The ultimate guide to adding a PLG motion | Hila Qu (Reforge, GitLab)

Hila Qu (00:00:01):
... [inaudible 00:00:01]. Always say is actually fundamentally DLG, data led growth. So when you give away your free product, what you want to get in exchange are two things. One is a broader reach because free product spread itself is lower barrier to entry. Two, you want to understand you usage behavior of those free users, which features do they use and which features kind of correlates with a higher conversion rate, retention rate, all of that. If you don't have a foundation of data and understanding of how to analyze those data, you are giving a way of free product for nothing.

Lenny (00:00:44):
Welcome to Lenny's podcast where I interview world-class product leaders and growth experts to learn from their hard one experiences building and growing today's most successful products. Today my guest is Hila Qu. I've heard some listeners have been doing listening parties with this podcast where their team listens to an episode all at the same time over Zoom and shares their insights and lessons in a shared chat. And I would say that this episode is a great candidate for that. It's incredibly packed with advice on how to start and optimize your product led growth motion. We talk through common pitfalls that you probably run into or to get started, feel us favorite tools, what you recommends for an initial PLG oriented team, how to audit your existing funnel, plus tangents on how to improve your activation and retention and some foundational overviews of product like growth and some of the core concepts associated with it.

(00:01:34):
Like I say at the end of the episode, this episode delivers tens of thousands of dollars in value. Something you won't find for free anywhere else. I am really excited to bring it to you. With that, I bring you Hila Qu after a short word from our sponsors.

(00:01:49):
This episode is brought to you by Amplitude. If you're setting up your analytics stack but not using Amplitude, what are you doing? Anyone can sell you analytics while Amplitude unlocks the power of your product and guide you every step of the way. Get the right data, ask the right questions, get the right answers, and make growth happen. To get started with Amplitude for free, visit amplitude.com. Amplitude, power to your products.

(00:02:16):
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(00:03:26):
Hila, welcome to the podcast.

Hila Qu (00:03:29):
Thank you Lenny for having me. I'm so excited.

Lenny (00:03:32):
I'm excited as well. I don't know if you know this, but you have the very unique distinction of having two posts in my top 25 most read post of all time in my newsletter, which are the two parts of your series on how to add a product led growth motion. And so I'm really excited to dig into product led growth and help more people be successful product led growth.

Hila Qu (00:03:52):
Awesome. I should have made it three posts, three part.

Lenny (00:03:57):
I like that ambition. There's always more. Yeah. Well I think the next milestone is get into the top 10, get two into the top 10.

Hila Qu (00:04:06):
Yes.

Lenny (00:04:06):
Okay. Maybe this podcast will... Oh, okay. This podcast will be in the feed of the newsletter, so maybe we'll get there. No pressure. No pressure. One question I wanted to ask you is anything come out of writing those guest posts? Has anything good happened as a result?

Hila Qu (00:04:21):
I always take a very long-term view for writing. I enjoy writing myself. Spend actually four months on that one. After it's published, I see a lot of shares kind of and people writing very long summary of it. That's always very encouraging and also many people I didn't expect reading it reach out to me, let me know, "Hey, I read that." For example. I think Ravi, he is also on your podcast. I didn't know him personally, one day he's like, "Hila, I read that. That's awesome." And a bunch of friends in VC and they kind of read that. They told me it's great. I even have a advisory client kind of landed because of that as well. So it's awesome.

Lenny (00:05:10):
Amazing. It makes me really happy to hear all that. I was also curious, has anything, and we're going to get into the details of all the stuff you wrote about and even beyond what you wrote about, but is there anything you're thinking has shifted on having after having written that series in terms of PLG?

Hila Qu (00:05:25):
I wouldn't say it's shifted completely because I always believe you don't need to be a PLG purist. Meaning there are kind of people who are like, "PLG is the future. It's only thing, you don't need sales." Right? I was never like that, but recently by working with a few of my clients, I witnessed in reality many startups actually are having both. They have a PLG motion, they have a sales team as well. PLG motion is perfect for lowering the barrier for more people to try, broader the reach. It's a kind of volume kind of game. And then the sales motion, you can have very targeted list of big customers you go after, you close them and it's a big order. Usually revenue, a very strong foundation for a company. And I've seen actually a lot of my clients that are doing, they have both. They're doing that. They try to get the benefit of both from their early stage and it's super cool.

Lenny (00:06:29):
Is the simple way to think about this trend that eventually every one will need to do both. It's not one or the other, it's just both. And it's just a matter of when you add the other.

Hila Qu (00:06:40):
I would think so because let's say if you are in the sales motion dominated kind of traditional B2B software industry, your competitors will be adding PLG, as soon as they add it they will have a benefit of attracting more end users and end users become case to the employer, to the clients. And you lose that. And if you are only in PLG somewhere else may go after the big customers. It takes time for PLG to go to the big customer and close them. So you lose a little bit of time there as well. I think eventually you need both.

Lenny (00:07:19):
Cool. That's kind of the way I've been seeing it. I did a few series on traditional product led growth companies, [inaudible 00:07:28]. All those guys, and they all add sales teams eventually last famous for being product led only. And so everyone ends up adding sales team. I think more recent trend is sales led enterprise E products are all just realizing they need a product led growth component. So that's kind of what I've been seeing too.

Hila Qu (00:07:43):
Yeah, exactly. But I would say it is easier if you have PLG from early on. If you are pure sales led, you try to add PLG, that's the harder thing to change basically.

Lenny (00:07:56):
Interesting to set a little foundation. Before we get into a lot of this stuff, it'd actually be helpful just to explain what is product like growth, just simply, because people hear this term a lot and it'd be helpful just to understand it broadly. And then also just like why is it so popular? Why does everyone want a product growth component to their business?

Hila Qu (00:08:15):
Just use a simple example in B2C product. When you think about Facebook, when you think about a lot of the products you use every day as an end consumer, it's always by default product led growth because there's no sales team [inaudible 00:08:32]. The LTV of the product doesn't support that. I think PLG the term become popular because traditionally in B2B, word sales is the main motion. You need a sales team to close the deal After the contract is signed, the end users can now finally use it.

(00:08:51):
But nowadays, it's not necessarily a case. You can have your B2B SaaS product developed in a way to allow end users to try before you buy. So that's the reason I think this has become being more popular. And the fundamental driver behind this is the user of B2B softwares are also human. It's the same human using B2C softwares and we're already trained to use product, try, and before we make any decision. And we demand that in B2B as well. So it needs to happen. And more and more companies are capturing that trend basically, and they're trying to utilizing that as a entry point to either disrupt existing B2B players or build something really awesome for end users. So that's why it's becoming more and more popular.

Lenny (00:09:42):
To pull on that thread a little bit more even to help people visualize a product led growth product, what makes it product led? There's a self-serve component, what are attributes or just kind of common elements of something that's product led versus sales led? Let's say.

Hila Qu (00:09:59):
Yeah, definitely. I think maybe we can use a product as a example, right? Think about Zoom how me or you, maybe everyday users, how we get to know Zoom is not necessary through a sales team call me code or email me code and introducing me this, showing a demo of Zoom, and I get to know Zoom, right? It's because maybe Lenny, you hosted a webinar I joined and I get to just use this software already without even knowing it's Zoom. And then afterwards I may one day think about I want to do this myself and I just do that in a sign-up and I already create a host a webinar and I can pay if I need a paid plan or I can use a lot of more advanced features when I, let's say hit the 40 minutes limit, I can already click that and pay and become a paid customer already.

(00:10:53):
So I think the key properties also of PLG products, think about it should have a very low barrier to entry. Usually it has a free version, free trial. You don't need get approval from your boss to use it. You can use it today and then it has some sort of a self-service checkout flow. If you need a better version, you can buy yourself as well. And this product, basically the free product will spread on its own in some way or another.

Lenny (00:11:24):
Okay, perfect. I think that was really helpful. I think we dive into some of the meat of the discussion that we have planned and where I thought it'd be fun to start is the common pitfalls that people fall into when they're trying to add a product led growth motion. And so what are the most common ways people fail when they're trying to figure out product led growth?

Hila Qu (00:11:45):
The first of all, as I mentioned, you need to have some sort of vehicle. A lot of the companies, if you go to their website, especially B2B companies, you'll see the biggest CTA is called book demo. They don't have anything else. The first step for you to do is submit a form and kind of basically explain yourself to this company, I'm from who and who company and I want to use the tool, can you come back to me and allow me to see a demo of your product? That means the entry point to PLG is cut off. Instead, the first step is you need to either have a free product, free trial, some sort of a low barrier entry for anyone who stumble upon this product to give it a try. A lot of companies don't have that. That's the first I would say hurdle or peaceful.

(00:12:38):
And especially if you are a sales lead and you already have all those things figured out, you try to go to add PLG, it's not as easy as just say, add a kind of free trial CTA on your website. You need to build this free experience. You also need to convince your sales team, your existing product team, your marketing team, "Hey, let's try this out." Because before this process is super clean. Everyone only get only selected future leads and sales work on those. But now you need to allow more people in and there need to be more understanding of their behavior data, the process need to change. So it's actually a whole process. So I would say that's first one. And along with that is some companies didn't think it thoroughly and they are just kind of saying, "Oh, PLG is cool, let's do PLG."

(00:13:34):
And then they maybe spend three months build kind of some sort of a very basic free trial and then they think that's it. They think the leads will come, conversion will come, self-service revenue will come. It's not that easy. It's not that simple. It is definitely a entire motion. So I would say you need to commit to it. Maybe you can do some thinking, collecting some data, build your conviction, but to a certain point you need to commit to at least a year or even two years kind of roadmap to build this entire thing out and change the process internally sometimes as well to support that. The last one, I would say a lot of times the company's committed, they want to do this, but they don't know the right way or they don't have the foundation, they don't have the expertise of PLG.

(00:14:27):
Their internal team, they're really good at sales or maybe really good at as the traditional motion, but they don't have this part of expertise and foundation. A common thing I see is that company want to do PLG and they have no usage data at all and they're like, "I will just doing PLG. But PLG I always say is actually fundamentally DLG, data led growth. So when you give away your free product, what you want to get in exchange are two things. One is the broader reach because free product spread itself is lower barrier to entry. Two, you want to understand the usage behavior of those free users, which features do they use and which features kind of correlates with a higher conversion rate, retention rate, all of that.

(00:15:20):
If you don't have a foundation of data and understanding of how to analyze those data, you are giving a way of free product for nothing. Like you are really not being able to utilize all of that to build your PLG motion. So I think data foundation and expertise in terms of how do I design that user journey, that journey is very different from the sales user journey. Those are sometimes missing in company when they just begin to doing this. And in those cases I think it's super helpful to maybe either find someone who have done this as an advisor or hire someone like you need to have that expertise or through advisor to support your PLG motion.

Lenny (00:16:06):
This is great. We're going to talk about the data piece more in depth later, but on the commitment piece, I thought that was really interesting. I imagine many times founders or leaders think they have commitment and then they realize maybe not so much. Are there any kind of flags that tell you that, "Oh, you're not actually committed to working on this for a year or two years, whatever it takes."

Hila Qu (00:16:27):
The red flags I've seen basically sometimes, first of all, they think about PLG equals launch of free version or launch of free trial. They made this assumption in their head, "Oh, I already have a product. I already have a software that's working, customers are using. Now if I add a free version, if I open a free trial, that's it." Like that's basically PLG, and I will have conversions. I will have people becoming a product qualified leads just because I have it. "Hey, I open this for you, just come and use it and [inaudible 00:17:07]." And I think that's one red flag. Basically they are not thinking about the entire thing through understanding the implication, not only the free product, it's really just a start. You need to think about how to activate, how to design the upgrade path, how those teams, those new growth teams work with other sales and marketing teams, all of that.

(00:17:29):
So that's one. The other one is they don't have a dedicated team. They just basically assign one person to the thing. They are imagine, "Hey, you already have this. It's not that big of deal. You can just figure this out by borrowing resources from everywhere and try to coordinate all the stakeholders from sales, marketing, product." That person need to be a magician in order to be successful in that basically. And I think the third thing is basically they are really doing this because it's trendy. They didn't think about the deeper strategic reason why this is a good fit for their business. Do you have a product that's relatively low complexity, doesn't require a lot of customization for the customer to see value.

(00:18:19):
Time to value need to be relatively short or you can figure out a way to make it short. And then do you have a lot of potentially end user S&B business? They are interested in the solution. They want to try that out. If you do not have both, if you for example, develop a software for the [inaudible 00:18:42]. Companies like [inaudible 00:18:44]. Or defense companies, only three target customer exist in the entire world, you don't probably want to do PLG, right? So think deeper about the fit and then commit. And I would say those are the red flags.

Lenny (00:18:59):
Okay. So on that last point, I thought that was a really interesting, we talked about how every company probably should add a product led growth piece, but I think what you're also saying is actually not every company, there are some companies like defense contractors that are probably going to be sale led.

Hila Qu (00:19:15):
I think it's a spectrum. I would say the defense company, defense software company is a pretty extreme example. And of course in those case, I don't think it makes sense, but I think majority of B2B software, I've seen, you've seen, we've used even some more complicated ones. Like Salesforce used to be this example of sales motion. They're the pioneer of SaaS and they do this so well, but they begin to add look into sales service portal and all of that. And even a lot of the bigger players are looking into that. So I think majority of the B2B software, probably they are in the middle of the spectrum rather than the defense company.

Lenny (00:20:05):
You kind of shared some of the attributes of what allows you to be product led, like quick time to value. If you have this in your head, what are some of those bullet points of what you need to figure out for it to be successful potentially as product led?

Hila Qu (00:20:18):
The first thing is that have a... And you mentioned you are able to have a vehicle, have a free version, have a free trial. Sometimes it's a open source product. A lot of developer products start as a open source product. It has its constraints, but it is also a great kind of vehicle for PLG or if none of those are option, you can build a really realistic kind of experience. For example, I remember Amplitude, they are pursuing PLG now, but they used to have a lot of barrier. As an end user, it's hard for me to put that code into my product and see my data, but they build a really realistic interactive demo that's getting closer to PLG. So it's not PLG, but it's getting closer and you can already see the value and play with it yourself. So that's the first step. Have a vehicle.

(00:21:18):
The second step step is time to value. Basically, just because you have this vehicle doesn't mean people will come and use it and see the value. So you need to figure out how do you give your users a warm start and help them get started. I was talking with a kind of company today, they just realized we have this tool and when people come in into the free trial, they are asked to do some action, but nobody know how to do that. They may not have everything ready to take that action. So we're like, "What about we gave them some sample video or sample action they can try." Right? It's not the same as they do it themselves, but it's better. It's getting closer. And after that you can ask them to try the thing on their own and they need to do more work.

(00:22:07):
So kind of think about all the ways you can reduce time to value. It doesn't need to be this big aha moment in the first five minutes, but at least give them some mini aha moments, right? So that's the second thing, third thing is think about from there. If they get aha moment, if they want to buy, you need to have this self-checkout flow ready, self-service flow. It's the foundation, if you have it, it doesn't mean they won't buy immediately, but at least it gave them this option to do that themselves. And the fourth thing I would say, between this kind of activation usage, aha moment to this conversion moment, actually there's a big gap. And what is the gap? How you can understand the gap, how you can guide people around that journey is basically you need to have a very good grasp of data.

(00:23:03):
You need to have the foundation to understand their usage, their behavior, and then you can design a user journey in the product, in email, in all those tools to guide user to the next step. So have a very strong data foundation there. I would say. I think those are the main thing. And there are other things like your pricing need to be relatively simple. If your pricing is super complicated, they need to... Whenever they pick, for example, they try the product, they love it, they have a self-checkout flow, but in order to decide how much they need to pay, they need to send your sales some information, you need to do a quote, then that's broken, right? Or they're already confused about this process. So that is another kind of important thing as well.

Lenny (00:23:54):
Cool. So just to summarize, I took notes on this kind of the things that you got to get. If you want to add a product led growth component, there needs to be something free and kind of self-serve that you can-

Lenny (00:24:00):
... growth component. There needs to be something free and kind of self-serve that you can just start using on your own. There needs to be a quick time to value, there needs to be a self-serve checkout experience. You need a data foundation. I really love the way you phrased it where one of the benefits of product growth is the data component that'll help you understand what to build on, how to monetize these folks. And then the last piece is pricing that's simple, that people understand.

Hila Qu (00:24:23):
Yeah, yeah, yeah. Just imagine you are building, selling something on e-commerce side. You need all of this, right. Just in order for the B2B buyer to buy your software in PLG motion, you need to make all those available to him. It doesn't mean if you view this, it'll happen, again, right. That's the data experimentation. A lot of that need to be there to support a lot of iteration and make this work.

Lenny (00:24:52):
Awesome. Okay, so we've been going in a lot of directions. We started with pitfalls and things you probably will... You'll run into that may set you off track. But let's zoom out again and let's get into, just say you're convinced we need to invest in adding a product-led growth motion to our product. What's the first step that you recommend for people to go down?

Hila Qu (00:25:12):
I think the first step actually, I would recommend founders and leaders to just understand what's PLG funnel, what's sales-led funnel with SLG funnel. Because I remember when I begin to work on PLG at GitLab, it was not that clear to me. There's a lot of things you can read, but they're not all super clear. What is PLG? How is that different? And through working on that myself, I begin to develop this conviction and kind of this clear picture. The biggest difference from SLG and PLG is that the sales funnel traditionally work like something... You have marketing team working on the top of funnel, bring visitor and then they need to have a process to turn the visitors into lead. And leads is something, it is basically very popular and vitally used in the B2B business. And you go through some qualification process and leads need to be from your target kind of customer, target industry.

(00:26:23):
The company need to meet certain size, but they also need to show interest. And how marketing team historically gauge interest is how much they interact with your marketing campaigns. Do they open an email? Do they read three white papers? Do they go to this webinar? That's how they gauge interest. And for each positive action you did as a buyer, they add some points to you. And once you reach certain points, you become this marketing qualified leads. Basically those are the better ones we featured through that process and we gave that to the sales team. And sales team has more process, but then they choose some of them, work on them, and they close some of them. So that's kind of traditionally B2B sales-led motion works. And then product-led funnel is different. It's much more similar to B2C. Basically you can still have people visit your website and they sign up for free version or free account or free trial.

(00:27:21):
The most important thing, the biggest difference, is now you want them to use the product. You can still send all the marketing emails, all of that, but those are supplemental. Those are kind of trying to get them to the product to use, to try, and the usage, product usage, is almost like the leading indicator for success for PLG, versus in the sales funnel, it's almost like how many do you get and do they interact with the marketing campaigns, which in the old days it's what you have because nobody can access your product unless the contract is signed. But nowadays that's almost like an artificial barrier. It's not there. You can totally build a product in a free version to allow people to use. So usage becomes so important. And that's the biggest difference from the usage that you have two potential conversion paths.

(00:28:18):
One is that if this product is not that expensive, the price point fits in most companies' budget. Some companies may just use their credit card and they buy online. That's also, you then don't even need sales team to be involved. And it's very similar to the B2C product, e-commerce product, buying process. And it's awesome because it's automated, you don't need to have more sales team involved. It's low cost, it's efficient, it can happen on its own every day. It will just add up to your revenue. And then the other potential conversion pass is where the product usage is high, but also this customer, this potential prospect, fits into your ideal customer profile. It's from a Fortune 500 company or it's from a target industry that you know they need your solution. Then this customer worth more of your time and you should actually not, even if they may want to buy on their own, you may want to still have your sales team or have your customer success team to reach out to them to understand a little bit more of the situation and give them some white glove service. Hopefully you can even close a bigger deal than if they would have buy on their own. So that's another pass. I call that PQL, PQA, like sales pass.

Lenny (00:29:47):
And that stands for product qualified lead, right?

Hila Qu (00:29:48):
Product qualified leads, product qualified account. So the first step is for you to understand those two funnels and then think about if you want to add PLG, right? What is this journey? What are the steps along that funnel you need to establish for your product in order for your user to be able to convert in that funnel?

Lenny (00:30:12):
So you talked about these two funnels. One question is, are they basically the same for almost every product or should you try to figure out what's really unique about my funnel? And then second, is there an example of product that you think about like, here's the sales led funnel for them and then here's the product-led version of that, just to make it a little more real even?

Hila Qu (00:30:30):
Maybe I can give an example first and then we can talk about the other question. So I can use GitLab as an example since that's where I'm most familiar. GitLab actually have a enterprise sales team, very strong sales team, from the very beginning. But the company also we started from open source product.

Lenny (00:30:50):
Maybe describe what GitLab is for folks that aren't super familiar with it.

Hila Qu (00:30:53):
Yeah, so GitLab, we are a developer platform, DevOps platform, basically engineer teams, developer teams. They use this product to manage their entire DevOps process, from storing their code, kind of managing the version control, releasing CSAD, like security scan, all of that. It's an all in one platform for that team. So for the sales-led motion, like I mentioned, the teams, our marketing team, were working bringing a lot of visitors to our website and they sign up for free trial, for free accounts. And then we have this lead nurturing and lead scoring process to surface which are the good ones for our sales team. In our sales team, we have SNB, we have the mid-market, we have enterprise, and they each kind of took their buckets of leads and work on them and close them. They become revenue.

(00:31:52):
And then how the product led funnel work for us is someone, maybe as a developer, I heard about GitLab, I go to website, I see, "Oh, I can actually sign up for a free account." I may use it for my personal project. My company may be using another solution, but I have some side project I'm doing as a developer. I want to use GitLab to host that. And I did that. And so you begin to see this, individual users having some usage but nothing to do with his company. And then one day maybe this person's employer, "We want to look into some other solutions. We have way too many point solutions for each step of DevOps. Now we want to potentially consolidate them. So what are the options?" And this engineer raise his hand, "Hey, I have been using GitLab for a very long time and I really like it. I think we should check them out." And then this team, maybe this engineer manager or CTO depending on the size of company, they're like, "Okay."

(00:32:55):
He went to their website and he kind of signed up for a free trial because that allow him to test some more advanced features. It's 30 days, but he already has... This person knows how to use it. This person already set up the foundation with the free version and they started the free trial. They use their 30 day to do a proof of concept, the entire company already using it for part of their process. And they're like, "Oh, awesome. I tried this feature, that feature, that feature. It's a great tool. It can support our workflow and I'm pretty sure we should be able to get ROI from this product." And then in this case they are like, "I only need five seats. It's cheap. I will just go to the pricing page and check out the pricing and buy from there." Or in some cases, this is a big company and we see this big company is using our product, our sales team get that data signal, they may send an email and reach out and say, "Hey, I saw you were checking it out. How can I help?" And that may start a sales conversation, eventually become a contract from there.

Lenny (00:34:07):
Great. Thank you for sharing that example. Maybe a last question on this first step of mapping out the funnel. Do you recommend people just get in front of a whiteboard and just sit together and like, "Here's what it would be potentially if we added a product-led growth motion?"

Hila Qu (00:34:20):
Yes. Yes. And I think it's not that... The devil is in the details. Just mapping out the big steps is not that hard. You think about, " I have a marketing site already. I can build a free version." And then they use the free version and I build a checkout flow and that's it. That's the story. But that's the first step. If you don't even have those components, mapping out the funnel will allow you to see a missing checkout flow, a missing free version, you already identified that. But the devil is in the detail one layer down. How do you design an experience for each of the step? What do you say on your marketing side to drive free signup? In the free signup, how do you guide them to use the three most important features? And in the checkout flow, which payment option do you offer so that customers from everywhere can buy very smoothly? So that's the next layers kind of detail that actually has so many opportunities for optimization, maximization and all of that.

Lenny (00:35:29):
That's actually a really good segue to the next question, which is just, okay, you've mapped out the funnel, what do you do next?

Hila Qu (00:35:35):
If you don't have the foundational components, you need to build all of that. But if you have something, if you already have this funnel exist, right, it's just not working perfectly at least, but it's working, it's there. I think the next step is you need to pick a starting point. Where do you want to focus first to drive the maximum impact? Personally, I'm a big fan of finding leverage. I think doing growth is always about finding leverage. If you can always find the area that with relatively small investment can give you the biggest results, that can be such a kind of momentum, can empower you through future experiments and more work. And just finding leverage is a beautiful thing in my mind. So I always want to do that. So when I think about pick a starting point, one thing I actually do with a lot of my advisory clients as a first step is, we do a full funnel audit, full PLG funnel audit.

(00:36:38):
Think about, we go through me as a kind of end user, go through the entire journey, pretend I am interested, semi interested, and I want to buy from the website. Does that kind of attract me? Is it super clear the value proposition? And then from there, going through the sign up of the free account or free trial, is that smooth? And when I begin to use the product, do I get to my aha moment fast or I am very confused and frustrated, abandoned at that moment? And from there, if I'm like, think this is good, right, I hit my aha moment, I want to buy. Can I even buy? You will never believe, like when I do this audit,, there are so many low hanging fruits usually in this process. For example, one client, when I go to the checkout flow, the kind of checkout form is so confusing.

(00:37:38):
They ask a bunch of questions that only let's say UK customer need. Every other places they don't need to answer, but they ask the question anyway. And I as a US based person is very confused and I drop off at that point. And then there are other things, for example, the aha moments like I talk about. I don't know what to do when I land inside a product for the first time, I'm super excited and ready, but I don't know what to do. I'm so lost and confused. That's usually a pretty big focus area and opportunity area. Just getting your users to aha moments. They are already over so many hurdles here, but don't just turn down them and they leave because it's so confusing.

Lenny (00:38:25):
It might be helpful just to explain an aha moment. I know people hear this term a lot. What's a simple way to think about what is an aha moment?

Hila Qu (00:38:32):
I think it as a moment, as a first time a user experienced value of your product. So it gets popular because Facebook has this example from the early growth days. I think you added 10 friends in seven days, you hit your aha moment. But there are many layers under that. The reason why Facebook used that to define its aha moment is because in early days, if you add these friends, you begin to form some connection. You can see an interesting feed, you can interact with your friends, and that social interaction, it's the core value of Facebook, and Facebook leaves by looking at a lot of data. If you meet that data metric criteria it's kind of very likely you will hit that aha moment. But I think for a lot of, especially we're talking about many SaaS product, B2B software, the value of such product is usually either you see a workflow can be supported by this, it can save your time, it can save your money, it can help you make more money, or it just solve this pain point that you never get to solve on your own without a software product.

(00:39:57):
So at GitLab we actually did a bunch of analysis. We're trying to understand what is the aha moment for our new users. We ended up have something along the line of two users, two features used in the first 14 days. So it's very similar to Facebook's kind of format. But deep down, because we are a platform, we are a team product, two users is talking about the team components. Whatever the first user is trying and using that is so valuable, he or she is confident to invite another coworker to come in. That itself is very, very valuable action and indicates this first user is seeing value. And if together they use two or more features, that means we are seeing the collaboration, the platform components of the product. And within the first 14 days, because it has to be reasonably quick but not unrealistic, because we are a complicated product, we're not Facebook, we're not Zynga or a game app, it's hard for you to figure it out in the first day. So yeah, I think it's a very important concept for any PLG company to figure out because that's often the biggest opportunity area I see.

Lenny (00:41:24):
Aha moment and activation is often interchangeable, right?

Hila Qu (00:41:27):
Yeah.

Lenny (00:41:27):
So those are kind of two things you'll hear. And just to reframe, re-say what you say, so GitLab's activation slash aha moment milestone was two users using two features in 14 days.

Hila Qu (00:41:38):
Mm-hmm.

Lenny (00:41:40):
And I imagine the way you got to that was you looked at what point does retention improve if they got to a certain milestone, right? Is that roughly how you [inaudible 00:41:48]?

Hila Qu (00:41:47):
Yeah, exactly. So there are how you can get to that, right? First of all, the internal team, our growth team, actually we did some brainstorming. We think about what are the potential action or behavior that indicate they're getting value. We ideally want to do something like they maybe successfully merge their first PR or they successfully run their first pipeline. All of that. There are some potential high value actions we can think of. We just list all of them. And then the next step is, we did a correlation analysis to understand, hey, those are the 10 high value actions we believe we want to look at. If a new user did this action, what's the maybe 30 day conversion rate and... Not 30 day, 90 day conversion rate. What's the 30 day retention rate? Because we look at both. Sometimes you only look at retention or you only look at conversion, it doesn't give you the full picture.

(00:42:52):
So we look at if you did this action, let's say if, Lenny, you are trying our product, you are able to successfully merge the PR in your first 30 days. Does that improve your likelihood to convert? Does that improve your likelihood to retain? And we compare across those 10 high value actions, compare with the average. And we begin to see, oh, some actions actually if you do that, it lift your conversion, lift your retention much bigger. And those are the candidates for potential aha moments. And from there, the reason why we ended up not picking one single action... For some products, actually you can pick a single action. If one action really stands out, I don't know, for Airbnb [inaudible 00:43:39] is probably, you book a hotel, you go to there, you are so happy, you leave a high star review. That's the key action for this platform.

(00:43:49):
For GitLab, we have so many different workflow components. Teams are here for different reasons. Some are here for security, some are here for like CSAD. So that's why we ended up combining like two action. It can be any of the two high value features. The next step is actually you need to launch some experiments to try to get more people to do those high value action. And you then see, do I see higher conversion? Do I see higher retention? Because in data you are only isolating correlation. You are not proving causation. You just saw people who are doing this are more likely to convert. But it doesn't mean if you get people to do that, they will convert. So experimentation is the step. You will finally kind of validate that.

Lenny (00:44:37):
Hila, this is amazing. This is like a mini podcast on activation. We should do another one just on this. And then in the show notes, I'll link to a couple posts that I've written with a bunch of advice on setting activation milestones and improving them. I forget if you've contributed to that post or not, but if not, we should add some of these stories. But let's get back to our core. We have enough to talk about on just product led growth. So just to summarize the audit that you do, I wrote some notes as you were talking, and maybe we can keep going from that point. What you look for when you're auditing a product to see where they may pick a starting point, what I wrote down is, one, are you just excited to try it? Is the landing page pulling you in? Two, can you actually use it on your own and just try it? Three, do you get to the aha moment where you're like, okay, I get it, [inaudible 00:45:25] it, and then can I actually buy this on my own? Is that roughly the audit? Is there anything more to that?

Hila Qu (00:45:30):
Exactly. And I also look at their initial first few emails they send to me, because sometimes the email magically can help a lot. If I'm frustrated the first time... The other day I'm trying a product, I'm frustrated, I'm like, I will give up. And then in the night I saw an email, I'm like, oh, maybe I just click the CTA and give it one more try. And that time actually I figured out I get to the aha moment.

(00:45:57):
So I also look at the email, the first initial emails, and then when I map this out, I ask the company to give me the data at very high level for each of the step. How many people are on your website? How many people go through signup? How many people hit this aha moment? We need to define that. We need to... Usually a lot of discussion, like how many people get to the aha moment, how many people started self-checkout and being successful. And then like that between my experience from a user perspective and the data, we usually immediately begin to see, oh, this is the biggest opportunity. Usually activation and conversion are two of the common starting places.

Lenny (00:46:42):
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(00:47:31):
Okay, so let's get into that then. So you've done this audit, what other advice do you have for folks to figure out where they should start and invest in that part of the product to help launch product-led growth?

Hila Qu (00:47:42):
You can do a audit like this yourself, right. Just imagine if you are a B2C user trying to buy a product, you want it to be easy. Ideally, PLG for B2B can be that easy as well. So go through that process and identify, where is confusing, where do you get stuck? If you find-

Hila Qu (00:48:00):
... where is confusing. Where do you get stuck if you find that you have a problem with activation, meaning if you enter into the product you are like what do I do, I don't know what should I do, and maybe I just left. And then, if that's the biggest opportunity, activation, then you need to think about find the right aha moment metric as the first step, as we just talked about, because that's the success, that's the goalpost. And then, design a product experience to help more people together. And I usually think about do is better than show is better than tell, meaning you want to remove all the frictions and somehow give them a warm start, give them some sample template, give them some sample thing they can play with initially in that very moment already, and you can supplement that with your email to bring them to the product if they don't do that. So that's activation. If activation is okay, but your conversion, your self-check checkout flow, usually there are also room for improvement. Many company I work with, when I try to buy, I cannot even find where to buy. It's very hard to find where do I click to start this checkout process, or they may have some frictions in the checkout flow where it's not localized. One company, when I look at their data, they find that India has very low success rate, which is expected, but we begin to say it's because the payment solution they choose actually doesn't support that market well. And they added another payment solution, immediately they are seeing much better success rate. And if they're already in the checkout, you don't want to lose any of them, right? Just do a hundred experiments to get to as much higher kind of commercial possible, because you don't want to lose any of them. So activation, conversion, usually are two great place to start.

(00:50:08):
And then from there, I would say think about your PQL/PQA, motion, which is the other conversion pass, which is if you also want to have sales blended into this, right, product-led sales motion, how do you set up the structure, the foundation so that you can know what are some data signal to tell you those are better leads? And what are some customer criteria, in terms of size segment, you should set up, how do you get those data, and then how do you hand this to your sales team, how they can close using those data, use this knowledge? That's another very big opportunity area. That's a bigger effort, compared to those two low-hanging fruits.

(00:50:53):
And the last thing I would say, product-led acquisition is a great place to start. If your product is a collaboration software, think about Airtable and it's Figma, right? As part of my workflow, I invite my team to join, I spread this out. If you have that use case, you can build that into a product that's awesome, that's very powerful.

Lenny (00:51:18):
So there's a lot there. So let me try to summarize what you just shared and how it connects. So you have a self-serve product, you've gotten to a point where you can sign up and try something for free?

Hila Qu (00:51:28):
Mm-hmm.

Lenny (00:51:29):
And then you do this audit of where along this journey do we think the biggest opportunities lie and the most leverage lives? And you have these, I think, four buckets of opportunity?

Hila Qu (00:51:40):
Mm-hmm.

Lenny (00:51:40):
Acquisition, which is top of funnel, do you want to double down and invest there first, or activation, which is help people see the value more quickly?

Hila Qu (00:51:48):
Mm-hmm.

Lenny (00:51:49):
Bucket three would be, you called it conversion, which essentially help them buy it more efficiently?

Hila Qu (00:51:56):
Mm-hmm.

Lenny (00:51:56):
And then there's a bucket of retention, of just keeping them around longer, which I don't know if you mentioned this, but I know that's probably not where you want to start, so it's even not worth chatting about too much.

Hila Qu (00:52:04):
Yeah.

Lenny (00:52:05):
Cool. And so the question, basically, a founder or product team has to decide is which of these three buckets do they go in on when they're trying to add product growth, acquisition, activation or conversion?

Hila Qu (00:52:16):
Mm-hmm. Mm-hmm.

Lenny (00:52:17):
It'd be cool, maybe just one example of each of these three buckets, like what's a product that did a good job here? And then you also talked about how to know which one to start with. Maybe just again, just a quick summary of you should probably start activation if this, if you have something like that?

Hila Qu (00:52:32):
You should probably start with activation. Activation is actually a common good starting place for most B2B software.

Lenny (00:52:32):
Awesome.

Hila Qu (00:52:40):
Because usually B2B softwares are not designed to really get you to use quickly, historically. A good example, there are, I think, all the best PLG companies, they do a awesome job. That's almost like my criteria to say whether this is a great PLG product or not. Think about Miro, as an example. If you go through their activation experience and sign up to usage, they ask very limited questions, very targeted. They drop you, kind of, they ask you about your use case, what are you here for? Are here to do a brainstorm session? Are you here to develop a roadmap? And they quickly gave you templates to get started. Just like in maybe five minutes, you finish the entire journey from go to the website and sign up, answer a few questions, and you are already using the template they provided to do the thing you want to do. That's time to value. That's a success. I think that's a really great standard for all the PLG, like a B2B product, try to follow. So that's activation is usually a good place. If you don't know where to start, do that.

(00:53:54):
And then conversion, I would say, is a place, again, worth investing, but there are two layers. One is the self-check-hub flow, just do some experiments there. You can actually go to any E-commerce website, like, I don't know, go to Lululemon, go to Amazon, make your conversion process as easy as theirs. That should be your goal. The consumers shouldn't be confused about complicated pricing, where to find all of that, so that's a place always worth investing, testing more, because that's revenue so close to be added into your book.

(00:54:39):
And then the PQL/PQA part, the other more-complicated path, I would say that's something you want to figure out activation and self-checkout a little bit, and you want to have some reasonable user number and then invest there, otherwise it can be a little bit jumping too fast and jumping too ahead. And the acquisition, a product-led acquisition is a great place to invest, if you have a collaboration workflow, you have some inherent, internal viral components in your products. Think about Figma, think about Calendarly even, right? It can spread. This product is so easy. You can build something to allow it to spread on its own.

Lenny (00:55:24):
Okay. I'm hoping that was really helpful, because I think a lot of people are like where do I start, what do I do to help start moving down this road of product growth? And what I'm hearing generally is just activation is probably where you want to focus, which is essentially getting people to your value quicker. And what's cool about that, and we had a podcast with Lauryn Isford from formerly Airtable, now at Notion, talking about all the ways to do that. And interestingly, one of the biggest levers for retention, and moving retention, is often onboarding and improving activation, so win-win.

Hila Qu (00:56:00):
Yeah, definitely. And I could talk a little bit about retention expansion, if you think that's helpful as well?

Lenny (00:56:00):
Sure, let's do that here.

Hila Qu (00:56:08):
Yeah, I know that I didn't talk about that in the post, and there are people asking, hey, do you plan to write another post on this specific topic? So the reason why I didn't cover too much retention expansion is, as you mentioned, it's not usually a first place to start. I call retention the messy middle. It's actually a messy part of the entire funnel. A quick activation, conversion, those are fast. Those are almost sometimes shorter time span, right? You have a lot of never, and you can test very quickly, and that acquisition is a very big leverage. You need to get more users, always.

(00:56:48):
Retention is super important, but it's a little bit messy. It's over a very long period of time, and your customers can be, at any given moment, they can be retained or not, like if they just cancel or they just decided not to use anymore, you already lost them, so it's a very messy part. But how I think about retention, there are two steps. One is how to build a habit in their usage pattern, so that they are using this maybe every week, every day. The key to do that is, first of all, your product need to have a high enough frequency. If you are using this once per month, it's not likely you can build this into a habit.

(00:57:39):
Before GitLab, I worked at Acorns. We started as an investment app, and the whole thing is passive investment, passive investing. You bought some ETFs, and then you basically don't even need to check, and you just keep adding money and it will grow, and after 10 years is awesome. It's actually the right investment philosophy, but when I worked as a head of growth, it made a big challenge for me, because think about set and forget it. They don't even need to go back to a product to be successful. And that make it very hard, as a head of growth, to drive engagement, drive retention. I don't even know whether they're retained or not, if they are not coming back, right? I can only gauge from other indicators. So I think one thing I would say about building habit is think about how to build those habit feature or collaboration feature into your workflow already, into the product already. That is the reason they can retain, fundamentally, if it's high frequency, if it involves collaboration with other people, if it's part of their workflow. So that's the first step. You can obviously use a lot of the looks to reinforce that. You can send them an email if they take certain action, and get them back, and to repeat that action, but fundamentally you need to build that into your product.

(00:59:09):
And then the next part around retention is I actually think extension is part of retention. Basically you already have a steady usage flow. You are using this habitually every week, every day. What are the right moment to prompt you to think about maybe buying more? And there are three buckets of product-led extension. The first one is up upgrade to a higher tier. The second one is buying more seeds, buying more license. The third one is if you have some sort of a consumption add-on component, just consuming more, right? Like for GitLab, you can go from bronze tier to a silver tier, you can go to a higher tier, and then you can buy more seeds, and you can also buy more CSCD minutes to consume. Those are all the different moments. How you can do that is really understand data, understand usage, and trigger a lot of the right conversation at the right moment to the right person.

(01:00:17):
And you can, again, a lot of similar tactics you use in activation conversion actually can be beautifully applied in expansion, because it's almost a combination of getting people to the aha of that feature, use that feature, try that feature, getting them to convert.

Lenny (01:00:34):
You're leaving all these gold bricks that I have to resist not following and getting off track with, because there's so much, and like retention is its own conversation. We could have maybe just one question along those lines. What's something that you've launched that had a tremendous impact on retention? Is there an example of just like, wow, that really had a big impact, you talk about frequency maybe, but what comes to mind?

Hila Qu (01:00:56):
I can share some of my example at a course my-

Lenny (01:00:59):
Yeah.

Hila Qu (01:01:00):
I think there are two things. One thing is actually very similar to what you just said. When I was asked to work on retention, I did a bunch of analysis. The biggest leverage for me is actually activation. So I ended up doing tons of experiments in activation. I identified what are the features for users to take experience value quickly so that they are more likely to retain. For us, it's a feature called recurring investment, which makes sense in hindsight, but at that time nobody's caring about that. We have some other very cool investment features called roundup investment, so nobody is really paying a lot of a attention on this, but when I look at data, I saw recurring investment has a high correlation with retention. So I did a lot of work trying to get more people to set this up, and which has been a great success, actually, in a very short period of time.

(01:01:58):
And then from there, I would say we begin to add more use cases that has a higher frequency, like I mentioned, right? If you only come here once per month to check our investment, it's very hard to retain you. We don't have any lever to engagement with you as well, if you are not in the product. So we ended up adding IRA account, retirement account. We ended up adding spending account, like a debit card, like more high-frequency use cases. Those use cases come with higher frequency and better retention by nature, so now you change the problem from how do I improve retention to how do I drive adoption of higher-frequency use cases? So I did, again, a bunch of experiments how to drive more adoption of retirement account. Once you have a retirement account, an IRA, there's tax consequences, all of that. There it's very hard for you to leave. So you flip the question into, again, adoption/activation problem in that case as well.

Lenny (01:03:04):
Amazing. Thank you for sharing those. Oh man, there's so many other things we could talk about retention, but we have enough to talk about on product-led growth. So there's two other areas that I want to touch on. One is data and infrastructure, and what people should know about how to set that up for success, and the other is hiring your team, and how to build out your product-led growth team. So starting with the data piece, maybe just as a big picture, just like what are the buckets of data and infrastructure people should be thinking about that they're going to have to invest in or should start thinking about early?

Hila Qu (01:03:36):
I think there are two big buckets. The first bucket is product usage data. As I mentioned, a lot of B2B software, they're really lacking in that, because when you sell via sales team, you don't need to know so many details, so granular usage data, all of that. The second bucket is I call this customer 360 database, because product usage data is one component, is the most essential. In order for your product-led gross motion to be successful, you also need to connect that with your marketing teams, marketing campaigns, your CRM, your sales force, who are the customers, prospects, what their stage. So those ideally need to be connected so that you have a 360 picture of your customer. If I have an Airbnb as a potential, like a target account, do I know there are users from Airbnb that are using my product, which features are they using, and do I send any marketing campaigns to each of them, do they respond, all of that. All of those ideally need to be connected, but in reality is all over the place. It's all in its own tools in most of the B2B companies.

Lenny (01:04:57):
What are just some tools that you think people should check out, start with maybe? What's Hila's recommendations on an initial stack or areas to explore, in terms of tooling?

Hila Qu (01:05:08):
I say there are two piece. One is infra, the other piece are some tools that are kind of secondary. So from infrastructure perspective, on data tool, my first tool usually, one is some sort of data hub segment, right? This next one is some sort of a product analytics tool. Think about Amplitude. I know PostHog is actually a pretty popular one. It's an open-source product analytics tool. There are Mixpanel, Pandle, all of that. So have some sort of data hub, data collection tool, and have some sort of product analytics tool. That's the data infrastructure.

(01:05:49):
And then you need to have an experimentation tool because, like I said, you cannot just imagine you build everything and everything works perfectly. So you need either like Optimizely, I know Amplitude has some experimentation components. Eppo is a new and upcoming one. You need some tool to allow you to do experimentation.

(01:06:12):
The third piece I think that's pretty essential, I counted in the infra, is some sort of a lifecycle marketing tool. I know many B2B companies, they use HubSpot or they use something for their email marketing, but those are usually least nurturing. And it's very different from lifecycle marketing tool, meaning you need to connect with Segment, Amplitude. You know what customers are doing your product, your design, your email, your in-app, your push notification, based on their behavior, at the right moment, to the right person. And you measure success by do they take the right action in a product, versus the lead nurture email marketing tool is do I get them to read the article, open the email, I add 10 points to their lead score, and they are a next step further in their list funnel? So, data tool, experimentation tool, lifecycle marketing tool, those are the infra.

(01:07:10):
And then from there, there are a lot of PLD tools you can add on top to make your day-to-day much easier. Just to start, as so like that are most essential for acquisition, you need to have some sort of a like a data enrichment tool. Think about ZoomInfo, Clearbit, because the biggest difference between B2B and B2C is that you still need to know about their company. You want to know this person, but you also want to know this person's company, right? That's a very important thing, and you can get a lot out of those data enrichment tool, and then you can design your journey differently based on that.

(01:07:52):
For activation, a lot of my clients are finding a lot of value in those tools like Appcues, User-Led, basically the tools that allow you to build onboarding flow quickly in a product without engineer kind of resource. So you need to do some initial integration, but as soon as you did that a marketing manager, a PM or someone, can just build some customized onboarding step-by-step flows himself. I think that's quite neat, because you need to test the tongue in that area.

(01:08:27):
And in terms of conversion, I would say there are many product-led growth, product-led sales tools. I think those are great. If you want to build out your PQL/PQA conversion pass, think about Endgame, Pocus, Tableau and Pace. There are a couple of them.

Lenny (01:08:47):
Wow. Amazing. That was an awesome list and really well-structured. Is there anything else along the data or infrastructure piece that you want to touch on before we move on to hiring and the team?

Hila Qu (01:08:59):
I just want to go back to the point, as I mentioned, product-led growth is data-led growth deep down. So in most of the situation when I see a company want to get started, where they are really missing or they need to invest more, is data. So if you identify you have a gap in this area, don't feel bad as well. A lot of pretty big companies are in the same shoes, and if you can't invest the time, money, the team, the tool, to figure this out, the benefit of this, right, the data collection, understanding usage data, can not only power your PLG motion, it can really power your entire product team, even your customer success team. Now you gave them the ingredients they need to develop the next feature, based on not only what your top customer asked for, but also what everybody's using, right?

(01:09:59):
Your customer success team can take a much deeper view in understanding what the clients are using, rather than just talk with the executives from the client and get a rough gauge of the situation. So I think it is a area worth investing, and every B2B company should be investing in.

Lenny (01:10:21):
I'm trying to channel what listeners might be thinking right now, and I imagine some people might be like what if I pick the wrong tool? I'm kind of stressed, I have to do all this research. I'm kind of worried about starting, because it'll set me up for failure later. Which of these buckets do you think is most important to get right, right from the beginning, and any advice on how to just avoid messing that up?

Hila Qu (01:10:41):
To get started, I would say probably a product analytics tool is the first step, and maybe the data hub, such as Segment. So if you have Segment and particle tools like that, it allows you to plug into so many different tools. You can basically try all the different tools, and if it doesn't work, you just flip a switch, you can try another tool. So there is a benefit there, but it is expensive, so I know companies may just go right into the product analytics tool. I would say it's hard to get it wrong completely, right?

(01:11:19):
In order for a product analytics tool to be meaningful, the first step is you need to collect the data, you need to do some instrumentation, you need to have the foundation. And then, because it's garbage in, garbage out, if you send a bunch of garbage data into your product analytics tool, your analyst will be just even more confusing, right? It's like he doesn't know whether to trust the data, what to use. So a lot of company I work with, the first step is maybe not looking into tool, but do an audit of your data instrumentation situation, to understand how many of the key actions are intact, is the format correct, is the data, what are the gaps? And you may need to do some re-instrumenta ...

Hila Qu (01:12:00):
Right, what are the gaps? And you may need to do some reinstrumentation, reformatting and things like that before you even plug into a product analytics to make it useful.

Lenny (01:12:10):
For someone that may want to do that audit, is there a thing you would point them to, or, I don't know, a blog, a course, something to help them understand if they're doing it right? Or is it like, "Bring Hila on," and you need someone like you to kind of help them through it?

Hila Qu (01:12:24):
No, you can bring me, but you don't have to bring me. I think there are, if you search on Google just the data dictionary, or data product usage, data audit, a lot of companies published template and spreadsheet you can use. I can even send you a few afterwards.

Lenny (01:12:43):
That'd be amazing.

Hila Qu (01:12:44):
And then you can just scroll through. Basically the key idea is go through your product experience, identify the key actions, and go through your data instrumentation and see, "Do they match?"

(01:12:57):
And the success of this is you identify the gaps and eventually you want to establish something called the data dictionary. I basically do that for a lot of my clients. And the data dictionary will include, here are all the key actions, what's the event name for each of those, and what are the property and things like that.

(01:13:17):
But you now know, "Hey, I have this action track, this is the name. If I have a new product manager or analyst, we can all refer to this." And everyone know the same definition rather than people are interpreting differently. So that's a very important part to success even before the tooling.

Lenny (01:13:39):
Awesome. It also reminds me a previous guest, Crystal Widjaja, has a awesome post on why most analytics efforts fail. And she talks a lot about this, of how to set your events up for success. So we'll link to that as well.

Hila Qu (01:13:50):
Mm-hm.

Lenny (01:13:51):
Maybe one last thing here, I'm trying to think about what would screw people up most, and it's probably not having a data warehouse and ETL sorts of tooling in place, because that feeds a lot of this.

Hila Qu (01:13:51):
Yep.

Lenny (01:14:01):
Is there anything you want to add there about just the importance of a data warehouse and how to set that up?

Hila Qu (01:14:06):
Some of the early stage companies I work with, when they just get started in the very beginning, they don't have data warehouse. They just basically have their product and they have some sort of a Google Analytics or Amplitude, and that's it. It's pretty wild, but it's working and they can get to someplace from there.

(01:14:25):
But as soon as you begin to have data user, it's time to get serious to establish a data warehouse, have some ETL solution. I think there are the most common best practice ones, like AWS and things like that. There are also some startups that are doing this and you can utilize as well.

(01:14:49):
But again, as soon as you become a serious business, you should invest in that. Otherwise, it's pretty wild and it's pretty fragile as well.

Lenny (01:14:59):
And when you say AWS, you mean at Redshift, I imagine?

Hila Qu (01:15:01):
Yeah.

Lenny (01:15:02):
Cool. Awesome. Okay, final area that we have time for, which is awesome, which is around building your team. So maybe just two questions here. What is your advice for starting the initial team investing in PLG? How does that usually look and what do you think people should do? And then later, how does that evolve over time?

Hila Qu (01:15:21):
How I see most companies started is the founder or the leadership team realize that they need to do PLG. And they build a conviction. Maybe initially there isn't even a dedicated team, but they did something here and there, they decided to invest in this.

(01:15:40):
And the common place to start is to hire a head of growth, or it can be a lead growth PM, but someone who has a little bit of experience in this area. And then they begin to build this core growth squad as the first growth team. And I think that's a very common place to start.

(01:16:01):
The other place to start that's less common, but I also think it happening in reality, is maybe they will start a cross-functional, almost like a tiger team. Because if the initial focus area is, let's say, they want to do a product qualified lead, or basically add that funnel. That involves not only product team, that will involve data team because you want to know what are the usage pattern that indicate these is better leads. You also need to bring sales team in because they need to work on those leads to close them.

(01:16:39):
So if that's the initial starting area, a cross-functional tiger team is also possible option. But the most common way is hire a head of growth, usually a growth PM, and then start a team with engineering, design, data to support that core growth squad.

Lenny (01:17:00):
And the main difference between these two. One is dedicated, "We are going to dedicate full-time people to helping us grow." Like I say we talked about earlier, let's say they're going to focus on activation and that's their whole job. Versus tiger team is basically they're borrowing resources from other teams and this is kind of a side project for them.

Hila Qu (01:17:18):
Yeah. A little bit, for a period of time. So it's temporary. It's kind of they almost to want to get into... I would say usually the cross-functional team, the tiger team, is a little bit prior to a full commitment. They're pretty much committed, but they still want to try this out and get a final conviction, and then they begin to dedicate resources.

(01:17:43):
And you ask about how do they evolve from there.

Lenny (01:17:46):
Before we actually get there, maybe one more quick question. Which would you recommend? I imagine you'd recommend a dedicated team, if you can do that.

Hila Qu (01:17:54):
Mm-hm.

Lenny (01:17:55):
When would it make sense to go the tiger team route? In what cases?

Hila Qu (01:17:59):
One situation I would recommend is that if the initial focus area is, like I said, product qualified leads, the sales conversion path. Because if you think about you have a head of growth or a core growth PM, that person usually has a growth PM background and is in the product organization. And they're awesome if the initial focus areas are activation, conversion, those kind of involve a lot of experimentation. But activation and conversion are relatively confined, it's something the growth PM and engineer design data, they can work on.

(01:18:39):
If your initial focus area you felt like, "My biggest bit is actually do this PQL thing," it is a little bit harder for the growth PM to socialize all those cross-functional resources, because he need to get pretty deep into data. He need to have a counterpart in sales, even in marketing. So in that case, I think it's possible that maybe you start a tiger team.

(01:19:03):
You can combine both. You can have a growth PM dedicated, but have some tiger team to be working with him or her on this PQL project as well.

Lenny (01:19:14):
Got it. And I like this term tiger team, by the way. I haven't heard that before. It sounds like a lot of fun. Very dynamic. Okay, cool. And then yeah, what happens next after you have this initial team?

Hila Qu (01:19:24):
Once you have this initial team, it's important to give them the resources they need, and give them an initial focus area, give them support and a little bit time, allow them to try things out and get some early wins. And early win is the biggest thing I would say for, and whenever you start a new growth team, try to look for some opportunity, try to get some early wins in whichever focus area you choose.

(01:19:53):
And from there, if you get some of the wins, the team has some momentum, there are more confidence from the organization in PLG, right? It's time to potentially extend and formalize. So fundamentally I think you should not only think about the PLG team, you should think about the PLG org. Because PLG is a motion, it's cross-functional by nature, it's not just a product team or growth team.

(01:20:24):
Eventually you need to get to the place basically there is a head of growth product, that's the center of the PLG org. But there's also need to be a head of growth marketing, that's his or her counterpart in marketing organization. And then a head of product led sales, that's the counterpart in the sales organization.

(01:20:47):
Exactly where they sit, how they sit, it's different company by company. The most common one is head of growth product report to product org, head of growth marketing report to marketing, head of product led sales report to sales. But they have some sort of a very strong collaboration, because they are working in the same motion and same funnel. But I think that's next step, think about this org.

(01:21:11):
Once you have those counterparts in product, in sales, in marketing, the next step is think about what are the metrics they own to make sure you can manage this funnel, this motion, in the data-driven way. Because the PLG metrics are very different from SLG. The top of funnel is more about high quality signups. You don't want a lot of traffic, you want free signup, free trials. But it need to meet certain quality bar, it's not just anyone.

(01:21:46):
And then the head of growth product, he or her top KPI is about usage, activation. Activated teams is a very common metric. And then maybe number of PQLs, that's another. You want to get those teams to certain usage threshold basically.

(01:22:07):
And then the head of product led sales, he will be focused on converting those PQLs into revenue. So he will focus a lot on conversion rate, efficiency and maybe revenue, things like that.

Lenny (01:22:23):
Got it. And you're sharing a lot of org design verbally in the post, which we'll share obviously in the show notes. You can actually see a diagram of what these look like, to help kind of make it super clear.

(01:22:36):
I have maybe just one more question. Going back to the initial team, what are the functions you recommend they have on this like MVP PLG team?

Hila Qu (01:22:45):
The most important one is have a growth PM to be the lead, right? Head of growth, director of growth, lead growth PM. And then the growth PM, as you know probably very well, growth PM, he is a PM but has a much stronger skill set in analytics, experimentation, very data-driven. Think about metrics.

(01:23:06):
The growth PM's way of working is similar to other product manager, but his KPIs is actually more similar to the sales and marketing work. He's very focused on the conversion rate, the journey, the funnel versus the feature specifically itself.

(01:23:23):
And then the other functions you need to have for sure, I would often say actually a data analyst needs to be the very first hire. Sometimes even try to find a growth PM who can do analysis if you're really small, you can find that type of unicorn person.

(01:23:43):
Or even before hiring growth PM, hiring analyst, I would actually go as far as that. Because without insight, without a lot of foundation, your experimentation, your effort is really directionless in a sense.

(01:23:58):
So growth PM, analyst. And from there definitely you need some dedicated engineer, you need a designer. Designer can be somewhat not dedicated in early days, but engineer needs to be. Some sort of user research support as well, it doesn't need to be dedicated. But those are the core growth squad.

Lenny (01:24:18):
Okay. Real actual last question here for the growth PM. In your experience, are they most often coming from within the company already and they kind of shift to this role? Or do you recommend they find someone externally?

Hila Qu (01:24:30):
That's an excellent question. I have seen both. I actually recommend if you can find someone internally, maybe he's a PM, he want to do growth. Or he is an analyst who want to become more like a product role.

(01:24:48):
I even have a one client, the head of growth I work with used to be a investor relationship, like head of investor relationship. And he reports to the CEO and founder. He's very analytical. He hasn't been a PM before, but he can socialize the resource within the company to launch experiments in product, in marketing, in all of that. And I, as an advisor, will come in, guide him in the area he's not familiar with. And we actually drive pretty good results together.

(01:25:20):
So I think prefer hiring internally if possible. If not, if you really don't have anyone internally with that knowledge or with that interest, you can look outside. I would say map the initial growth PM hire to your starting point. If we already decided activation is the biggest focus area, try to find some growth PM with that experience. And if the conversion is a focus area, acquisition is the focus area, try to find someone with that experience.

Lenny (01:25:54):
I love that advice. We've reached our very exciting lightning round. I've got actually seven questions for you, the most ever we've had for a lightning round. Are you ready?

Hila Qu (01:26:04):
I'm ready.

Lenny (01:26:06):
Okay. What are two or three books that you've recommended most to other people?

Hila Qu (01:26:10):
This first one is called The Almanack Of Naval. Yeah, I don't know whether we read that one. I really love that one. That's kind of a life-changing book for me. I have it-

Lenny (01:26:22):
Do you have a favorite Naval-ism that comes to mind?

Hila Qu (01:26:26):
I learned finding leverage from him. He talked about there are four type of leverage. It can be your writing, it can be code, it can be capital, it can be team. So the reason why I invest a lot in writing is I felt like that's my leverage. And I love that.

(01:26:44):
The second book is called How Women Rise. I really love this one. I gifted this to a lot of my female team member and I really learned a lot from them.

(01:26:56):
And the third one is my book, it's called [Chinese 01:27:01]. It's only in Chinese, if you don't read Chinese you cannot read it. But I heard, my friends told me, if you are launching an email campaign, if you're doing experiments, have this book by the side, it will help with conversion rate just by its appearance.

Lenny (01:27:18):
That's amazing. Is there an English translation or is it only in Chinese right now?

Hila Qu (01:27:22):
It's only in Chinese, so you have to learn.

Lenny (01:27:25):
All right, I see. All right. There's an advantage there, if you can speak Chinese your email conversion will go up.

Hila Qu (01:27:29):
Yes.

Lenny (01:27:30):
And then just to the first book, it was called The Almanack Of Naval, right?

Hila Qu (01:27:34):
Okay.

Lenny (01:27:35):
Is that right?

Hila Qu (01:27:35):
Yes, yes.

Lenny (01:27:36):
Okay, cool. Sweet. And we'll link to all these. Okay, favorite recent movie or TV show?

Hila Qu (01:27:41):
I watched a movie, it's a sci-fi movie from China, it's called The Wandering Earth 2. It's by the famous author, Cixin Liu. He's the author of Three Bodies. I don't know whether you heard of it?

Lenny (01:27:53):
Mm-hm. Oh my God, love that.

Hila Qu (01:27:54):
That movie is awesome. It's kind of really cool. I really highly recommend it.

Lenny (01:28:00):
I have to go check that out. Oh my God. I heard they're bringing Three Body Problem to Apple TV or Netflix. There's like a show coming.

Hila Qu (01:28:06):
Yes, yes. I look forward to that as well. I watched many versions already kind of film, none of them are good. So-

Lenny (01:28:17):
That's the problem it's so hard to do well. Oh man, I'm not optimistic, but I'm excited anyway.

Hila Qu (01:28:21):
Yeah, yeah.

Lenny (01:28:22):
Favorite interview question that you like to ask.

Hila Qu (01:28:24):
When I interview a growth PM or analyst, I will always ask, "What is a experiment you launched that has a very unexpected result? And what did you do after that?"

Lenny (01:28:37):
What do you look for in an answer there that makes you feel like they are strong?

Hila Qu (01:28:41):
So first of all, they have to be launching a lot of experiments to get very unexpected answer. So if you are only... Many people remember their success for the interview, they prepare that very well. I don't want to ask, "What's your successful experiment?"

(01:28:58):
Secondly, I want to know just why it's unexpected. That reveals the deep, deep level of their thinking, how deep they are thinking. If they should expect that based on what they described, then they are not thinking deep enough, they are not understanding customer enough.

(01:29:15):
And what they do afterwards is also awesome. Like, "How do you face a failure or unexpected result? What are the clues you can pursue? What are the actions you can take? How do you learn something out of it?"

Lenny (01:29:28):
I love it. What's a favorite recent product you've recently discovered that you love?

Hila Qu (01:29:33):
I would say, similar to everyone, ChatGPT. But also Lululemon yoga pants.

Lenny (01:29:43):
Amazing. Great. What's something relatively minor you've changed in your product development process that has had a tremendous impact on a team's ability to execute?

Hila Qu (01:29:51):
Yeah. At first I added basically a section in the dock, in the ticket stack. Ask the PMs to write the success metric ahead of time. As well as adding which of the growth lever this is helping. Is this contributing to acquisition, activation, retention, monetization? And it forced them to sometimes think through deeply, "Why are we even doing this?" Sometimes they ended up not doing that by just writing it down.

Lenny (01:30:23):
I love that. Next question. I know you're big on children's books, do you have a favorite children's book?

Hila Qu (01:30:29):
My favorite children's book is called Someday, and I recommend everyone to check it out. And basically it's talking about how our children used to be our baby, become our kids, and when they are taller and more stronger than us and they will remember us.

Lenny (01:30:51):
I'm going to need to check that out now. And final question. I know you're big on growth concepts, you have all these frameworks and concepts. And so what is your favorite growth concept?

Hila Qu (01:31:02):
I would say north star metric, because I find it's not only valuable to growth, it's valuable to just everything.

(01:31:10):
When I think about what do I want to do with my career, does that fit my own personal north star metric? When I think about how I want to raise my kids, I think about what's the north star metric for successful education for my kid?

(01:31:27):
Because it forced me to think long term. It forced me to think about what's valuable to me, to them, not only by the society standards, ARR revenue, like salary. And also what's my vision for myself and for my kids.

Lenny (01:31:43):
I love that. It reminds me of a recent guest where she always asks, "What are you optimizing for?" Whether she's talking with her kids or her husband or her team, and it's a similar concept.

(01:31:54):
Hila, this was incredible. I think we've shared tens of thousands of dollars of value, and it will probably lead to millions of dollars of revenue for a lot of companies. And it's everything I hoped it would be. Thank you so much for being here and for sharing so much wisdom.

(01:32:08):
Two final questions. Where can folks find you online if they want to reach out and learn more? And how can listeners be useful to you?

Hila Qu (01:32:15):
Yeah, they can find me on LinkedIn. Just search Hila Qu, H-I-L-A Q-U. You can find me. I have a personal website that's under development, but I contracted it to my kid, to my 12-year-old. So he need to wait until summer and hopefully this summer he can finish it.

(01:32:32):
Yeah, if you are a founder, you are looking for a growth advisor, feel free to hit me up. I'm always happy to just have a call with founders and leaders, get to know more people. And I'm a growth nerd, so I always want to nerd about growth anyway.

Lenny (01:32:51):
Amazing. Hila, again, thank you so much for being here.

Hila Qu (01:32:54):
Thank you.

Lenny (01:32:55):
Bye, everyone.

Hila Qu (01:32:56):
Bye.

Lenny (01:32:59):
Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcast, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennyspodcast.com. See you in the next episode.