This week I talked to a technology company that has a successful product-led growth strategy. They want to move into legal.
I had…concerns.
For reasons that have been difficult to articulate, I’ve harbored doubts about “build it and they will come” working in the legal industry. When this company asked me for advice, it forced me to explain those concerns, and now I want to think through them with you.
So, here are two questions that will hopefully give you some go-to-market options as we answer them:
If product-led isn’t working in legal, are we just doing it wrong? Or,
Is legal just a terrible environment for a product-led growth?
The first possibility is rooted in ignorance; the second in special-ness. While we (including me) too often assume special-ness, ignorance may be the issue.
Let’s work through it.
What is Product-Led Growth?
“Build it and they will come,” right?
It’s an alluring promise. As so many legaltech and alternative legal services companies come out of a founder scratching his or her own itch, it’s a promise with some legs.
“I have this problem and it itches and I hate it and…technology!” And then we wait for everyone to buy it.
You might have imagined a dreamworld in which a lawyer on a large team sees your product then becomes a brand advocate, spreading the good word until everyone she comes in contact with jumps on the hype train.
As appealing as that illusion is, product-led growth is more disciplined than dreaming.
Advocates for PLG have tried to standardize a definition for the strategy. Here’s one that works:
“Product-led growth (PLG) is a business methodology in which user acquisition, expansion, conversion, and retention are all driven primarily by the product itself. It creates company-wide alignment across teams—from engineering to sales and marketing—around the product as the largest source of sustainable, scalable business growth.”
This definition underscores PLG as not simply a prospecting process, but a development methodology inside a company.
As Hubspot’s Kieran Flanagan put it, “Product-led growth is really the rise of cross-functional.”
According to Flanagan, product development should obsess over viral loops that encourage users to spread the product. This is the traditional view of PLG. Common examples include Hotmail’s use of a sign up link at the bottom of every email, Dropbox using shared file folders, and Slack’s invite system.
This aspect of PLG focuses on how users spread the word. The idea is to ship a product worth talking about and incentivize/systematize the talking. When that’s done well, delivering known value before asking for any money, the user will test and buy without salespeople in the middle.
But Flanagan argues that PLG should change how the company builds as well as how it sells. Cross-functional teams center on one metric and work together to align the things they make and the things they say.
Seen this way, product-led growth is not “build it and they will come,” it is a multidisciplinary approach to development. But there are costs to this approach.
Why Product-led Growth is So Hard
If you can generate demand by delivering a great product to the end user without asking for money up front, that’ll drive the engine, right? So why don’t we all do that?
I think it’s an issue of marginal cost and Lean Startup folklore.
If you’ve been in business long, you’ve probably read Eric Reis’s book The Lean Startup. While allowing that Reis provided more nuance in his book, the philosophy is generally summed up like this:
You should only make things people want, so develop a hypothesis of what people might want, develop the cheapest version of that thing, then let people try it. They’ll give you feedback you can use to improve the thing over time.
But how can you use this “Minimum Viable Product” (MVP) approach if you’re doing product-led growth?
The key assumption behind PLG is that you deliver usable value to an end user before they’ve given you any value in return. There’s no sales pitch because there’s no risk: the user will try your thing and find it so valuable that she’s willing to pay for it.
This is not an MVP setup.
You have to invest a lot of energy early in both product development and go-to-market planning in order to win at PLG. That creates a marginal cost issue.
Although profit margins become amazing once you’ve sold the 10th product—you’ve already developed the thing and you aren’t using transactional costs like salespeople to make the buy happen—those first few sales are EXPENSIVE.
PLG requires a premium product that’s worth upgrading to, a free product that’s good enough to stop people in their tracks, and a distribution model that gets the free product in front of people. That can easily be a years-long investment before capital returns are even possible.
It’s easy to see why unprofitable, VC-backed companies rule the B2C world. The marginal cost hill is a steep one to climb in PLG, but the returns are amazing on the other side of that hump.
So what about legal B2B? Can we create something so cool, so well-funded, and so well-distributed that PLG can succeed?
Concerns.
Is Legal Too Special? Maybe.
There’s a lot to chew on here, mainly because we have so little data about lawyers-as-buyers and so much conjecture.
But let me share five pillars of product-led growth from startup advisor Carilu Dietrich that you can work through.
According to Dietrich, you must have these 5 things in order to do PLG well:
An amazing product that wows within minutes.
A user who wants to educate themselves. This education means using the product, solving a problem, and producing some output that’s useful to others.
A buyer who becomes the internal champion to the rest of the team initially and potentially more of the company through time.
A corporate culture focused on experimentation and learning through iteration and data.
Philosophy of solving problems through product and software rather than through people or money.
Hm. That list stings given the common stories and surveys about our industry.
See why I had concerns?
I’ll let you sit with that. Maybe community-led growth is an imperfect/necessary alternative in our industry. We’ll talk more about that later.
(I’d also encourage you to read this piece by Brian Balfour about product-channel fit. In short, you need to stop thinking about product in isolation and start thinking about systems for product adoption. That’ll be key whether you use PLG or some other strategy.)
Keep building.