By Shane Burgess
Introduction
In the last 2 years, there has been a marked shift in Private Equity investment in technology companies, away from B2C and into B2B – what we used to think of as enterprise software. At the same time, there have been some significant changes in how these companies behave, and how they grow.
Product-led growth is not a new thing but nowadays there is a growing trend for the growth motion for many B2B companies to have more in common with B2C than with the enterprise software companies of old. The sector is undergoing a seismic shift as many software companies adapt to a more product-led growth (PLG) strategy which focuses on the product itself as the primary driver of customer acquisition, expansion, and retention, rather than sales & marketing. This change is influencing the type of executive leadership required to succeed in this new model.
Defining PLG
In PLG companies the product itself serves as the main vehicle for acquiring, activating, and retaining customers. This approach leverages the product’s inherent value to drive user engagement and conversion, often through freemium models, self-service trials, and viral loops.
Several factors are contributing to the rise of PLG in enterprise software:
- Consumerisation of IT: There is an increasing expectation that business applications are as intuitive and user-friendly as consumer applications. This trend drives demand for products that can be easily adopted and scaled without extensive training or sales intervention.
- Shift in Buying Behaviour: Modern buyers prefer to try before they buy. They are more inclined to explore products through self-service trials and free tiers before making a purchasing decision.
- Data-Driven Decision Making: With the rise of analytics, companies can leverage user data to refine and enhance the product experience continuously, driving engagement and growth organically.
- AI: Increasingly being deployed to drive personalised recommendations, predictive analytics, dynamic pricing, automated support, and dynamic feedback
Our friends at Hubspot have produced some excellent content on this subject. https://blog.hubspot.com/service/product-led-growth
The Impact of PLG on Executive Leadership Hiring
The evolution to a product-led approach to growing your business necessitates a different set of skills and competencies among executive leaders. Traditional leadership roles are evolving to meet the very different demands of a PLG strategy.
The Key Leadership roles in a PLG Company are:
- Chief Product Officer (CPO)
- Role Evolution: The CPO’s role becomes central in a PLG strategy. They define the product vision, ensure user-centric design, and continuously iterate the product based on user feedback and data analytics. This role is broadening in scope and influence becoming, in many ways more of a GM or CGO.
- Required Skills: A deep understanding of user experience (UX) design, data analytics, and product management. They must also be adept at cross-functional collaboration, working closely with marketing, sales, and engineering teams.
- Chief Marketing Officer (CMO)
- Role Evolution: In a PLG framework, the CMO’s role shifts from traditional outbound marketing to a focus on product marketing and growth hacking. They leverage user data to drive engagement and conversion through targeted campaigns and in-product messaging. Data is at the centre of the flywheel in the new CMO office.
- Required Skills: In addition to proficiency in digital marketing, data analytics, and customer lifecycle management they should also have a strong grasp of content marketing and community building to foster user engagement and advocacy.
- Chief Revenue Officer (CRO)
- Role Evolution: The CRO in a PLG company must understand both sales and product dynamics. They are responsible for aligning the sales strategy with the product’s value proposition and ensuring seamless user experiences that drive conversions. The evolution of this role can be extreme – the CRO role at Hubspot was renamed ‘Inbound CRO’ reflecting a total change in orientation.
- Required Skills: Expertise in sales strategy, customer success, and data-driven decision making. They should be capable of leveraging product usage data to identify upsell and cross-sell opportunities.
- Data Science and Analytics Leaders
- Role Evolution: Leaders in data science and analytics become crucial in a PLG environment. They analyse user behaviour to provide actionable insights that inform product development and marketing strategies.
- Required Skills: Proficiency in data analysis, machine learning, and statistical modelling is essential. These leaders must also be skilled in translating complex data insights into strategic recommendations for product and marketing teams
- Chief AI Officer (CAIO)
- Role Evolution: A new role (it was only a matter of time) that is yet to be fully defined, and will vary widely in job content depending on the company.
- Required Skills: Robust technical knowledge and understanding of Gen AI combined with deep business understanding. Business first. Strong change manager & consensus builder. Good communicator. Strong grasp of compliance issues.
Areas for PLG Leaders to Develop
To thrive in a PLG-driven enterprise software market, leaders need to cultivate a new set of skills and attributes:
- User-Centric Mindset: Leaders must reframe their thinking to consider the user experience on the entire customer journey and continuously seek to understand and address user needs through product enhancements at every stage
- Data Literacy: Proficiency in data analytics is crucial for making informed decisions that drive product improvements and marketing strategies
- AI Proficiency: Already having a profound transformative effect, fluency in AI is absolutely essential
- Cross-Functional Collaboration: Effective leaders must break down silos and foster collaboration between product, marketing, sales, and engineering teams.
- Agility and Adaptability: The ability to quickly adapt to changing market conditions and user feedback is essential for maintaining a competitive edge
- Growth Mindset: It’s an over-used term but continuous learning and innovation is the key to driving product led growth
Conclusion
The increasing momentum of product-led growth as a key driver in enterprise software is a profound shift that is reshaping the software industry landscape. As many companies become less reliant on traditional sales teams, the role of executive leadership needs to evolve to meet the demands of this new approach. Change brings opportunity and leaders who can successfully navigate this transition by embracing user-centric design, AI and data-driven decision making, and cross-functional collaboration will thrive.
One final noteworthy point is that it feels that our software clients are more open than ever before to looking at first-time CEOs – especially those who have risen through the product function. The age of the sales led software CEO could be close to its end.