Introducing a product-led growth (PLG) model to your business takes a lot more than simply adding a free trial. It’s a transformational undertaking that involves a complete reset and reframing of your business. It will touch every aspect of what you do, and require adaptation from every part of your organization.
If you think integrating PLG is the right move for your company, you’re probably wondering how to get started. As a CEO, I know how challenging it is to turn everything upside down in pursuit of reinvention. But as the CEO of Brightidea—the first-ever online innovation platform—I also know that there are efficient and effective ways to approach the innovation process and ensure better outcomes.
Using some of the innovation strategies we’ve developed with our clients, we were able to develop a PLG strategy to help us expand our total addressable market (TAM) and start scaling our business from $10M annual recurring revenue (ARR) to $100M and beyond.
The Catalyst: A Need to Expand TAM to Fuel Growth
Brightidea bootstrapped its way into the niche of innovation management, reaching $10M ARR and earning a spot as category leader. Of course, from there, the question became how we could get to $100M ARR. The surface-level answer was pretty straightforward: expand our TAM. The more in-depth question of exactly how to expand our TAM was a little more complicated.
The clear path to a bigger TAM was downmarket, but to follow it we needed to find a whole new way to sell. In our pre-PLG days, we were running a classic B2B enterprise SaaS model. Our initial deal size was typically between $50K and $75K, and both the product and the sales process were pretty complex. Our product offers a lot of custom CSS options, which factored into every sales conversation. The sales cycle for these kinds of deals runs about 4 to 6 months and involves a classic 2010-style marketing stack: Google Ads, LinkedIn, HubSpot, content marketing, Salesforce, inside sales, and demos.
The challenge we faced was that using a similar sales motion with mid-market customers drove our customer acquisition cost (CAC) way up to the point where the numbers were getting upside down. It was clear that we needed a new approach to simplify the process, so we could bring our CAC down to a place that made sense.
The idea of PLG had been on the table for a while. We admired the success of companies like Atlassian and Salesforce. It was really impressive, for instance, to see a company like Salesforce convert a free trial into $20M of annual revenue with HP. We just weren’t sure exactly how to proceed with adding a PLG motion to our own business.
The Problem-Solving Approach: An Innovation Lab
Part of what helped us achieve success was coming to the challenge knowing that the journey to PLG would take effort and time. We understood that this change was quite probably a multi-year proposition. We also understood that such a transformational endeavor warranted a dedicated team.
To house our dedicated team we formed an innovation lab—a strategy we often use with our customers. The goal for this group was twofold. First, they needed to help prove that PLG was the right approach to drive our downmarket TAM-expansion strategy. And second, they needed to develop an initial plan for how to execute it.
The five-person innovation lab team was led by one of our best executives, kind of like a Y Combinator startup. We gave them headcount—both existing people and new hires as they saw fit—a big office space where they could all sit together, and had them report directly to the CEO, so they wouldn’t get tangled up going through existing processes.
It made a lot of sense to break this team out from the core organization—the “mothership,” as the innovation lab called it—because it was still firmly in an operational mindset that revolved around quarterly targets. We needed a team that could take a completely fresh look at the situation and consider all possibilities. We needed them to really get in there and find the answers to tough questions. How do we go downmarket? How do we get to a lower price point? How can we simplify the sales process, create new packages, avoid redlines, and nip security audits in the bud?
As the innovation lab team explored all the options and various scenarios, they uncovered a lot about the potential audience and previously unidentified opportunities. For instance, their research identified a new buyer segment—the single-activity buyer, often someone who just wants to run an isolated hackathon. Brightidea had never developed a package to address this type of buyer.
Part of the innovation lab’s work to formulate a new PLG strategy was the development of personas and qualification criteria for the new market segment. While the team knew that these buyers wanted something simpler than an enterprise-level solution, they needed to learn more about the audience’s exact needs, preferences, and price points. To facilitate this research, the core Brightidea organization began dividing lead flow—steering leads that they would normally have thrown away (inquiries from companies with less than 5,000 employees, for example) to the innovation lab team. The team would then work the sales process with these leads, and through that process, gain critical insights to inform the PLG strategy.
The Solution: A Free Trial and Internal PLG Evangelism
Eventually, the innovation lab team concluded that free trials and PLG was the appropriate growth model to help Brightidea expand TAM by adding a mid-market audience. Once the team identified the free trial, it became the forcing function that moved everything forward. The trial gave the team something to focus on, something to feed and optimize.
Once we set things in motion, we needed to move fast to avoid diluting the brand or putting people off from the experience. We simplified the process as much as possible, and then bought ads to push traffic into the system. From there, it was a matter of watching closely to see where people got blocked. It was kind of like building a covered bridge when you don’t have all the planks. You’re just putting down the planks you have and filling in the rest as you go along. Eventually, you get to a place where you can put up handrails and a roof.
When the innovation lab had served its purpose, we dismantled it and reintegrated the team back into the core organization. We thought about it as similar to the way you gather goals together to get them hot for a barbecue, and then spread them out before you start cooking. The innovation lab was where we stoked the fire, and when we returned the lab team members to senior leadership roles in various parts of the “mothership” organization—product, marketing, sales, etc.—they evangelized PLG to the other functions. The lab team members had the religion, so to speak, so they were perfectly suited to convert the rest of the organization by helping them warm up to the idea.
The Takeaways: Commit, Be Patient, and Believe
When we started our PLG transformation, we were kind of fumbling our way through the process. We knew we needed to expand our market. We knew we wanted to go downmarket. But we also knew that we couldn’t jump directly from selling a $50,000 platform to selling a $49.99 single-user option. It was too big a leap for people to wrap their heads around.
The innovation lab strategy made it workable for us to explore the possibilities and opportunities in a thorough and efficient way that encouraged and harnessed innovation to help us come up with the best path forward. Our Brightidea Idea Box free trial has been running since spring 2021, and we’re really pleased with the results.
At the end of the day, we realized that there were three crucial steps to our ultimate success:
- We committed fully. You have to just decide that you’re going for it, and burn the ships. You have to accept that the project is not going to pay for itself in three months while at the same time realizing that PLG is the way the world is going, and—if you don’t want to be obsolete—you have to do it. Even if you have to go into it a little blind, knowing the transformation is going to be brutal, you still need to just do it.
- We were patient. You have to accept that there will be setbacks. You’ll realize you don’t have the skills you need, or that the person you assigned to a particular job function can’t pull it off. You will need to adapt and evolve, but that’s all part of the process. It won’t happen overnight, and it won’t happen according to plan, but it will happen.
- Believe you can get there. Remember that success is feasible. The journey will have its challenges, but you will overcome them. And, in the end, you’ll look back and realize how exciting, rewarding, and fun it was. You’ll learn a lot, and come out smarter and stronger in the end.
Finally, don’t forget to celebrate your success. Brightidea’s business is super complex. There were times we thought we weren’t going to get through to a working PLG strategy, so it was really important to celebrate our victories. After all, it’s pretty awesome to be able to make money in your sleep.
