Active value vs Passive value - learnings from $1.5M of developer spend

Hey all,

Long-time IHer here, now armed with some learnings from non-indie products. Hopefully, this will give you a shortcut that we would've loved to know 2 years ago when we first started building Flywheel.

Active vs Passive value

You'll sometimes hear B2B founders talk about their product "moving closer to revenue", and in this case, it has nothing to do with monetizing their product. What they mean is this: Does the perceived value of my product directly link to revenue?

I don't know if anyone else uses the terms Active and Passive value, but they've been helpful to me ever since I thought of them. Here are my quick definitions.

Passive value: Provides insights, information, or ideas for how a customer can improve their company / product / project.

Active value: Allows customers to directly improve their metrics, products, or projects.

Here's how it worked for us.

Flywheel 1.0

We thought the value of Flywheel was stupidly obvious. Install our tracking snippets, and we'd do all of the hard work to analyze your product adoption, marketing traction, and the attribution between them. Setup took 1-5 minutes on average and we gave (in my opinion) really useful information back.

The issue: this value was too passive.

Of course you might say, Amplitude and Mixpanel were historically passive and so are all other analytics products! Well, you're right. But we made a fairly significant tradeoff when building Flywheel 1.0 — not allowing custom reports.

This was a calculated decision on our part. We thought the "build your own reports" market was saturated, outdated, and required too much user effort. So, we decided we would limit our own work by reducing the scope of combinations, and would limit user effort by hardcoding our dashboard calculations.

However, users couldn't learn answers to specific data questions, which means the app was extremely passive. It was the worst of both worlds. A passive product with no ability for users to make edits themselves. Ouch!

So, not understanding this concept, we added Session Replays to Flywheel 1.0. This was a big step forward, actually! Our customers really enjoyed being able to watch videos of their users. But the same issue remained: once I discover an insight, what do I do with it?

Flywheel 2.0

Here's where we went from Passive to Active value.

We kept all of the same product and marketing analytics, as well as session replays. However, users can now take action directly from Flywheel that impacts their users. Specifically, we built out powerful User Engagement and Alerting features. Examples include:

Upselling users via in-app modals, triggered by specific actions and deployed by Flywheel. Think Pendo, but easier to use.
Announcing new features via website banners, personalized to each visitor. Think Intercom, but better for B2B.
Sending Slack alerts to team members for errors, opportunities, and intent signals. Idk a comparison for this actually, other than hardcore alerting tools like Sentry.
(Coming soon) Personalizing marketing pages with A/B test copy relevant to the visitor (e.g. if Google Optimize had access to product data). Taking on companies like Mutiny with this one.

The difference in our sales calls with these new additions is tremendous. Now, users can learn from our passive value, then take action from Flywheel to get active value. The best part is, the active value can be analyzed via the passive value, creating a circle of value.

What I would do differently next time

First, I would think carefully about if my product is going to be considered Passive or Active by a customer. Namely, does my product directly impact their business or does it provide opportunities for them to do it elsewhere? The former is easier to sell.

Second, I would find the smallest feature that would deliver active value to a customer, even if my product features would be mostly passive. This way there's always an opportunity in a call to reference how using [New Product X] would [Increase Metric Y]. This value prop was always too vague in Flywheel 1.0.

Third, I would see if there are ways I can add differentiated Active Value features compared to my competitors. This helps give the perception of being more valuable than others.

And that's about it! Hopefully this helps you create more useful products in less time, with less money.

Good luck selling.