Learn how Todd Olson created Pendo, a product experience platform that helps software product teams deliver software users love.
What’s your background?
Before I started Pendo in 2013, I had a long career building companies and products. I had a passion for programming and entrepreneurship from the beginning. I was writing code as an intern at a large commercial bank when I was 14, and in my senior year at Carnegie Mellon, I became a part-time student in order to start a software company with a friend. It was called Cerebellum Software, and we raised more than $20 million in venture capital. I went on to found another company called 6th Sense Analytics which was acquired by Rally, where I became VP of product and contributed to a successful IPO.
At Rally, I experienced the need that would eventually inspire Pendo. I often felt like we needed to better understand how our users were engaging with our products, but I didn’t have a way to answer basic questions like: Do my customers like using our products? What features are most used and by what types of customer segments? What features impact revenue and retention the most?
What is Pendo, who uses it, and why?
Pendo is a product experience company that gives product teams the tools they need to create and deliver software products that people love. Specifically, with Pendo, product teams can understand product usage, collect feedback, measure NPS, onboard users, and announce new features within a web or mobile application — all without requiring engineering resources.
When we first founded the company, our goal was to help make the lives of B2B product teams easier. There has traditionally been a blind spot when it comes to insight into product usage. As Pendo has grown, we’ve seen an increasing number of use cases extend beyond product roles to encompass teams like customer success, UX, growth marketing and sales. The reason is simple: product is the gateway to promoting customer loyalty and maintaining users. Product functionality and insight have a significant impact on each of these teams.
Product plays an important role, especially at a time when the complexity of enterprise technology is at odds with the world at large. Enterprise technology users often have to cope with complex and burdensome product experiences, while being surrounded by amazing product experiences in their daily lives. There’s no reason that enterprise technology shouldn’t be as intuitive as Uber, Slack or Netflix.
The enterprise software market is a trillion dollar industry being held back by lack of product insight. Product teams responsible for building, delivering and improving our experiences with software are not equipped with the tools they need to convert customer needs into product features. This lack of insight leads to poor user experience and squandered product investments. We recently released a report that found that 80 percent of features in the average software product are rarely or never used, which we estimate to have cost $29.5 billion in wasted R&D.
Considering all that’s at stake for product teams — maintaining positive brand perception, creating loyal users, guiding smarter R&D investments — there is a massive market potential for Pendo and businesses are taking notice. Our customers have evolved to include Fortune 500 enterprises, and industries as varied as healthcare, insurance, government, retail, manufacturing, oil & gas, logistics
What motivated you to get started with your company?
Pendo was born out of problems I faced building products. Delivering products that people love requires a deep and thorough understanding of your customers, the problem they’re trying to solve and then a constant evaluation of how satisfied they are.
As the VP of product at a growth company, too often I didn’t know the answers to these questions. I had to sometimes wait weeks for our data scientists to research the answers, and by that time the data was irrelevant. This only gets worse with scale. As companies grow and introduce new products to more customers, these basic questions get harder and harder to answer.
I personally felt this pain, but I knew I wasn’t alone. Before starting Pendo, I tested a few other ideas for startups, but I kept returning to this idea of solving this long standing challenge for product teams. I knew product teams everywhere lacked tools for understanding product usage. As every company is becoming a tech company — with brands like Disney, Walmart, JP Morgan Chase and Starbucks reinventing themselves as digital-first companies — this lack of purpose-built tools for product teams was becoming an existential crisis for many.
What qualities make a good product manager?
I believe that empathy is one of the most important qualities of product managers — you have to really care about solving problems for your customers. That means working hard to understand customers and the core reasons they are using your product. Product managers also need to be able to work cross-functionally within a company to influence and inspire teams on specific projects and to convince executives which new features to build or retire. This requires a blend of emotional intelligence and strong data analytics skills. PMs don’t need to be highly technical — a basic understanding of software development is sufficient.
We published the results of our annual State of Product Leadership Survey recently, and the data shows good product management is not just about skill sets and character traits of individual PMs. Success is also driven by where product sits in an organization, as well as how the product team is evaluated. I believe that PMs should sit in a dedicated product organization, led by a chief product officer (CPO), and our survey shows that structure is becoming more prevalent.
PMs should be evaluated on business metrics like customer retention, customer happiness and customer engagement — that’s what we’ve found to drive innovation. What surprised us in our survey results was the overwhelming number of product managers — 77% — that are still evaluated based on number of features shipped. This incentivizes product managers to advocate for features just because their competitors have them, rather than focusing on providing value to customers by helping them discover and adopt existing features.
What’s your business model, and how have you grown your revenue?
We are a SaaS based application, so companies pay us an annual subscription fee based on the number of active users of their application. We also offer professional services and a free NPS tool to help businesses measure customer satisfaction.
Our growth is driven by identifying a major gap in the market, and delivering our own purpose-built solution, which has promoted strong customer loyalty and retention. We have also worked to champion the entire product ecosystem, helping product managers do their jobs better and uniting the product community.
We created ProductCraft, a destination editorial site for product managers. We also produce two industry conferences, ProductCraft: The Conference, which is coming May 9 to San Francisco, and Pendomonium, our annual customer conference in Raleigh. Additionally, we created The Product Cloud Alliance, a coalition of like-minded companies helping product teams at different stages of the product development lifecycle.
What are your goals for the future?
We want to rid the world of bad software. From a product perspective, that means introducing new solutions, with more sophisticated analytics, to let businesses understand and improve their own products. From a corporate perspective, Pendo will serve larger and more diverse enterprises and grow into new markets, as evidenced by our recent expansion into the U.K.
What’s driven your growth?
I attribute our growth to a combination of market timing and our focus on serving customers. Five years ago, investors questioned the size of our market. They wondered whether product teams would ever have the budget to purchase a platform like Pendo. Today, we’re seeing massive enterprises adopt Pendo, and just last month, in its annual State of the Cloud report, Bessemer Venture Partners predicted 2019 would be the year “Product has purse strings.” Product is earning a seat at the table in organizations around the globe that make software. This trend has driven our growth, and will continue to drive it.
We’ve also stayed true to our focus on serving our customers well. In fact, one of our core values is “Maniacal Focus on the Customer.” It’s our north star. Our software empowers our team to better understand, guide and communicate with customers, but we also have practices in place to keep that focus. From collecting regular feedback on our roadmap and existing features, to rotating engineers through customer calls, to actually handling support questions myself from time to time, we work diligently to keep our customers at the center of our universe at Pendo. The impact of that is greater than 100% retention, growing user communities in key markets, and a slew of Pendo customers willing to advocate on our behalf.
Another part of staying focused on the customer is innovation. We spend an outsized portion of our budget on R&D. We spent much of the last year retooling parts of our platform to enable greater scale in the future, including enhancing the experience of creating guides for non-technical users and adding features that appeal to larger enterprise teams. We will soon bring a new product to market, a massive undertaking in a relatively short time frame. We‘re constantly working to build integrations that enable our customers to work more effectively. We believe innovation is critical for serving customers, but also for establishing category leadership and driving growth.