Why contech needs more product-led growth companies
Are you a startup investor or digital innovation lead in an engineering firm? Then maybe you’ll be interested in understanding why it is time for more product-led growth in construction technology. We aim to paint a picture of the world as we see it and how CalcTree is taking advantage of a significant trend in SaaS.
What is Product-led growth (PLG)?
“Product-led growth (PLG) is an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion.” OpenView. Head over to OpenView’s website to learn more about the fundamentals of a PLG strategy.
A simplified comparison of traditional B2B sales-led vs PLG SaaS products. Traditionally you might request a demo. Now, you just sign up and trial a product. Before, there would be an implementation rollout. Now, it's automated onboarding. Where there may have been training sessions delivered across the company, articles, chatbots and discussion forums enable a self-serve support system.
In short, product-led growth companies like Slack and Atlassian are taking advantage of a broader industry shift occurring in buying power from Execs and Managers to End-users. The former recognises that the top-down rollout of new technologies is challenging to do well in the chaos of everyday operations. Execs are now more open to bottom-up organic adoption of tools if their staff love it and helps with doing their work better and faster.
Another simplified visual below depicts the changes to purchasing behaviours in the world of SaaS products. The End User Era is helping drive greater autonomy and, therefore, greater staff empowerment to make the right choices of tools for the job. All enabled by product-led SaaS companies that reach end-users directly and remove adoption friction. Gone are the days of presentations or phone calls with executives or managers. New customers can now trial products on the web and pay a subscription if the product proves to be valuable.
Why it’s important
Runaway successes like Calendly, Zoom, Shopify and Twilio exemplify this business strategy, so it’s no surprise that PLG companies outperform traditional SaaS and S&P 500 indexes. The graph below shows the average growth of stock prices post-IPO of companies that fit in the different categories listed. Highlighting the superior performance and customer success of PLG companies compared to all others.
PLG means that the company lives and dies on pleasing the end-user. This makes meeting user needs the top priority for PLG companies and aligns the objectives of both parties, creating a win-win situation.
PLG companies are typically engineering heavy since more capital goes into hiring engineers and product teams to build out a robust product. This tips the balance of power in the hands of product development, which in turn creates a stronger engineering culture. Consider Google as a good example, its swarm of top engineering talent and the innovations they’ve generated. Benefits of an engineering culture include an appreciation for introversion, deep thinking and a thirst for solving complex problems for users. Our belief is that this user experience culture leads to creating a more meaningful product in the long run.
Risks of using PLG products
There are always risks associated with any strategy and here are a few with PLG products:
PLG platforms often store your data on shared cloud servers. With hacks and data breaches, companies are often rightfully concerned about their data security. However, cloud providers have also evolved and now offer private cloud storage out of the box. It’s easy enough for a SaaS company to extend dedicated storage if this is a concern, typically via an enterprise subscription tier.
‘If End Users were free to choose what tools they want, wouldn’t this lead to even greater data fragmentation?’ Quite possibly! In the short term, it can.
However, it can offer greater business and workplace agility in the long term. Here’s why:
- One tool can’t do it all
- Therefore, tools need to integrate to enable data to flow between them
- PLG tools are typically integration-friendly as its part of their ethos to reduce adoption friction
- There are increasingly tools like Zapier, and in the construction industry, Speckle, Agave, and soon CalcTree to integrate data between tools
- Over time, companies can leverage the power of specialised tools to solve various problems with increasing automation
We’d argue that being locked into a private ecosystem from a single provider is riskier in the long run. Markets are changing increasingly faster, and so is the rate of innovation. Keeping up to speed with such changes is vital for staying competitive.
Why product-led growth is needed in contech
“In construction, decision making power lives at the end of the hierarchical branches, often down to each individual on a jobsite! This decentralized decision making organisation is particularly well suited to PLG. Experienced workers, foremen or project managers are also natural leaders in a community where trust and references are still king or queen. Turning them into champions for a product goes a long way!”
Guillaume Bazouin, Head of Startup Programs at VINCI’s innovation hub: Leonard.
Guillaume shared this view directly with CalcTree recently from his vantage point at VINCI overseeing the contech ecosystem. VINCI is the world’s largest construction company conglomerate, employing over 217,000 staff worldwide.
Adopting a PLG strategy in construction tech doesn’t come without scepticism. In discussions with tech investors and even contech founders, we've faced it:
- “It’s hard to do in this industry.”
- “Companies are used to top-down sales.”
- “We’ve tried doing PLG but had to pivot back to a traditional sales method.”
However, we back the PLG strategy that our community believes in. Why? Because:
- End-users in the construction industry are tired of the failed promises from software companies. Finding out the product is not a fit for their requirements only after lengthy sales meetings, 2-3 demos, proposals, transactions and finally, trials. In large firms, management’s detachment of digital practices from on-the-ground teams perpetuates this frustration and further muddies companies' ROI on digital spending. Entering firms bottom-up means we can bypass this disconnect and get straight to solving end-user problems.
- Traditional sales cycles acquire new customers at a slower pace than PLG companies. This can slow company growth, as tech companies often rely on revenue or investment driven by growing customer traction to fund further product development. This sales cycle is perhaps a key cause of the innovation stagnation the industry has experienced to date.
- Nichey popular technical design tools are often built by self-taught developers and construction engineers who built the tool to solve a specific problem or fill a gap in their workflow. As such, the very nature of those tools focuses on the tech and not the user experience, which can cause adoption to suffer.
- Frustration with existing tools, particularly amongst the younger generation of engineers, pushes them to build their own with the little resource they have at their disposal. This drives further fragmentation and rework in firms. But also highlights a an opportunity for PLG companies to form powerful alliances with such personas.
- Agitation from end-users and, increasingly, managers in this industry is reaching an all-time high. Heightened by the stark contrast experienced between the consumer apps they love and use and the clunky industry software they are forced to use.
For CalcTree, adopting PLG means, at worst, we have a steady stream of inbound leads that require a low touch sales model to convert. At best, we become a ubiquitous platform amongst engineers through ease of adoption and embedment in the design process.
We’re seeing evidence the culture is ripening towards more bottom-up technology adoption in civil and heavy industries. Recent examples:
- Speckle’s $5.5M seed round, having acquired “thousands of recurring users, growing at 20%+ MoM organically and without any marketing (in fact, Speckle famously spent $16 on marketing in the past 2 years)” Foundamental.
- PlanRadar’s €30milion Series A round led by New York-based Insight Partners.
- Fieldwire’s $300million acquisition by HILTI
What is CalcTree’s strategy?
Engineers don’t like to be sold to. They are a pragmatic breed that will adopt and recommend a product if it solves a meaningful problem. As digital decision making power shifts to end-users, it makes sense for us to trial a product-led strategy. It’s precisely the belief in which Twilio built a hugely successful platform for over 10M engineers.
“If you're a developer who wants to explore the possibility of using Twilio for a small proof of concept, chances are, you're not going to need your boss's approval to pay for it or try it out” Toplyne.
In short, our strategy is to offer a free trial and version of the product for engineers to test. We will work closely with users via our public Slack community to iron out the clinks to build a great product.
We will build features to support organic adoption within teams and organisations by offering Team and Enterprises subscriptions to unlock the full potential of CalcTree.
What is CalcTree, we hear you say?
We’re a venture-backed ConstructionTech startup, soon to launch the world’s first multi-disciplinary calculation management platform. We help you ensure data, designs, and calculations are always in sync. Freeing you to spend more time creating innovative, sustainable, and modern designs.
To learn more, join our waitlist and Slack community today!