People
Many of the commercial and operational challenges product companies face can be attributed to a single root cause: their priorities are out of whack. When an enterprise is “sales-led” instead of “product-led,” desired growth outcomes become elusive.
Sales-led companies respond to customers’ needs and constantly try to keep up with user and/or buyer demands. In this model, feature or service requests typically originate from sales, marketing, and/or customer success functions. Consequently, R&D teams are forced to scramble to prioritize and deliver to keep customers happy.
Solving one customer’s unique needs at a time leads to a self-defeating cycle: product backlogs become a never-ending list of customer commitments. With pressures to keep clients happy, product strategy is quickly abandoned and technical debt skyrockets.
A product-led model, on the other hand, proactively anticipates the needs of customers and continuously delivers incremental value – such as features and services – to users and buyers, often ahead of market demand. By relentlessly focusing on the problem statement and value-driven solutions, best-in-class product companies truly own their roadmaps and effectively steer investments, control spend, and optimize ROI.
To put it simply, sales-led organizations respond to sales pipelines and client demands, whereas product-led organizations pioneer and deliver innovation ahead of the market.
Why is it better to be product-led?
Product-led growth has become an established core focus for leading private equities, investors, executives, and founders. Research shows that companies with higher product focus scores earn 14.4% higher shareholder returns than their peers1. These enhanced returns are a result of lower costs of goods sold and leaner operations, resulting in higher profit margins. By relentlessly focusing on delivering value across multiple key customers and segments, businesses can avoid the trap of costly, bespoke product development, and maintenance.
Where do you fall on the spectrum? Four critical questions to ask and key symptoms to look for:
| Critical Question | If Yes | If No |
| Do product roadmaps reflect strategic, value-adding innovation that serves multiple segments? | You are closer to product-led; the product function is working to stay ahead of the customer needs and innovate to bring value adding solutions to multiple segments at a time. | You are closer to sales-led; the product function is serving more as a prioritization layer and are essentially taking orders |
| Do sales teams have defined selling rights / motions? | You are closer to product-led; products have defined features sets and experiences. Customizations are allowed; however, customers pay for them and for the priority in which they are delivered. | You are closer to sales-led; if sales can sell whatever is needed to close the deal, product and engineering teams will have to stop working on the product strategy and deliver on one-off contractual commitments |
| Are service delivery / implementation projects standardized? | You are closer to product-led; the product was developed with implementation in mind and any non-standard activities are known up-front and charged to the client | You are closer to sales-led; it is likely each implementation is unique and heavy investments are needed to deliver on time |
| Do you have financial visibility at the portfolio and product level? | You are closer to product-led; each product investment has a business case that enables granular allocation of revenue and costs per investment made | You are closer to sales-led; revenues and costs are challenging to allocate due non-standardized and/or account specific features |
Other symptoms of sales-led product businesses often include:
- High degree of customized software
- Non-standardized product portfolios
- Above average maintenance efforts and costs
- High support / incident volumes
- High degrees of technical debt
- Product & Engineering teams become order takers from go-to-market functions
- Limited investments in capturing voice of the customers
- Lower cross-functional collaboration across the product lifecycle
- Limited to no end-of-life sunsetting strategies
- Slow, lengthy, costly, sometimes unprofitable implementations
Often executives focus on any one of the issues above without understanding there is a systemic operating model issue.
By shifting to a product-led model, leaders can expect:
- Lean, more simplified, and profitable product portfolios
- Defined selling rights with explicit hunting and farming roles
- Speedy, low-cost, high-margin implementations
- Increased customer satisfaction scores
- Product & Engineering teams operating as innovation engines
- Robust mechanisms to capture voice of the customer
- Focus on measuring adoption to optimize experiences across multiple segments
Making the shift is not a flip of a switch. However, there are proven levers that can make impactful, measurable change:
- Enhance Product Management Capabilities: Strengthening or scaling specific product management skills -- such as market analysis, competitive intelligence, and user research - can yield remarkable outcomes. The optimized approach can typically lead to 30% reduction in development rework and 25% faster time-to-market2.
- Elevate Product Telemetry: Implement advanced user tracking and behavioral analysis. Utilizing these insights can result in a 20% improvement in user retention rates and a 15% increase in customer satisfaction.
- Increase Product Configurability: Offer configurable features to users. Businesses with configurable products achieve ~70% higher customer satisfaction rates and a ~40% reduction in customer support costs2. Additionally, professional services often measure accelerated implementation timelines due to a reduced dependency on engineering resources.
- Prioritize User-Centered Design: Investments in user-centered design gives back with dividends. According to Adobe, companies placing a strong emphasis on UX design witness a 200% increase in customer satisfaction and a 300% increase in conversion rates.
- Enhance R&D Efficiency and Effectiveness: To stay ahead of user needs, optimize agile methodologies by focusing on:
- Cross-Functional Collaboration: Enhance collaboration between Sales, Marketing, Product, Engineering, Customer Success, and Finance. Distribute accountabilities so that all functions are coordinated on investment steering, value delivery, and operational scalability.
- Iterative Feedback Loops: Incorporating user feedback in every sprint cycle can result in a 25% increase in delivered features aligned with user expectations2.
- Continuous Deployment: Adopt continuous deployment practices, leading to a ~20% reduction in time-to-market for new features2.
- Optimize and Govern Business Cases: Develop a template that balances the focus on customer and business value. Map all roadmap items to approved business cases and enforce data-driven ways of working.
Empowering the Path Forward
Transitioning from sales-led to product-led requires comprehensive alignment and a calculated strategy. Armed with data-backed insights and a commitment to sustainable product-led growth, organizations can undergo a transformation that positively influences their bottom line.
1 Harvard Business Review
2 AlixPartners Analysis
