This is the first post in our Product Innovator Series exploring what it takes for businesses to survive and thrive in the product-led era.
Amplitude was founded on the belief that companies are about to enter a new era. And if you’ve been paying attention to the leaders of the world’s largest companies, you might share in this belief as well.
Leaders like Herbert Hainer, who led the transition of Adidas from an apparel company to using digital to drive their mission of supporting all athletes. This was one of many decisions that led to a 10x growth in Adidas’ market cap over his tenure. Or Enrique Beltranena, CEO of Volaris, who claimed that “in 5-10 years Volaris will be a digital operation that flies airplanes.” Or Bob Iger, who which recently announced that Disney will launch a direct to consumer service to compete with the likes of Netflix and others.
All of these companies exemplify this new era that we’re entering - the era of the product-led company. It’s a transition from a time when sales and marketing-led companies ruled the world.
Let’s dial the clock back 30 years - If you wanted to buy something back in the 1980s, your only option was to speak to a salesperson who was knowledgeable enough to teach you about the latest and greatest. Sales was really the only department in a company that could be held accountable to business outcomes. And what about the product team?? They were using the same manufacturing techniques that Henry Ford created at the beginning of the 20th century: waterfall “assembly line” development cycles packaged up onto physical disks. And the marketing team? They lived by the old adage, “Half the money I spend on advertising is wasted, I just don’t know which half.”
But then online came along and with it, a new software distribution model emerged (SaaS). And now we could measure things. We could hold Marketing accountable to business outcomes. But the products being developed, the websites and applications, were essentially marketing tools – glorified digital brochures. Product and Engineering teams were responsible for pushing new releases out the door, but it was Marketing’s job to drive growth and engagement. Product and Engineering may have created the websites of the 1990s and 2000s, but Marketing owned them.
Today, however, websites and apps are the product. And this isn’t just in tech. All businesses are becoming digital product companies, and modern product teams are increasingly being recognized as critical drivers of revenue.
Take Peloton, an Amplitude customer. In 2015, they were lauded as the best cardio machine on the planet by Men’s Fitness, and yet their CEOs response was: “who cares?” Why? Because they’re really a tech company disguised as a cycling brand. Yes, they sell exercise equipment, but what they really sell is an experience.
They sell fitness at your fingertips. And they control every touchpoint of the consumer journey, from the purchase, to the exercise classes done with that bike. By being able to understand, learn and react to the needs of their customers, they’ve sustained 99% monthly retention and an expected 250,000 subscribers by the beginning of next year.
Imagine being a traditional exercise equipment manufacturer and competing with that. You can’t unless you become product-led.
And the companies that are leading the charge into this new era are doing exceedingly well. Just take a look at some of these headlines:
All of these companies are changing the game. And they’re doing it by being product-led. So what does it mean to be product-led?
Product is now your distribution channel. To learn about your product, people read reviews from other users, or just try it themselves. Instead of spending hours researching upfront, they’re using the product upfront. The buying decision is no longer disconnected from the usage of the product. The freemium model that was made successful in gaming has spread to almost every vertical, from consumer to B2B. If you’re not thinking about how to use product as your distribution channel, I guarantee you that your competitors are.
Product is now your competitive advantage. In today’s era, barriers to entry are extremely low and the number of competitors has exploded almost exponentially. You can’t rely on someone using your product just because they (or someone else) bought it. As Expensify CEO David Barrett said, “Our users outnumber the buyers 100:1. They are the ones with the power.” In the product-led era, lock-in no longer exists and retention is king.
Product is now your driver of customer loyalty. Consumer loyalty to brands is at an all-time low. Instead, in the product-led era, consumers are loyal to the best experience. And if you’re not continually delivering on that experience you’ll lose. No industry is safe from this.
Well, we can look at what companies like Facebook, Amazon and Tesla have in common. Speed and agility.
Speed and agility is what leads to building a Great Product. As Charles Darwin put it, “It is not the most intellectual of the species that survives; it is not the strongest that survives; but the one that is best able to adapt and adjust to the changing environment.”
So if maintaining agility is so critical, why aren’t all companies doing it?? Because they can’t. The majority of their management techniques were built for a bygone era when planning, deliberation and predictability were highly valued. And so they struggle becoming product-led.
Best-in-class companies flip these reasons on their head. They employ a new way of thinking. They observe, orient, decide and act.
They interact with their customers directly. They bring the voice of the user right into the heart of decision-making at every stage of the process. To do that, they work directly with the customer instead of outsourcing to a centralized research department and make sure that the product team is the expert on the customer.
They use data to inform product decisions, not validate decisions they’ve already made. They acknowledge that while you cannot substitute vision with data, you can better understand customer needs and test hypotheses about what customers want by utilizing data.
For example, Instacart, an Amplitude customer, doesn’t measure success by looking at vanity metrics like app opens or sessions started. Instead, they take the time to research and define an event that represents a user truly getting value out of their product, what we call the critical event. They then use this metric – which for Instacart is making a purchase – to measure engagement.
They make sure those closest to the customer - those that typically have the best understanding of the data - have the power to act and react to customer understanding.
Leadership creates this autonomy by ensuring alignment around vision, not direction. They set the framework, and then cascade that down to each team, but give them the autonomy to figure out how they will achieve that vision.
Teams are optimized for agility: they can iterate quickly because they have access to the data to quickly prove what is and isn’t working.
We’ve seen product-led orgs create autonomy by changing their product development processes to a “Pod” or “Squad” structure, popularized by the Spotify product development team. The methodology organizes product development teams into group of people called squads. Squads are united by a shared view of the customer and common definition of success, like engagement or retention. These squads roll up into bigger groups called tribes, which focus on end-to-end business outcomes, forcing a broader picture on all team members.
The analytics team at YellowPages takes this setup a step further by using Amplitude to empower squads to answer questions directly without relying on others. This has reduced bottlenecks, increased their pace of learning and ultimately enabled a 100-year-old company to move from quarterly releases to a biweekly release cadence.
Instead of following a strict release schedule, team members are held mutually accountable to an outcome. This reduces the finger pointing that can occur between siloed organizations like product and engineering and drives to a collective goal.
That goal is rooted in business objectives, not things like sprint points completed, lines of code shipped or number of features delivered.
So what are you waiting for? Are you going to adapt to the changing environment, or are you going to follow the path of half of the Fortune 500 and fail to evolve?
Obsess about the customer and go beyond vanity metrics to understand their entire customer’s journey.
Decentralize decision making to empower those closest to the customer to make product decisions and have the agility to ship great product fast.
Interested in learning more? We’d love to talk with you about what it takes to survive in this new product-led era and how Amplitude can help. Get in touch or leave a comment.
Editor’s note: This is the first post in our Product Innovator Series exploring what it takes for businesses to survive and thrive in the product-led era. If you’d like us to take on a particular topic under this theme, we’d love to hear from you. Please leave a comment below.
I often talk about how having too much furniture in my house or more clothing than lasts me one wash feels wasteful and unnecessary to me. I get a lot of anxiety when i walk into my house and see things in there that i haven't used at any point in the last week or two. It's why i don't own an umbrella, or a raincoat, or a fan, or a hairdryer, or any kitchen appliances, or whatever. When it is cold, i am cold. When it is wet, i am wet. When it is hot, i am hot. If i can't cook a meal with a pot and a pan and a knife, it is too elaborate. But that's all just garden variety "simple living", something that is now trendy enough amongst Instagrammers and Mediumbloggers that you can read a hundred other treatises. Let's talk about stuff.
Stuff is not utilitarian and does not pretend to be. No one buys an ornamental teapot and plans to use it to serve tea. Stuff is what people surround themselves with because they enjoy buying things, they enjoy receiving gifts, they enjoy tchotchkes that give their home character and mementos that remind them of where they've been. Stuff is the enemy of freedom. Furniture and clothes and appliances can all be passed on to other people who will use them, but stuff has no value to anyone besides you. The older you get, the more stuff you amass. And each time it makes moving harder.
From when i was very young, because our family moved a lot, i learned not to collect a lot of stuff. I went through purges where i would throw away all my doodles and letters and photos and worthless knickknacks. Like, who wants to transport all that garbage internationally? Who cares? I lived like that for years, and every now and then i would think back to something that happened to me as a kid, and i realized i didn't have the odds and ends that would trigger memories any more. Even at the age of 20, my childhood was drifting away.
There was a moment during my relationship with T when she was rummaging through a "memory box" of hers and was able to share detailed anecdotes from when she was 5 or 6 years old - maybe even younger. I don't remember exactly how the conversation proceeded, but i do recall coming out of it with the sense that she pitied me for not having any connection to my past - that it was something sad and unfortunate. I resolved then to start retaining stuff and stop with the purges. I would appreciate it in 5 years, in 10 years, right?
Wrong. I mean, it's nice to have memories, but it's nicer to be free. I still feel bad about the boxes of stuff i left with a friend in Toronto almost 4 years ago. She has since moved to a different city dragging my shit with her, but i haven't missed it at all. She has my CD collection, some of which i ripped beforehand, but a good chunk of which i didn't and haven't missed. She has my cuddly toys, some of which are from my earliest childhood and kept me company through lots of hard times. She has my books that i tried to donate but couldn't find anyone willing to pick up. But mostly she has about 15 years worth of gifts and journals and cards and trinkets i denied myself the liberty of purging because, you know, they might be meaningful or something. Yet, here i am 4 years later and i cannot for the life of me remember what any of them are. All they bring me is guilt (for filling up my friend's storage room) and anxiety (because i know i have to get back to Canada at some point to go through it all).
What have we got here? A huge stack of random phone numbers, track IDs and other drunken notes written by people i met in dive bars and nightclubs all round the world. Some flyers and stickers for parties i went to. Wristbands for Garbicz festival. Pack of cigarettes branded for Katerholzig nightclub. A pinecone from halfway up the Sierra Madre Oriental. Chestnuts from i can't remember where, but someone gave them to me. A pit from some kind of strange fruit a Sudanese guy gave me. An ornamental teacup my dad inexplicably gave me. A Narcotics Anonymous keychain from my ex that i half keep around half as a joke and half as a reminder to remain sober from time to time. A bottle cap from a bar in Detroit. A plastic ball from the ball pit at the Katerholzig closing. A rubber ducky from i think the NYE shenanigans the year after. Some carvings from Namibia. A St Thérèse de Lisieux chain i still have from when i was with T ~15 years ago. A freakin business card of a bookstore i visited in Berkeley when i was like 17 or something (never left my wallet).
Okay, so i do kinda like having that stuff, when i take the time to look at it. And for 4 years worth of stuff this is reasonably portable. Maybe the right thing to do is just keep whittling away the things that don't matter any more. Before i took this photo i X-ed out a few things - some hairclip i was either given or found somewhere that reminded me of a night or place i no longer remember what it was, various maps and brochures i picked up in the towns i visited across America last year... I can still talk or laugh about what's left.
This is the point where a better writer would go back and rewrite all the paragraphs before i took the photo to support my conclusion that a little bit of stuff is good. But i am not much of a writer, and i need to have a shower before heading out to meet my mom who is in town. So i will stop here. I do want to reflect on this more in the coming days, though. I'm sure i will. Packing your whole life into a bag you can carry on your back tends to provoke this sort of musing.