June 17, 2019

Innovation in the product-led era

Amplitude was founded on the belief that we are entering a new, product-led era of business in which a company’s success is determined by the quality of their customer experience.  Being product-led means being guided by the potential of your product to drive growth, and breaking down the silos between “the business” side of things (like traditional sales and marketing) and “the product”. Because in the product-led era, the business is the product.

It’s an exciting time for product development. More and more customer experiences are happening through our digital products. And this shift is transforming the impact that we as product builders can have in an organization.  

Product as a revenue center

I see it happening in our customers’ organizations every day: Companies are shifting away from their view of product as a cost center—a part of their business where they must manage the costs of R&D and hope for innovation to occur—to a revenue center. Company leaders are starting to have confidence that investment in product development will drive business growth.

This shift is happening, in part, because we can finally tie product outcomes to business outcomes.  We are able to see how investments in new products or features are driving the ultimate currency of the C-suite: revenue and lifetime value.

I don’t think this can be overstated. In the business world, predictability of revenue is king.  Aaron Ross literally transformed the sales industry through his book Predictable Revenue. In marketing, the ability to attribute visitors to their acquisition sources drove an entire martech revolution.

Something similar is happening in product right now.  Because we can now track behavioral data about how users are using our products, we can understand what drives success at the product level. And because product usage directly drives revenue (or can be attributed to something like a product north star), we can start to evaluate the ROI of our investments.

But the management systems that worked in the sales- and marketing-led eras don’t apply in the world of product.  A cascade of top-down mandates doesn’t provide enough freedom to innovate.  Anyone who’s tried to estimate how long it will take to launch a breakthrough product experience knows it’s impossible to accurately forecast.  So how do we balance innovation with predictability in the product-led era?

Product-led innovation

There’s a popular myth about innovation. Like many myths, this one has a hero—a single great inventor who has a brilliant idea that everyone else executes. And in this myth, the pace of innovation is just the rate at which geniuses come up with new ideas.

But we know that’s not true. While some people may be better at idea generation, great ideas can come from just about every corner of your company, at any time—if they’re given the space to grow.

The key to create an environment where the following 2 things can occur:

  1. Everyone’s ideas are welcomed, regardless of role or department
  2. Ideas are quickly tested, validated, built upon

The first failure point I find in most organizations is the expectation that product ideas must come from the top.  

But in fact, the opposite tends to be true. Often it’s the people on the front lines—those who are closest to the customer problem—who come up with the most impactful idea. Its critical to create an environment where this can happen—where everyone in your company is empowered to innovate and share their ideas.

In fact, as a team leader in the product-led era, it’s not actually your job to come up with the best new ideas. It’s your job to ensure that your company is creating the right environment for great new ideas to flourish—and pursuing and investing in them with the right degree of rigor.

That is the second failure point that I see: failure to manage the chaos.  In a world where everyone is encouraged to propose ideas, it can be difficult to objectively decide which ideas to pursue.  If the decision feels arbitrary (or worse, like only the ideas “blessed” from the top get through), you risk undermining the autonomy of the system.  The science of innovation is all about how accurately you can sense and respond to the right ideas and eventually “discover” your way to an innovation.  But how can you ensure that your organization quickly hones in on the most promising ideas—while swiftly de-prioritizing others—in a fair and transparent manner?   

This is where data comes in: Nothing captures the opinion of the customer better than their actual usage of your product.

By identifying the proper “leading” signals—metrics that are both sensitive enough to change in a short period but also correlated with long-term measures of success—teams can quickly validate whether the solutions they’ve built are truly innovating and delivering value to their customers.  

An Amplitude example

Creating a systematic way to drive innovation is something we’ve been able to do successfully at Amplitude. One of the latest examples was our launch of Team Spaces last fall.

It started in January 2018 at our annual ‘Kill the Company’ (KTC) exercise—one of the many company-wide activities we run to encourage innovative thinking.  If you haven’t heard of KTC, its an exercise in which you’re asked to imagine the company that would unseat your own, based on the book and research by Lisa Bodell. It’s a good forcing function for 10x thinking and encouraging everyone to submit innovative ideas.

One of the ideas that came out of our KTC exercise was a concept called “Amplitoogle” (Amplitude + Google) that spoke to our broader product strategy of collaboration and discovery within the Amplitude product. The team that came up with Amplitoogle put together a compelling vision backed by research that showed many of our customers came into Amplitude with intent (questions) but did not know how to answer them. And many times these were questions that had been asked and answered by a colleague in the past.

this is a photo of a team presenting their idea during a Kill the Company excercise at Amplitude. This image shows a group of coworkers explaining their concept to a room full of colleages
A team presenting during Amplitude's Kill The Company exercise

Our collaboration and discovery product pod decided to charter the concept and began testing it out with rapid iterations on a weekly basis.

We turned our browse page into a search page. We introduced a relevance ranking for content. We built a new user experience centered around search. We simplified the search page to reduce cognitive load. With each change, we observed positive impact on our leading metrics of number of users searching and finding content.

But these metrics did not tell the whole story. While we were able to move the leading signals, after a couple months we had enough data to show that these changes were not having a positive impact on our long-term measures of success—new users successfully moving up our ladder of engagement.  Through further qualitative research, we discovered that these users were not quite ready to start asking questions, but instead wanted to discover the types of questions they could answer in Amplitude.

Around this same time, we were kicking off our semi-annual Hackathon.  And in that Hackathon, one of the winning projects was ‘Teams’—a place for teams to collaborate and share their learnings in Amplitude. It was a more push-based way to drive exploration vs the pull-based approach of search.

And we ran with it. We built out the Team Spaces MVP and articulated new leading metrics to measure how well a customer was adopting the early version of the feature.

this image shows a detail from a spreadsheet. there are 4 rows color-coded by value
How we measured successful adoption of our Team Space alpha

Testing began with our 6 alpha customers, and every 2 weeks we added another tranche of new teams. With every new release, we started to see improvement in our leading indicator metrics.

this is an image of a spreadsheet with green yellow and red color coding
With every iteration, teams starting going from red to yellow to green

Once we saw successful adoption within our beta group, we knew we had a winner and Team Spaces was released to all of our customers.  This feature eventually led to a 67% increase in total collaboration within the product and a 25% increase in new user retention.

The future of product innovation

The real takeaway from the Amplitude example above isn’t that we built a great product experience—it’s how we got there.  

We could have easily dictated a solution from the top, but instead we empowered our team to come up with their own ideas to drive product strategy forward. We also didn’t blindly commit to that idea—we built it in an iterative fashion that allowed us to quickly measure impact and adapt our strategy.  If we hadn’t had this system in place, I can guarantee you we would not have delivered the same type of results.

As we move further into the product-led era, I believe most teams will begin operate in a similar way. The trick is to create an environment that encourages everyone in the company to propose new ideas—combined with a system that uses product metrics to quickly determine the most promising directions. This combination of art and science leads to innovative solutions that delight customers in a predictable fashion.

Of course, this new era of is still in its infancy. We’ve all got a lot to learn from each other. If your team is looking to bring a similar system of innovation to your organization—or have an interesting approach of your own—feel free to reach out!

Justin Bauer is CPO at Amplitude, where he leads the company's product vision and strategy. In that time, Amplitude has grown by more than 20x to become the leading product intelligence platform worldwide. Prior to joining Amplitude, he was the founder/CEO of Rivalry Fantasy Sports before it was acquired in 2015. He has also held leadership positions at Booz Digital, McKinsey and is an alum of Stanford GSB and Carleton College.

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