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class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-8 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-8 mdc-u-ts-9"><span> </span><span class="AuthorsByLine_mck-c-authors-byline__author__XdrlD"><span class="AuthorsByLine_mck-c-authors-byline__no-wrap__Ced0j"><a data-component="mdc-c-link" href="/our-people/rikki-singh" class="mdc-c-link-inline___7DRrt_2734c4f mdc-c-link-inline--secondary___YKoOK_2734c4f"><span class="mdc-c-link__label___Pfqtd_2734c4f">Rikki Singh</span></a></span></span></div><div class="mdc-u-grid-col-md-start-8 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-8 mdc-u-grid-col-lg-end-11 ArticleContent_mck-c-article-content__share-tools__kWRRw"></div></section><section class="mdc-u-grid mdc-u-grid-col-md-12 mck-u-animation-blur-in-400"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-11"><div data-component="mdc-c-description" class="mdc-c-description___SrnQP_2734c4f mdc-u-ts-5"><div class="mck-u-links-inline">Adobe’s Varun Parmar discusses product-led growth and emphasizes that a great product should be intuitive, deliver immediate, tangible value to users, and be the primary driver of business growth.</div></div></div></section><main data-layer-region="article-body" class="mdc-u-grid mdc-u-grid-gutter-xxl"><div class="mdc-u-grid mdc-u-grid-col-1 mdc-u-grid-col-md-12"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-11"><div class="mdc-o-content-body mck-u-dropcap"><p><strong>In this episode</strong> of <em>McKinsey on Building Products</em>, McKinsey’s podcast on software product management and engineering, McKinsey partner Rikki Singh speaks with Varun Parmar, general manager of Adobe. Throughout his career, Parmar has led product teams at technology companies that are leaders in product-led growth (PLG), such as Box, Miro, and Adobe. Their topics of discussion include how exceptional products drive growth, the importance of reducing the amount of time it takes for customers to gain value from a product, achieving cross-functional alignment, and embracing cultural shifts—key elements for advancing product-led sales (PLS), an evolution of PLG. An edited version of their conversation follows.</p>  <h2>PLG philosophy and how to use it effectively</h2> <p><strong>Rikki Singh:</strong> Varun, before we jump in, please introduce yourself.</p> <p><strong>Varun Parmar:</strong> I am currently general manager of Adobe, overseeing a new generative AI [gen AI]–first application. My journey in the tech industry spans more than two decades, and most of that experience is in product management, leading high-growth initiatives across companies including Box, Miro, Adobe, EMC, and Dell. I also cofounded a company that was acquired by Box.</p> <p><strong>Rikki Singh:</strong> How has your career influenced how you think about PLG, and what’s the philosophy behind PLG?</p> <p><strong>Varun Parmar:</strong> Throughout my career, I’ve been working at the intersection of technology and business, and I’ve realized the immense potential of leveraging product capabilities to drive things such as user acquisition, engagement, retention, and expansion. My philosophy for PLG is deeply rooted in the belief that a great product should be the primary driver of growth for a business. In a nutshell, creating products should deliver tangible value. If a business cannot deliver something valuable to customers, then nothing else matters because the value proposition is not strong.</p> <p>Beyond that, you need to build something intuitive. It should deliver immediate value to the user and have built-in mechanisms to go viral and get the flywheel going. By flywheel, I mean thinking about your business model more strategically and then figuring out what to implement into the product design that will surface those experiences. As a product person and as a strategist, you have to take a step back and determine which one or two metrics are most important for you to trigger growth in your business. For example, Amazon’s metrics were low price structures and low cost. In that case, everything started by being frugal and making sure they had a competitive advantage so they could price products lower. Then they could attract many users and sellers.</p> <p>Unlike traditional sales-led approaches that rely heavily on sales teams, relationships, and outbound efforts, PLG focuses on creating seamless user experiences that essentially convert new users into strong advocates for the product. To me, PLG is a business methodology in which user acquisition, conversion, retention, and expansion are all primarily driven by the product itself. This approach aligns the product team closely with business outcomes and fosters a strong cross-functional alignment. The product needs to work closely with both marketing and sales to create this magic.</p> <p><strong>Rikki Singh:</strong> What is an example of successful PLG? What tactics work?</p> <p><strong>Varun Parmar:</strong> PLG companies such as Miro, Slack, Dropbox, Zoom, and Atlassian have all done spectacular jobs and accomplished amazing things across the user acquisition funnel. The top of the funnel is focused on user acquisition, and the thinking around PLG is centered on delivering value before you can monetize. This is a subtle principle, but it’s important.</p> <p>For example, Miro allows users to get a version of their app without signing up for it, and it’s a highly optimized flow. Users can search for a whiteboarding app and experience the application in less than a second. Some companies call these experiences “preproducts.” They’re essentially creating lightweight experiences so users can see the value in the company’s products. If your entire focus is on building a great product and the value proposition is strong and differentiated, then conversion rates will increase.</p> <p><strong>Rikki Singh:</strong> What are other key use cases within the PLG funnel apart from user acquisition?</p> <p><strong>Varun Parmar:</strong> Onboarding and activating users are also key moments. For many businesses, these steps tend to be leaky parts of the funnel where people drop off. Onboarding is not just about giving users tools and tips; it also requires thinking about the persona or role of the user and what they want to accomplish. This goes back to the “jobs to be done” framework—that people buy products to get a certain task done. Successful strategies include templating things based on a user’s function or role to speed up the delivery of value.</p> <h2>The evolution to PLS</h2> <p><strong>Rikki Singh:</strong> Underpinning every use case is the notion of getting users value faster, which continues to happen as companies think about upselling or cross-selling opportunities. In addition to knowing the user, what other aspects do you think are critical for enabling PLG?</p> <p><strong>Varun Parmar:</strong> There are multiple things inside and outside the product that are necessary. PLG requires a deep investment in data infrastructure because you can do it well only if you have visibility into the user funnel and know which things work. Product managers, designers, and engineers all need to understand and have access to these metrics to enable these flows to happen inside of the product.</p> <p>Additionally, culturally, the product, marketing, and sales teams have to work as one unit. You have to blur the lines between the functions. Who’s acquiring the top of the funnel? Who owns the landing page for when the user clicks on an ad? What is the flow from the beginning? All three teams need to facilitate those things.</p> <p><strong>Rikki Singh:</strong> Who owns the PLG outcomes: product, marketing, or sales? Your point on alignment answers this to some extent, but who owns the outcome, and how do you foster that cross-functional collaboration effectively?</p> <p><strong>Varun Parmar:</strong> In the PLG and PLS models, ownership of outcomes is inherently cross-functional, which can be difficult because there is no direct point person. Product is quarterbacking, but marketing and sales are equally important in driving and supporting successful outcomes. And doing this well requires a holistic approach in which these functions are aligned on their plans, metrics, and teams and are marching toward a common goal.</p> <p>The product team’s primary responsibility is to develop and maintain a product that drives every step of the user funnel, from acquisition to engagement to conversion, which encourages retention and expansion. They are also in charge of building the user experience so it’s seamless, valuable, and continuously improving based on data insights.</p> <p>The marketing team should be responsible for promoting the product, driving awareness, and generating leads. In a PLG model, marketing is also responsible for accurately defining the product value proposition in the company’s messaging. Acquiring users requires marketing to be precise about the value proposition the product delivers so the leads have a strong product–market fit.</p> <p>The sales team should be thinking about how to leverage a PLG model to reduce its dependency on a traditional sales model or to process and convert high-value leads. Salespeople need to be open to understanding how the product works in a deeper way; they need to be open to looking at data so that when they go in front of the customer, they can have meaningful conversations.</p> <p>Each of these teams are equally responsible for the outcome. It’s the amalgamation of these teams through a unified vision and set of goals and metrics that leads to a successful outcome.</p> <p><strong>Rikki Singh:</strong> In some sense, it feels like PLG and PLS approaches are allowing the industry to build products that better fit customer needs. What do you think about that?</p> <p><strong>Varun Parmar:</strong> More so, PLG requires a stronger value proposition than traditional sales approaches. There is a customer pain point and need that is deep enough that customers want to look for a product or a solution that solves the problem; this magic does not happen automatically. PLG increases the quality of the product and the business you are building in a meaningful way because you cannot rely on your relationships and presence in the field to get business and close deals. The product has to stand on its own two legs, and it needs to show exactly how it can deliver something quickly.</p> <div data-component="mdc-c-module-wrapper" data-module-theme="default" data-module-background="transparent" data-module-category="" class="mck-c-disruptor1up mck-o-md-center mck-u-inline-module-border-top mck-u-inline-module-border-bottom mck-u-screen-only" data-layer-region="disruptor-1up"><div class="mdc-u-grid mdc-u-grid-gutter-md mdc-u-grid-col-lg-12 mdc-u-grid-col-md-12 "><div class="mdc-u-grid-col-md-span-12"><header data-component="mdc-c-header" class="mdc-c-header"><div class="mdc-c-header__block___i1Lg-_2734c4f"><h3 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_2734c4f"><div>Subscribe to the <em>McKinsey on Building Products</em> podcast</div></h3></div></header><div data-component="mdc-c-link-container" class="mdc-c-link-container___xefGu_2734c4f mdc-c-link-container--display-column___X0HDD_2734c4f mck-c-disruptor1up__content Disruptor1Up_mck-c-disruptor1up__content--links__VV4lE mdc-u-grid-gutter-md"><a data-component="mdc-c-link" href="https://podcasts.apple.com/us/podcast/mckinsey-on-building-product/id1735607317" class="mdc-c-button___U4iY2_2734c4f mdc-c-button--primary___Ed-lT_2734c4f mdc-c-button--size-large___jwpUy_2734c4f" target="_blank"><span class="mdc-c-link__label___Pfqtd_2734c4f">Apple Podcasts</span></a><a data-component="mdc-c-link" href="https://open.spotify.com/show/79pncGJtBtzz7pFoR6OiH8" class="mdc-c-button___U4iY2_2734c4f mdc-c-button--primary___Ed-lT_2734c4f mdc-c-button--size-large___jwpUy_2734c4f" target="_blank"><span class="mdc-c-link__label___Pfqtd_2734c4f">Spotify</span></a><a data-component="mdc-c-link" href="/capabilities/people-and-organizational-performance/how-we-help-clients/mckinsey-academy/product-academy/mckinsey-on-building-product" class="mdc-c-link-cta___NBQVi_2734c4f"><span class="mdc-c-link__label___Pfqtd_2734c4f">Listen to previous episodes</span><span data-component="mdc-c-icon" class="mdc-c-icon___oi7ef_2734c4f mck-link-arrow-right-icon"></span></a></div></div></div></div> <h2>Measuring the success of PLG </h2> <p><strong>Rikki Singh:</strong> You mentioned that leaders need to be aligned and offered incentives using consistent metrics. What are the top metrics that you’ve seen effective PLG organizations use? You mentioned usage and conversion rates across the funnel; are there other metrics you consider to be key?</p> <p><strong>Varun Parmar:</strong> Often, PLG firms refer to the NSM [North Star metric], which is essentially the one metric that is most positively correlated to the outcomes they’re trying to drive. To drive revenue, you have to drive something else that will lead to revenue, such as conversions. Often, the NSM is a metric that is highly correlated to revenue. Many best-in-class companies have robust data science teams that monitor different actions and behaviors to come up with the NSM. It can take a while. I’ve seen companies spend a year or more experimenting with multiple metrics. Once you define the NSM, you figure out what you can do to drive it and communicate to your product teams how can they contribute toward achieving it.</p> <p>This is where having a strong data foundation, strong analytics team, and hypothesis-driven approach is important. In a sales-led organization, a lot of the focus is the revenue. In these PLG companies, revenue is important, but the way you get it is the focus.</p> <p><strong>Rikki Singh:</strong> If you’re trying to align three different groups in a massive organization, the simpler and clearer you can define the common metric and the method for tracking it, the better the alignment.</p> <h2>Current challenges in PLG</h2> <p><strong>Rikki Singh:</strong> Do you think it’s becoming harder for companies to drive PLG because of smaller budgets or tougher buying decisions that organizations have to make?</p> <p><strong>Varun Parmar:</strong> There’s no denying that there are headwinds in a PLG-only model for those reasons. The economic landscape is evolving, budgets are not increasing, and because companies are now funding AI initiatives, they’re dipping into existing budgets and buying decisions are being elevated higher in organizations. So executives are making decisions that otherwise could be made by middle management.</p> <p>Having said that, PLG as a strategy is quite sound. Companies have to figure out how to navigate the existing environment and implement a few strategies to address these challenges.</p> <p>One strategy is sharpening the value proposition. If the value proposition is not strong or deep enough, companies should avoid investing too much in putting the PLG in motion and acquiring customers because conversion will be hard. It’s important to take time to build value propositions and capabilities that differentiate the product.</p> <p>Another strategy is making the business case, particularly in product-led sales, bulletproof. To do that, data is key. For example, if a company uses Miro to help boost collaboration among its cross-functional teams, the outcome could be that it reduced the time to market for new products by 30 percent because cross-functional teams across geographies were more effective. Data also improves the quality of the outcome. Leveraging that data to tell a compelling story helps show how the product can be valuable. How can you tie the business case to the ROI that the customer is trying to drive?</p> <p>Last, while the product can be amazing, there are usually other opportunities to delight customers. In a budget-constrained environment, allowing the customer success function to help the organization realize value can play a pivotal role. In my experience, decision makers can point to members of the customer success team who have been supportive, which helps the company achieve the outcomes it desires.</p> <h2>How gen AI is affecting PLG</h2> <p><strong>Rikki Singh:</strong> Gen AI is top of mind for everyone. What is your perspective on how gen AI will impact PLG and PLS adoption? What implications does it have for leaders?</p> <p><strong>Varun Parmar:</strong> Gen AI is a transformative technology with a fundamental value proposition: when it comes to PLS and PLG, there’s a big opportunity to automate actions. You can introduce gen AI into areas of the workflow that you want to build so it is augmenting them and supporting the different stakeholders on the product, marketing, and sales teams.</p> <p>For example, salespeople can get a synthesized view of the adoption, history, utilization, and opportunity of a certain customer quickly. Marketing can use AI to attract customers, find user acquisition strategies, and research what cohorts of users are performing the best. If they run a marketing campaign, for example, they can see which leads are converting the best or which brands are engaging the best.</p> <p>Teams can use gen AI to find solutions and guide the thinking that they already have. Experimentation is important, but once they find a model that works, they’ll be capable of doing more than they thought possible.</p></div><div class="container-placeholder"></div></div></div><div class="mdc-u-grid mdc-u-grid-gutter-xl"><section role="contentinfo" data-layer-region="article-about-authors" class="mdc-u-grid mdc-u-grid-col-md-12 AboutAuthor_mck-c-about-author__nRJzu"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-3 mdc-u-grid-col-lg-end-11"><h5 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_2734c4f mdc-c-heading--title___5qyOB_2734c4f mdc-c-heading--border___K8dj3_2734c4f mdc-u-align-center"></h5><div data-component="mdc-c-description" class="mdc-c-description___SrnQP_2734c4f mdc-u-ts-8 mck-u-links-inline mck-u-links-inline--secondary mdc-u-mt-5"><div><p><strong>Varun Parmar</strong> is general manager of Adobe. <strong><a href="/our-people/rikki-singh">Rikki Singh</a></strong> is a partner in McKinsey’s Bay Area office.</p> <p>The author wishes to thank Aditi Chawla, Akul Vijayvargiya, Stratos Botis, and Tomas Pinilla for their contributions to this article.</p> <p><em>Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.</em></p></div></div></div></section><section class="mdc-u-grid mdc-u-grid-col-md-12 mck-u-screen-only"><div class="mdc-u-grid-col-md-start-2 mdc-u-grid-col-md-end-12 mdc-u-grid-col-lg-start-5 mdc-u-grid-col-lg-end-9"><h5 data-component="mdc-c-heading" class="mdc-c-heading___0fM1W_2734c4f mdc-c-heading--title___5qyOB_2734c4f mdc-c-heading--border___K8dj3_2734c4f mdc-u-align-center">Explore a career with us</h5><div data-component="mdc-c-link-container" class="mdc-c-link-container___xefGu_2734c4f mdc-c-link-container--align-center___ar3mu_2734c4f"><a data-component="mdc-c-link" href="/careers/search-jobs" class="mdc-c-button___U4iY2_2734c4f 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customers, leading to better business outcomes."},"displayDate":{"jsonValue":{"value":"2024-11-06T00:00:00Z"}},"body":{"value":"\u003cp\u003e\u003cstrong\u003eIn this episode\u003c/strong\u003e of \u003cem\u003eMcKinsey on Building Products\u003c/em\u003e, McKinsey\u0026rsquo;s podcast on software product management and engineering, McKinsey partner Rikki Singh speaks with Varun Parmar, general manager of Adobe. Throughout his career, Parmar has led product teams at technology companies that are leaders in product-led growth (PLG), such as Box, Miro, and Adobe. Their topics of discussion include how exceptional products drive growth, the importance of reducing the amount of time it takes for customers to gain value from a product, achieving cross-functional alignment, and embracing cultural shifts\u0026mdash;key elements for advancing product-led sales (PLS), an evolution of PLG. An edited version of their conversation follows.\u003c/p\u003e\n[[audio 1]]\n\u003ch2\u003ePLG philosophy and how to use it effectively\u003c/h2\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e Varun, before we jump in, please introduce yourself.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e I am currently general manager of Adobe, overseeing a new generative AI [gen AI]\u0026ndash;first application. My journey in the tech industry spans more than two decades, and most of that experience is in product management, leading high-growth initiatives across companies including Box, Miro, Adobe, EMC, and Dell. I also cofounded a company that was acquired by Box.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e How has your career influenced how you think about PLG, and what\u0026rsquo;s the philosophy behind PLG?\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e Throughout my career, I\u0026rsquo;ve been working at the intersection of technology and business, and I\u0026rsquo;ve realized the immense potential of leveraging product capabilities to drive things such as user acquisition, engagement, retention, and expansion. My philosophy for PLG is deeply rooted in the belief that a great product should be the primary driver of growth for a business. In a nutshell, creating products should deliver tangible value. If a business cannot deliver something valuable to customers, then nothing else matters because the value proposition is not strong.\u003c/p\u003e\n\u003cp\u003eBeyond that, you need to build something intuitive. It should deliver immediate value to the user and have built-in mechanisms to go viral and get the flywheel going. By flywheel, I mean thinking about your business model more strategically and then figuring out what to implement into the product design that will surface those experiences. As a product person and as a strategist, you have to take a step back and determine which one or two metrics are most important for you to trigger growth in your business. For example, Amazon\u0026rsquo;s metrics were low price structures and low cost. In that case, everything started by being frugal and making sure they had a competitive advantage so they could price products lower. Then they could attract many users and sellers.\u003c/p\u003e\n\u003cp\u003eUnlike traditional sales-led approaches that rely heavily on sales teams, relationships, and outbound efforts, PLG focuses on creating seamless user experiences that essentially convert new users into strong advocates for the product. To me, PLG is a business methodology in which user acquisition, conversion, retention, and expansion are all primarily driven by the product itself. This approach aligns the product team closely with business outcomes and fosters a strong cross-functional alignment. The product needs to work closely with both marketing and sales to create this magic.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e What is an example of successful PLG? What tactics work?\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e PLG companies such as Miro, Slack, Dropbox, Zoom, and Atlassian have all done spectacular jobs and accomplished amazing things across the user acquisition funnel. The top of the funnel is focused on user acquisition, and the thinking around PLG is centered on delivering value before you can monetize. This is a subtle principle, but it\u0026rsquo;s important.\u003c/p\u003e\n\u003cp\u003eFor example, Miro allows users to get a version of their app without signing up for it, and it\u0026rsquo;s a highly optimized flow. Users can search for a whiteboarding app and experience the application in less than a second. Some companies call these experiences \u0026ldquo;preproducts.\u0026rdquo; They\u0026rsquo;re essentially creating lightweight experiences so users can see the value in the company\u0026rsquo;s products. If your entire focus is on building a great product and the value proposition is strong and differentiated, then conversion rates will increase.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e What are other key use cases within the PLG funnel apart from user acquisition?\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e Onboarding and activating users are also key moments. For many businesses, these steps tend to be leaky parts of the funnel where people drop off. Onboarding is not just about giving users tools and tips; it also requires thinking about the persona or role of the user and what they want to accomplish. This goes back to the \u0026ldquo;jobs to be done\u0026rdquo; framework\u0026mdash;that people buy products to get a certain task done. Successful strategies include templating things based on a user\u0026rsquo;s function or role to speed up the delivery of value.\u003c/p\u003e\n\u003ch2\u003eThe evolution to PLS\u003c/h2\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e Underpinning every use case is the notion of getting users value faster, which continues to happen as companies think about upselling or cross-selling opportunities. In addition to knowing the user, what other aspects do you think are critical for enabling PLG?\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e There are multiple things inside and outside the product that are necessary. PLG requires a deep investment in data infrastructure because you can do it well only if you have visibility into the user funnel and know which things work. Product managers, designers, and engineers all need to understand and have access to these metrics to enable these flows to happen inside of the product.\u003c/p\u003e\n\u003cp\u003eAdditionally, culturally, the product, marketing, and sales teams have to work as one unit. You have to blur the lines between the functions. Who\u0026rsquo;s acquiring the top of the funnel? Who owns the landing page for when the user clicks on an ad? What is the flow from the beginning? All three teams need to facilitate those things.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e Who owns the PLG outcomes: product, marketing, or sales? Your point on alignment answers this to some extent, but who owns the outcome, and how do you foster that cross-functional collaboration effectively?\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e In the PLG and PLS models, ownership of outcomes is inherently cross-functional, which can be difficult because there is no direct point person. Product is quarterbacking, but marketing and sales are equally important in driving and supporting successful outcomes. And doing this well requires a holistic approach in which these functions are aligned on their plans, metrics, and teams and are marching toward a common goal.\u003c/p\u003e\n\u003cp\u003eThe product team\u0026rsquo;s primary responsibility is to develop and maintain a product that drives every step of the user funnel, from acquisition to engagement to conversion, which encourages retention and expansion. They are also in charge of building the user experience so it\u0026rsquo;s seamless, valuable, and continuously improving based on data insights.\u003c/p\u003e\n\u003cp\u003eThe marketing team should be responsible for promoting the product, driving awareness, and generating leads. In a PLG model, marketing is also responsible for accurately defining the product value proposition in the company\u0026rsquo;s messaging. Acquiring users requires marketing to be precise about the value proposition the product delivers so the leads have a strong product\u0026ndash;market fit.\u003c/p\u003e\n\u003cp\u003eThe sales team should be thinking about how to leverage a PLG model to reduce its dependency on a traditional sales model or to process and convert high-value leads. Salespeople need to be open to understanding how the product works in a deeper way; they need to be open to looking at data so that when they go in front of the customer, they can have meaningful conversations.\u003c/p\u003e\n\u003cp\u003eEach of these teams are equally responsible for the outcome. It\u0026rsquo;s the amalgamation of these teams through a unified vision and set of goals and metrics that leads to a successful outcome.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e In some sense, it feels like PLG and PLS approaches are allowing the industry to build products that better fit customer needs. What do you think about that?\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e More so, PLG requires a stronger value proposition than traditional sales approaches. There is a customer pain point and need that is deep enough that customers want to look for a product or a solution that solves the problem; this magic does not happen automatically. PLG increases the quality of the product and the business you are building in a meaningful way because you cannot rely on your relationships and presence in the field to get business and close deals. The product has to stand on its own two legs, and it needs to show exactly how it can deliver something quickly.\u003c/p\u003e\n[[disruptor1UP buildingproductspodcast]]\n\u003ch2\u003eMeasuring the success of PLG \u003c/h2\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e You mentioned that leaders need to be aligned and offered incentives using consistent metrics. What are the top metrics that you\u0026rsquo;ve seen effective PLG organizations use? You mentioned usage and conversion rates across the funnel; are there other metrics you consider to be key?\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e Often, PLG firms refer to the NSM [North Star metric], which is essentially the one metric that is most positively correlated to the outcomes they\u0026rsquo;re trying to drive. To drive revenue, you have to drive something else that will lead to revenue, such as conversions. Often, the NSM is a metric that is highly correlated to revenue. Many best-in-class companies have robust data science teams that monitor different actions and behaviors to come up with the NSM. It can take a while. I\u0026rsquo;ve seen companies spend a year or more experimenting with multiple metrics. Once you define the NSM, you figure out what you can do to drive it and communicate to your product teams how can they contribute toward achieving it.\u003c/p\u003e\n\u003cp\u003eThis is where having a strong data foundation, strong analytics team, and hypothesis-driven approach is important. In a sales-led organization, a lot of the focus is the revenue. In these PLG companies, revenue is important, but the way you get it is the focus.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e If you\u0026rsquo;re trying to align three different groups in a massive organization, the simpler and clearer you can define the common metric and the method for tracking it, the better the alignment.\u003c/p\u003e\n\u003ch2\u003eCurrent challenges in PLG\u003c/h2\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e Do you think it\u0026rsquo;s becoming harder for companies to drive PLG because of smaller budgets or tougher buying decisions that organizations have to make?\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e There\u0026rsquo;s no denying that there are headwinds in a PLG-only model for those reasons. The economic landscape is evolving, budgets are not increasing, and because companies are now funding AI initiatives, they\u0026rsquo;re dipping into existing budgets and buying decisions are being elevated higher in organizations. So executives are making decisions that otherwise could be made by middle management.\u003c/p\u003e\n\u003cp\u003eHaving said that, PLG as a strategy is quite sound. Companies have to figure out how to navigate the existing environment and implement a few strategies to address these challenges.\u003c/p\u003e\n\u003cp\u003eOne strategy is sharpening the value proposition. If the value proposition is not strong or deep enough, companies should avoid investing too much in putting the PLG in motion and acquiring customers because conversion will be hard. It\u0026rsquo;s important to take time to build value propositions and capabilities that differentiate the product.\u003c/p\u003e\n\u003cp\u003eAnother strategy is making the business case, particularly in product-led sales, bulletproof. To do that, data is key. For example, if a company uses Miro to help boost collaboration among its cross-functional teams, the outcome could be that it reduced the time to market for new products by 30 percent because cross-functional teams across geographies were more effective. Data also improves the quality of the outcome. Leveraging that data to tell a compelling story helps show how the product can be valuable. How can you tie the business case to the ROI that the customer is trying to drive?\u003c/p\u003e\n\u003cp\u003eLast, while the product can be amazing, there are usually other opportunities to delight customers. In a budget-constrained environment, allowing the customer success function to help the organization realize value can play a pivotal role. In my experience, decision makers can point to members of the customer success team who have been supportive, which helps the company achieve the outcomes it desires.\u003c/p\u003e\n\u003ch2\u003eHow gen AI is affecting PLG\u003c/h2\u003e\n\u003cp\u003e\u003cstrong\u003eRikki Singh:\u003c/strong\u003e Gen AI is top of mind for everyone. What is your perspective on how gen AI will impact PLG and PLS adoption? What implications does it have for leaders?\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eVarun Parmar:\u003c/strong\u003e Gen AI is a transformative technology with a fundamental value proposition: when it comes to PLS and PLG, there\u0026rsquo;s a big opportunity to automate actions. You can introduce gen AI into areas of the workflow that you want to build so it is augmenting them and supporting the different stakeholders on the product, marketing, and sales teams.\u003c/p\u003e\n\u003cp\u003eFor example, salespeople can get a synthesized view of the adoption, history, utilization, and opportunity of a certain customer quickly. Marketing can use AI to attract customers, find user acquisition strategies, and research what cohorts of users are performing the best. If they run a marketing campaign, for example, they can see which leads are converting the best or which brands are engaging the best.\u003c/p\u003e\n\u003cp\u003eTeams can use gen AI to find solutions and guide the thinking that they already have. Experimentation is important, but once they find a model that works, they\u0026rsquo;ll be capable of doing more than they thought possible.\u003c/p\u003e"},"isFullScreenInteractive":{"boolValue":false},"hideStickySocialShareBar":{"boolValue":false},"desktopID":{"value":""},"mobileID":{"value":""},"desktopURL":{"value":""},"mobileURL":{"value":""},"desktopPaddingPercentage":{"value":""},"mobilePaddingPercentage":{"value":""},"desktopOverrideHeight":{"value":""},"mobileOverrideHeight":{"value":""},"cerosOembedURL":{"value":""},"cerosRenderMode":{"targetItem":null},"cerosBackgroundColor":{"targetItem":null},"hideByLine":{"boolValue":false},"tableOfContentsTitle":{"value":"TABLE OF CONTENTS"},"accessStatus":{"targetItem":{"key":{"value":"RegisteredUsers"},"value":{"value":"Registered 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article.\u003c/p\u003e\n\u003cp\u003e\u003cem\u003eComments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey \u0026amp; Company or have its endorsement.\u003c/em\u003e\u003c/p\u003e"},"authors":{"targetItems":[{"template":{"id":"3FBABDB63A094F68B1F8E1BBE1BA124E","name":"Author"},"id":"264E7D3E029D4FAD92ADD0EF888757B5","name":"Rikki Singh","authorTitle":{"value":"Rikki Singh"},"description":{"value":""},"thumbnailImage":{"alt":"","src":null},"profile":{"targetItems":[{"standardImage":{"src":"/~/media/mckinsey/our people/rikki singh/rikk-singh-standard-profile-1536x1152.jpg","alt":"Rikki Singh"},"emailLinks":{"value":"Rikki_Singh@mckinsey.com"},"linkedInUrl":{"value":"https://www.linkedin.com/in/ritikasingh24/"},"description":{"value":"Helps software companies around the world on product-related topics including product management and build"},"locations":{"targetItems":[{"name":"Bay Area - Silicon 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