The product-led era comes with a lot of changes. The ways of starting and scaling a business have changed and even traditional roles, like marketing managers and product managers, have evolved considerably. We have fewer silos and more cross-functional teams.
In this interview with Kieran Flanagan, VP of Marketing and Growth at HubSpot, we explored how Hubspot managed to shift from a purely marketing-led business to a product-led one. Kieran shared his thoughts with us on how to build high-performing cross-functional teams that are set for success.
Kieran Flanagan believes that traditional organizational structures are not fit for purpose in product-led companies. “When you think about how work gets done, there are multiple teams who overlap in terms of the work they need to do”. To build cross-functional teams, Kieran feels that you need to have well-stated problems so you can actually understand how the business is going to grow from acquiring users.
Kieran pondered over some of the biggest questions that product-led teams face: “If you’re in a product-led company, how are you going to activate those users? How are you going to get them to take more meaningful actions and then your product, are you going to get them to upgrade, monetize those users, and then how are you going to retain those users to your customer success?”
The purpose of having cross-functional teams is to have individuals, from across your company, working together to try and solve some of the biggest problems that the company is facing. I was interested to hear Kieran’s thoughts on how cross-functional teams could be supported by goal setting.
“I think that goal setting is really being able to instrument a model of your business in a way that all of these teams share the same common language for growth. To give you an example, at HubSpot, we originally went to market to B2B, which is kind of like a sales marketing-led model. In 2016, we added a freemium model, which is a product-led model where you can acquire users and get them to start using your products from day one”, Kieran explained.
When HubSpot launched the freemium model, Kieran quickly realized that they needed to start working in a new way, as an organization. “We obsessed over a few questions. Are we acquiring enough users for our model to be successful? Are they activated into teams? We looked at whether the users were doing something meaningful, such as inviting other people into our platform. Retention is the killer of most businesses. So when you actually have your key metrics model, you can start to build accountability across teams.”
I wanted to understand a little bit more about the practicalities of transitioning to a freemium model. Before the freemium model, HubSpot had individual teams focused on product, sales, customer care, and marketing. After HubSpot launched the freemium product, they created themes around KPIs, teams, and metrics. I was interested to hear about what the internal transition looked like.
“Marketing and sales had to escalate between both teams and we had to generate a certain amount of revenue in terms of the demands that would equate to enough revenue for our sales team. We looked at the value of each type of marketing qualified leads. Let’s say we had demo contact sales, we looked at it, what is the dollar value of each of those things? And you can get by both by knowing the close rate and knowing the average sale price that comes from each of those things. Then I can look at a monthly chart or flowchart and say, well, we have to generate $10,000 MRR this month”, Kieran explained.
Kieran continued, “When we moved into freemium, we had more accountability that we had to build across these different teams. We now have an SLA built across marketing, sales, and product. We reverse engineer back from how much MRR do we need to generate each month? And then we go, if we need to generate that amount of MRR, what is the dollar value in PQL?”.
Instead of using MQLs to measure the dollar value, Kieran uses PQLs (Product Qualified Leads). These are actions that a user takes within the product that suggests they want to buy the paid products. “We can tell what the dollar value of each of those is by looking at the close rate and the average sale price. You know you have two core metrics that are integral for you to hit your revenue number and product teams can take ownership of those metrics to create better onboard and create better upgrade experiences”.
“Marketing teams are accountable for making sure that they have enough user signups coming into the model to actually again hit their revenue number. You’re continually working back how many user signups do I need each month they hit the number of active teams that are going to generate the amount of PQRS and then sales in the freemium model”, Kieran explained.
It’s all about making sure that the key teams in your organization are speaking the same language of growth. The marketing team is accountable to the product team and the product team is accountable to the sales team. The line between marketing and product has begun to fade in many organizations. I was interested in understanding how the role of the product manager evolved at HubSpot under the cross-functional teams model. There is this rising trend of having a growth product manager and I was keen to hear about how this was being implemented into HubSpot.
“This is a sweeping generalization and it’s not applicable to all companies, but it is applicable to a lot of companies who adopt growth. And there’s kind of three core phases of growth within the evolution of growth and in the company. And so the first stage is this kind of chaotic stage where a company wants to do growth, right? They either go into a new model where they have to try to figure out how to make this thing work. They’ve seen the benefits of doing growth elsewhere and they want to instill that growth practice and those growth frameworks within their company”, Kieran explained.
Kieran continued, “But they’re unsure of how to do it. So they get a small collection of people and maybe these people are passionate about growth, so they start trying to make moves on a metric and try to move the needle on the metric. But it’s chaotic because no other teams, when we know what growth is from what these people are doing, and they’re continually asking for things, they want products to do things for them”.
The evolution of growth can sometimes result in a few missteps that can create friction. “You invest further in growth and you centralize it. So, you create one central team and then you give them the core metrics you want them to be accountable for. Let’s say in a typical product, that model with a centralized growth team, you would say, okay, your remit is to activate more of these users and to create better upgrade paths”.
Kieran believes that you need to give them the resources they need to be accountable for their own metrics. “This team that has full accountability for metrics, they have the resources they need to be able to be accountable to those metrics and other teams now understand what this growth team is doing. You need to have a growth team that is educating the rest of the company on how to do growth”.
In the third phase, you move into decentralization. This is where growth starts to be owned by the different product managers because the product managers have started to work with this growth team. “They can see the benefits of optimizing my onboarding flow and running experiments on my upgrade points. And they’re starting to take responsibility for growth within how they actually build their products.”
In my personal experience, even when working with a team of 10 people, when trying to implement that model to break the silos and create more cross-functional teams, it’s pretty easy to create a case. I was curious to hear from Kieran about what went wrong, in a big business like HubSpot, when they switched to that new model.
To answer my questions, Kieran responded: “In the chaotic stage, the first stage was like learning for us. We created a lot of internal friction because people were trying to do the right things, but they’re reliant, I think you create chaos and friction when you have teams who are accountable to metrics that they can not fully own themselves”.
“I had these metrics that I owned and I was very reliant on a product team and growth was quite new and they didn’t really know why we were asking for these things. I didn’t do the best job of initially building those relationships with the product engineers, trying to understand what they were motivated by trying to understand how I could better interact with them”.
“One of the things I used to do in that first three to six months was arrive with a long list of solutions and say, ‘Here you go, engineering, do all this stuff’. And really what a great product manager does is not provide the solution to their engineers, they actually come with a well-stated problem. It was really about trying to figure out how we could create the right ownership, accountability, and working relationships.”
We hope you enjoyed learning about the many benefits of the cross-functional team model, along with the potential challenges that it can bring. I certainly enjoyed speaking with Kieran Flanagan about his experiences at HubSpot and finding out some useful insights about the cross-functional team model and how it applies to product-led organizations.