in our model. Now, flip aside, go to the other spectrum very heavy, where someone's like actively engaged in either a free trial or a free version of your product.

[00:09:43] Then you're looking at how heavily are they using this thing and what you're trying to understand. If someone who's like using it every single day of their lives, Maybe, maybe they'd be a good candidate for a paid version of the product because maybe it's missing out in certain features, or maybe they want, you know, better level of support.

[00:10:03] In that case, the way you engage with them may be very different. Now they've chosen to engage with your company, not via a human. They're coming in through the product. So in that case, maybe use in product messaging to say, Hey, we notice you're in this product every single day. Would you like more? Hey, maybe you're missing this feature.

[00:10:21] Would you like us to unlock it for you? Or would you like this extra level of support? So I think there's a way to engage that individual just short of having a human reach out that would be really, really appropriate given how they engage in your business.

[00:10:35] Dan Saks: Do you believe the product- led mentality will replace salespeople and the need for the human interaction?

[00:10:42] Todd Olson: I think a lot of these techniques, free people up to focus on higher value activities. That's how I think it should be thought of. I mean, if you've got a group of humans who are selling to startups that are paying you. Very, very small amounts. Maybe it's more economical for your business to not have a human actual accountant.

[00:11:01] You take that human and you move that human up market to talk to bigger companies where it's more economical and actually more relevant, right? So I think there should be certain types of companies that are selling to regulated industries or really large businesses, or having to deal with like procurement teams or like heavy security situations.

[00:11:21] That it's just gonna take a while for that to be fully product led. And I think there's always gonna be some opportunity for a human to engage. So I think, I don't see this necessarily as replacing, I see as more as augmenting and freeing humans up to do higher value activities. You see the same with news is that people are talking about product- led growth is way to drive more efficiency in their business.

[00:11:43] I think it's absolutely can be think thought of in that vain.

[00:11:47] Dan Saks: One of the things that we've done at AppDirect recently is shifted from an enterprise led go to market pre pandemic, where majority of our sales was dependent on in person prospecting, at conferences, hosting our own conferences, wining and dining, very high touch enterprise sales, where there was actually very little visibility into the digital touch points the customer until after the contract was signed.

[00:12:08] And over the last, uh, three years, we've undergone a product- led transformation. And I would say the biggest, uh, surprise that we had was how much resistance from our sales team we had at the beginning by doing things like having a self-service product or putting pricing transparent on the website. And initially our sales people were some of the biggest detractors of the product like growth model, and kind of wanted it to stop or be ripped out.

[00:12:32] What we found is that the biggest detractors have now turned into the biggest supporters because they're much more effective, they're much more efficient, they're able to be more consultative. And instead of being someone who's facilitating a transaction and being kind of the bad cop negotiating, they're now the thought leader and consultative person to help guide them through the product how to get the right business objectives.

[00:12:56] And because of that consultative approach, they've been able to sell much more based on value. And that's augmented their ability to maintain strong pricing. And it's made it much easier to compete next to other competition. So we found that while the cultural transformation was very hard, the end outcome was, you know, positive for all, you know, especially the sales team.

[00:13:20] What advice do you give when you see companies that are undergoing that transformation and how do you help manage the cultural shift that's required?

[00:13:29] Todd Olson: Yeah, I've seen the exact same thing and I could not have said it better myself. And at the end of the day, you're freeing people up to be more consultative, connective value, ultimately gonna deal with better deal values.

[00:13:41] Look, I think you need strong leadership to undergo any sort of change. So, you know, a couple things that I see as a big pitfall and embark us is that if the sales team has too resistant, often organizations neuter the product. Some of our investors called it like cripple wear, like are you shipping cripple wear? And what that means is that this product that you're shipping feels like an incomplete product.

[00:14:06] If it feels incomplete, product-led growth's never gonna work. If you get into this thing and the experience is awful and it feels like arbitrarily limited or like lots of pay walls up and just pisses people off and they leave, if it's a good experience. But yet has some necessary, you know, levels of paywalls, et cetera, tiers, however folks have it set up.

[00:14:28] It ultimately could be a big help for sales because you're getting people in, you're getting people kind of hooked on the product, and then it can be a conversation of how does this fit your business or your use cases. You have the only consultative pieces, but I think what I often see. Helping people understand that one needs to be a great product.

[00:14:48] If it's a great product, it's much more likely to work. And two, understand and kind of help people work through that transition. In some cases, you know, it could be as simple as comp related. I often coach teams is like, there's a lot of conversation around saving money at first, blah, blah, blah. Double comp, if that's like the issue, like look, try to figure out a way to get past the organizational change.

[00:15:10] You can always make changes later, but try to take away all the potential negative perception you have around this to get it off the ground. Cause once it's off the ground, people start seeing success, then you can start making changes to drive more efficiency.

[00:15:24] Dan Saks: And you mentioned the efficiency of PLG and as a subset of B2B SaaS, but we've definitely seen in recent IPOs or other private companies is that, you know, faster growing, more efficient companies tend to be product led. And it's really not just about that initial sales funnel conversion with product qualified leads. What we've found is that the benefit of being product led and self-service is that clients need to engage less in manual and one off requests around support or our product team now treats any interaction as a bug in some ways and really tries to say, okay, how do we create a more streamlined experience?

[00:16:05] So it's really created a full shift in the mindset of our organization. And what we also found is that it really helped people collaborate better across teams. Whereas before, you know, product was on one side and sales was on the other, and you had sales engineering in between your product marketing, what we've seen is like really team's now emerging around solving customer friction points and collaborating around product requests.

[00:16:28] So I found it to be a really great mechanism for collaboration. What have you seen in terms of the role of the product organization and how that may need to shift in this environment?

[00:16:40] Todd Olson: I think product organizations, by default, historically speaking, I've always been one where I would classify it as a sphere of influence, not sphere of control type role, like look, Former head of product.

[00:16:51] I never had like tons of headcount. Like product management teams are relatively lean, rather I power, so to speak, in the organization or head of products, powers their ability to influence others, influence sales, influence marketing, influence other teams. So that's why I actually think growth works there is that by their role, the best product people, which is fantastic at influence, it means you're gonna have to work very, very well, cross-functionally and have to influence people.

[00:17:19] Yeah, I think some of your examples are really interesting ones we've seen across our customer base, like support's a great one. How do I reduce support tickets? That's where the pain may be felt in the support org, but then that support org, that changes in the product need to work with the product team to make sure they're creating a cohesive customer experience.

[00:17:38] And I think the other thing is that within a product team, there needs to be really, really good communication. Cause the last thing you want is like some growth team trying to drive people top of funnel in and convert them while another team is trying to do self-service and somehow they collide and they're just constantly messaging users all the time and just confusing 'em.

[00:17:58] So there needs to be this more holistic kind of user journey idea to make sure that whatever the user's seeing is just an overarching stitch together experience. So I think product teams need to make sure they step back and look holistically at what's going on. Cause like what you'll see is people get excited, oh my gosh, I could use the product to do this.

[00:18:19] Or you know, marketing team is doing some conference and they realize that if they message users and app, they're gonna get 15% more participants than if they do an email campaign. Now you got marketing using it, you tech support team using it. You've got your growth team using it. Well, what's that overarching experience feel like?

[00:18:36] Like how do you deal with conflicts between them? How do you prioritize which one of those messages are seen when by which users? Like, I think you need to think a little bit differently about the experience and again, make sure someone owns the overall thing. So I think that's another important thing for product teams to think about.

[00:18:54] Dan Saks: With the popularity of a lean startup methodology, I feel like a lot of businesses are just pushing agile and lean and get it out and ship it, but there's less consideration into how things scale over time. And one of the things that we found is that you. Ship a feature of many features and then just keep focusing all your attention on the new features that you ship.

[00:19:14] But that's different than thinking about adoption and how do you work around the failure path, for example. So what's your targeted sla? And if a scenario doesn't work the way it's expected, you know, how does your team proactively think about that in advance versus waiting for a support ticket to be created?

[00:19:30] Do you get a sense of like the trade off between move fast and break things versus making sure that the product that gets shipped initially can be adopted and is properly documented and has great guides and a great experience?

[00:19:43] Todd Olson: I think a lot depends on what it is you're building, right? So like there's something that you're building at pretty known entities, like it's not very controversial.

[00:19:51] It's fairly obvious what you need to build. I mean, things like, you know, SSO, like that's just a generic feature. Most companies have things like that. Or if you didn't have it when you're tiny, you're eventually gonna need it when you're larger. If you're dealing with enterprises, you need to experiment with SSO.

[00:20:05] You check the inbox, , so that one, get it out there, check the box, you're not gonna get credit for having the best SSO in the world typically. Like that's one where it's table stakes feature. That's another way I'll frame that conversation. And with table stakes, just get it out the door. If it's a feature in your product that is very differentiating, like you believe, it sets you apart from everyone else and you believe it's one of the core reasons that people use your product, and that's one where I think there's really value in driving a lot of experimentation.

[00:20:37] There's value in collecting feedback. There's value in not only shipping. But then the leaving space in your roadmap to shipping for what we call fast feedback or follow up work, where we iterate for potentially sprints, months, quarters until we feel like we've nailed it.

[00:20:54] There's been a few features in our company's history where we're like, we're gonna deliver this thing. We're gonna get out there. We know it's gonna be early, but we're gonna leave. We're gonna reserve capacity to iterate until we feel like we've crushed this thing. Because this is core to the experience in our product and core to who we are. We don't do that with everything, but for some things I think there's a lot of value in making sure you stick with it until it's done.

[00:21:16] And like we've used a qualitative measure and just asks people on. I mean, maybe not weekly, but the last time we did this, I think biweekly, we were asking people and like we were shipping fast, we didn't declare victory until we were getting kind of on a Laker scale, fours or fives, like from everyone we're asking.

[00:21:35] And then we declared done and we moved on to the next thing. But it took us months to achieve that just by listening.

[00:21:42] Dan Saks: As a leader of an organization like the last couple years, there's a lot that you can't control, right? There's unexpected inflation, pandemic, war, recession. What do you do in terms of thinking about those winning strategies and how do you leave agility for things that you maybe couldn't plan for?

[00:21:59] Todd Olson: Well, it's also why you check in every quarter. So like take the pandemic, which is a really good example. We had a plan for the year and. The way our quarter rolled, I mean, I guess what March is when like 2020 is when most of the effect of the pandemic started to take hold with Lockdowns, et cetera. That was about mid-quarter for us.

[00:22:18] So when we came to our Q2 planning, which was, you know, basically in April, 2020, we had a large conversation like, look, the world just changed. It literally just changed what is relevant on our model and what is not relevant. And we adjusted accordingly. And I think that's the advantage of while you have annual plans checking in regularly to make sure that it reflects the reality of the situation is really smart.

[00:22:48] Case in point, right now, inflation's a piece of it, but like the market is fundamentally changed. Like you look at valuations are down, in many cases, around 50% from November of last year till now. And more important, The way high growth businesses are being valued has changed. So, you know, we've kind of shifted from what would be described as kind of a growth at all cost strategy being rewarded to more efficient growth.

[00:23:17] Okay, well what does that mean? That means our plan, which was built for that last economy, needs to be adjusted. And if it isn't adjusted, it's gonna leave us in a potentially riskier position than if we adjust. Different companies will choose to handle this situation differently. And that's totally up to them.

[00:23:35] But I'm kind of the mindset of the world's changed. This is the reason we have different planning cycles. We should be adjusting, we should be shifting. And so we are, we're actually going through that change now. So we had our planning session two weeks ago. We've started to cascade changes to our plans.

[00:23:50] They're not major changes, but some of the things we're doing is less relevant today than it was six months ago. That's okay. That's okay. So I think part of the reason I love cadence and planning is that I know our system will catch these things. I don't stress around, oh crap, the world just changed. What do I do now?

[00:24:09] I was like, oh, well planning's coming up in a few weeks. We'll talk about that . You know, it's like, I think if you have structure and discipline in your business, that structure and discipline will accommodate all of these changes to the point where, I don't need to schedule a bunch of one off meetings and do a bunch of changes like it's going to happen part of the normal course in cadence.

[00:24:30] And I think that honestly makes me a little less stressed. No change is hard. We have to manage it all through it, but you know, as long as I know it's gonna happen, I think generally speaking, I think it's a little bit easier.

[00:24:43] So bringing the conversation full circle, we started by talking about how product led growth can help you, a revenue driver and a customer experience improver, but it can also help with efficiency.

[00:24:52] Dan Saks: And in the world where valuations are now shifting from growth at all costs to focus on efficiency, how can people use Pendo or your community and your strategies to get a better hold of their efficiency?

[00:25:06] Todd Olson: I think every company should be thinking about ways in which they can leverage product led techniques and not only deliver a better customer experience, but deliver a more efficient product experience.

[00:25:15] A lot of companies will be like, well, we just can't do a frame. You know, they don't wanna deal with that change We talked about with sales organizations and everything else, because the usually there can be quite a bit of resistance challenge with it, but maybe start with the post-sales experience or start with the support experience.

[00:25:31] The reality is, If you can find ways to reduce support buyin by 20%, you know, that's significant. That will save the business money over time. Oh, by the way, none of your customers actually like reaching out and having to talk to your support organization. So I would say pretty much every company should be thinking about ways in which to become more efficient using product led techniques.

[00:25:52] And again, if not in the top of the funnel, do it post-sale transaction to make sure you're delivering a great experience there.

[00:26:00] Dan Saks: Are there any resources or people or companies you'd wanna point people to for good examples of this?

[00:26:06] Todd Olson: Our website has entire product- led hub. So if you go to Pendo slash product led, you'll see a whole set of resources around it.

[00:26:14] We have, you've already cited that I have a book on this topic we have and a company box that we can send that works through exercises with teams. But I think, you know, as I said earlier, there's a spectrum of things you. Put an online demo on your website, which is a great way to start doing more product led things, which will drive more efficiencies for your business.

[00:26:33] You don't have to kind of go full tilt in any one direction. You can start incrementally, but I think there's a lot of case studies around companies that have become more resilient and stronger leveraging product- led techniques, and if you have done it now, is a really good.

[00:26:49] Dan Saks: Great. Well, Todd, thank you so much for joining. It was super insightful and definitely inspirational for many companies on their journey.

[00:26:56] Todd Olson: Awesome. Thank you.

[00:27:01] Dan Saks: Thanks for listening to Decoding Digital. Make sure you never miss an episode by subscribing to the show in your favorite podcast player. To learn more, visit decoding digital.com. Until next time.