Has CLM Reached Product Market Fit?
Luke warm testimonials and protracted implementations should have us asking questions
How dare I even ask this question!
Contract Lifecycle Management is the crown jewel of #legaltech. Out of all of the #legaltech categories, CLM has got the most funding and the most user demand, not to mention disproportionate coverage in my newsletter recently.1 Everyone’s buying it, the consultants are implementing it and even the big tech companies are investing in and acquiring it. As one person on my team challenged me on our group chat, “Dude, CLM isn’t going anywhere.”
So how, then, could I possibly question whether CLM has achieved something as basic as product market fit (PMF)?
Background: PMF is a term people in startups like to use to figure out whether a product is fit to scale.2 Startups are always debating internally and externally whether they have achieved PMF. Of course there is no moment where you wake up and say “We’ve done it! We’ve reached product market fit!” Product market fit is a continuum with many tipping point moments along the way, kind of like one of those coin machines at Dave and Busters.
There a bunch of different methods to assess where your company is on the PMF curve. One litmus test is to see how total number of users would increase if marketing were to slow down. Is the number of users growing organically or is traction simply a product of marketing? I guess that’s my question about CLM — is its popularity the result of everyone telling everyone how much everyone needs CLM or is everyone telling everyone how much they need CLM because CLM has actually achieved PMF. And indeed, there is a lot of money going into marketing CLM, both from tech companies and implementation partners, both of whom stand to get richer as this vertical grows.
There was a moment at CLOC Vegas that got me thinking about this.
The other day I decided to ask Google how long a typical Salesforce implementation takes. According to Google, the answer is anywhere between a couple of weeks to a few months at the really long end. Then I asked Google the same question about CLM and the answer was 12-24 months. I know why companies use Salesforce, and you’d be crazy not to use a CRM tool to run a sales team inside a big organization without some way to manage and track customer relationships. But would you be crazy NOT to implement a CLM? No. In fact, there are plenty of experts in the field that think CLM is the emperor’s new clothes. There are others who believe that before putting in a new CLM, everyone must temper the expectations and be willing to embrace a steep change management curve.
I don’t know if I’m fully on board with CLM being the emperor’s new clothes. But, anytime I hear about long protracted implementations and change management apologetics, all I hear is “has NOT achieved product market fit.” Does that make me naïve about the realities of enterprise wide implementations? Maybe. But maybe CLM shouldn’t be so painful.3 Maybe implementations shouldn’t lead to lawsuits. Maybe legal departments shouldn’t have to hire temps because FTEs are busy getting the system up and running. I have counseled multiple Fortune 500 legal departments to wait on putting in an end-to-end CLM workflow, and they have thanked me for it.
In a January 2021 post, Jae Um (quoting Netscape founder Marc Andreessen) wrote, “I believe the KTech market will pull the product out of startups — and the visible signals from the past three years suggest, at least to me, that the time is now.” I think about this line “pull the products out of startups” a lot. I’m not sure her exact timing was correct, but the overall description of the market phenomenon is A+. Like my team member said, “Dude, CLM isn’t going anywhere.” The demand for digitization of contract workflow is simply too strong. But, before things can get better, we’re going to have to admit that they should get better. Despite the CLM excitement, the vertical as a whole may not have reached a PMF that matches the hype.
So how does CLM get to PMF? In future newsletters (and an extra special webinar I will be telling you more about soon), I am going to cover what is broken in CLM’s product market fit (*spoiler alert* there are a LOT of theories) based on conversations with CLM & contract tech veterans, some who have left the industry and some who are back for another ride. Highlighting the product market flaws can help improve product market fit and better equip you to pull the product out of startups. If you’re thinking about CLM or struggling with your own, you don’t want to miss these insights and tips, so make sure to subscribe!
P.S. if you’ve got specific ideas about why CLM is broken, get in touch (I may want to include your ideas in future posts). If you think my take is wrong, please (pretty please!) let me know — my content will only ever be as smart as you and the other readers who hold me accountable.
For a deep dive on PMF, check out Seeking Alpha founder David Jackson’s notes Product-market fit | A Founder's Notebook (wordpress.com)