The Four-Way Fit — Chapter 12: Immerse and Ideate (Part 3)

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CEO Quest Insights

19 min readMar 2, 2021

In this chapter, we take a close look at the first stage of company-building — the “Immerse and Ideate” stage. It is a stage underemphasized in previous innovation models. Advocates of the lean startup model encourage founders to “get out of the office” at the beginning of a startup, so as to validate key assumptions. But this standard is woefully insufficient. You can’t gain the insights necessary to achieve a true value breakthrough without deep immersion inside your customer’s world. If your objective is to build an iconic global enterprise, the Immerse and Ideate stage is the vital first step.

Immersion is important because it opens you to a level of customer empathy that’s inaccessible any other way. When you live within your chosen market and your visionary customer’s world, you begin to care. You discover your customer’s frustrations, their fears and their obstacles. You begin to approach their gaping problems and screaming needs with empathy. It takes empathy to act on your insights to create solutions that address problems or needs in a compelling way. Empathy can only emerge from immersion¹. That’s why the first stage of company building, Immerse and Ideate, is such a vital step in the creation of an iconic enterprise.

Market, Product, Model and Team

Market

Clarify market viability: the market’s boundary, structure, trends, disruptive factors and size
Determine segmentation scheme: organize the market into natural segments (for B2B, by vertical, size, geography, etc; for B2C by age, gender, income, psychographic profiles, etc.)
Clarify segments: for each segment, determine its purpose, the jobs to be done to advance the purpose, its personas, and each persona’s role and supporting jobs to be done
Identify top priority segment: perhaps the segment you know the best, one that exhibits significant (gaping) problems and (screaming) needs
Recruit visionary customers: two to three willing to open their worlds to you
Working with these visionary customers, observe and empathize real people living inside the problem domain; observe people representing all key personas
Specify their gaping problems and screaming needs: what they are, why they are gaping and screaming, and the economic and psychological benefits of solving for them
Identify the efficacy of existing product solutions and hacks in addressing these problems and needs for these people; find the gaps and confirm these gaps are significant

Product

As you narrow in on the most gaping problems and screaming needs, ideate (brainstorm) ways to solve them
Consider whether you possess the knowledge and capacity (technical or otherwise) to effectively solve the problem

Model

Not a primary concern yet — in this stage, business model concerns are speculative

Team

Review the founder viability filter (see Chapter 5) to confirm your founding team is startup ready
As to the “thinking competencies”, design thinking matters most

The Story of DispatchTrack

As of this writing, it has been my privilege to serve as coach to Satish Natarajan, CEO of DispatchTrack, for six years. Today, DispatchTrack is a fast-rising global last-mile logistics platform. It has achieved world-class levels of customer satisfaction and retention, and is methodically expanding into more and more verticals inside global supply chains. Its future is bright. But it all started with a problem that turned into an idea.

Background

A number of years ago, Natarajan ordered a couch from a local furniture store. He was told to be at his home at 9 AM for the delivery. 9 AM came and went. As the day wore on, he became more and more frustrated. Finally at 4 PM, the couch arrived. It took up a big part of his living room — but waiting for it had taken up a much bigger part of his day. The next day, Natarajan and his wife Shailu Satish drove down to the furniture store to find out what had happened. They stayed there six months.

The result of their immersion into the logistical challenges of furniture delivery was DispatchTrack.

The Immerse and Ideate stage is traversed in thirteen steps:

Let’s see how these steps played out in the story of DispatchTrack.

Choose the Market

The first step in company-building is to “choose your market”. Choice of market is vital — at least if your ultimate goal is to build an iconic enterprise. You must consider three market attributes:

Is it big enough? If at enterprise scale you were to secure 100% of the customers in this market, would your annual revenues be greater than $1B? If not, it may be difficult to secure outside funding
Is it expanding? A shrinking market is usually an unattractive nesting ground for a new business
Is it being disrupted? Are existing players becoming destabilized (or may soon become destabilized) in such a way that creates an innovation opening?

At this stage, you can’t know for sure whether the problems and needs you discover will be equally relevant in all segments, nor whether the segment you start in will ultimately prove to be the most attractive. Market selection is very important at the outset. Segment selection is less so.

Satish and Shailu were instantly drawn to the retail furniture market. Specifically, they wanted to focus on last-mile furniture delivery. It was an interesting problem because it touched upon both business productivity and customer satisfaction — two areas of special interest to Satish.

The furniture store marketplace was large in its own right — but Satish and Shailu soon realized it was just the tip of the iceberg. Similar delivery challenges existed in food delivery, building supply delivery, and in fact in every type of large-item delivery — not just in the US, but all around the world. A big global market was in front of them. Moreover, it was clear that online shopping was precipitating rapid growth in this market. And since the legacy logistics solutions used by stores were proving incapable of solving key problems, it was a market ripe for disruption.

Recruit Alpha Visionary Customers

Once you have chosen your initial segment, the next step — and it’s an important one — is to recruit a small number of visionary customers. For a B2B company, it’s best to find two or three. With just one, you can’t see patterns. With more than three, you can’t spend enough time inside any one of them to go deep enough. That’s why in B2B businesses, two or three is optimal. For B2C companies, the right number is much more than three; it could be in the hundreds or thousands (depending on your application).

Satish and Shailu were fortunate that the owner of the furniture store from which they had bought their sofa welcomed them in. Perhaps it was not surprising: here were two talented engineers willing to live inside the store, research the entire furniture ordering and delivery workflow, and seek out ways to save money and improve customer satisfaction. Still, Satish and Shailu worked hard to earn their trust. They kept out of the way when the store was busy. They routinely took the owner, manager, salespeople and drivers out to lunch. They were patient and thorough. It was obvious to everyone from the outset that they were there to help.

After six months of research inside this first store, Satish found another locally-owned furniture store willing to sign on as an alpha visionary customer. This enabled him to gain pattern recognition as to the types of problems common to both, versus those that were unique to the first store.

Enter

Once you have recruited your alpha visionary customers, you need to gain full access. You need to be able to observe the whole system: the interactions between people, workflows, technology and money flows. Where are the lags? Where are the barriers and broken processes? What is the human cost? This requires sustained access to the right people and teams.

Satish and Shailu quickly gained the trust of the owners and managers at the two visionary customer stores. They were given free rein, and they took full advantage. It soon became clear to them that four personas were relevant in furniture delivery: the owner, manager, salesperson and driver. They began to note that each of these personas had unique concerns — they each had unique jobs to be done. They then began to observe how these jobs were being done. They began to take note of the daily interactions between customers, salespeople, order workflows, delivery workflows, drivers, trucks and technology.

Watch

In this step, the mission is to simply understand the world as it is — to record the variety of use case scenarios, the roles people play, the purposes they pursue, the jobs they must complete and the obstacles they face. Your first job is to observe and learn.

Satish and Shailu spent hours with the owners and managers, seeking to understand their objectives and routines. They observed salespeople with customers, and saw what they did behind the counter. They went on delivery rounds with drivers. They experienced first-hand the hardships drivers endured as they sought to mollify frustrated customers. They observed everything with a beginner’s eye. When I interviewed him, Satish’s first memory was of the notebooks they carried — into which they wrote pages of notes every day. It reminded me of the way Jane Goodall approached her research into ape behavior. Like Goodall, they wrote down everything they saw. They then went home and talked about it at night.

Learn

In this step, you seek to understand the jobs to be done, at least as well as the actors who must perform them understand them. You seek to clarify all the relevant actor personas: their roles, their supporting jobs to be done, their frustrations and their psychographic profiles. Here the mission is to deepen your understanding of their problems and needs. To accomplish this, you live with them. You might even video them doing real work.

At the time Satish and Shailu began their research, existing logistics solutions were cumbersome, limited, built on old technology and not mobile-enabled. As they pondered the problems owners, managers, salespeople and drivers were encountering, they noticed that existing logistics solutions focused only on mileage reduction — cost savings for the store. The customer’s experience was not a focus. Scheduling and routing tools were inadequate, resulting in wait times for customers that often stretched the entire day.

They also made an observation that turned out to be pivotal: the brunt of customer dissatisfaction landed on the shoulders of drivers, the ones who had to interact with frustrated customers at the point of delivery. For drivers, the inability to provide an accurate arrival time to the customer was a gaping problem that engendered a screaming personal need — the need to be freed from constant negative customer interactions.

Clarify

In this step, the task is to crystalize the specifics and relative importance of all of the jobs to be done, for all use case scenarios, within your domain of interest. Map out the workflows, define roles, note the technologies that are used and identify the feedback loops that influence the workflows. In a consumer context, you will focus on how humans are meeting their relevant emotional, physical and spiritual needs.

Satish and Shailu approached their work with scientific rigor. Step by step, they studied the process by which their alpha visionary customers were shipping furniture to customers. They noted every failure point throughout the process. They noted which factors tended to cause failure. They noted how furniture store employees sought to address them. Despite the best efforts of these employees, failure happened frequently — causing delivery time estimates to be persistently unreliable.

With further digging, it became clear to Satish and Shailu that the central problem was one of transparency. Existing tools did not offer sufficient predictive capability to guide delivery scheduling and routing. And the customer was being kept in the dark until the truck rolled into the driveway, often hours later than planned.

Find Limits

At this step, you must identify any existing constraints that impede the jobs to be done. Given these jobs to be done, and the goals and motivations of the humans involved, what is the limiting factor? The limiting factor can be a functional barrier, or an emotional barrier. Find the limiting factor for all the use cases. “Five Whys” questions can help you get to the root. Ask people to define their needs in verb-based ways (“I need to reach higher”), not noun-based ways (“I need a ladder”). Seek out the need, not the solution. You will then prioritize the most important needs, and the most important limiting factors. You may begin to contemplate what can be done about it. What is the boundary of current innovation? What isn’t yet possible?

The inability to deliver furniture to customers when promised created great customer frustration, which in turn frustrated all furniture store employees — from the owner on down. Satish and Shailu soon realized they had come upon a gaping problem for the furniture store as a business. And all employees were experiencing a screaming need to find a fix.

Name the Human Cost

Once you understand the limiting factors, you need to determine their significance in human terms. How do these constraints impact the people inside the domain of interest? Are these limits assumed and accepted? Are they minor irritants, or significant stressors? For whom? What are the goals and motivations of each of the relevant personas?

Eventually it became clear that the inability to provide customers timely delivery was a major problem that impinged upon all four key personas inside the furniture store. For the owner, unhappy customers led to negative social media reviews — which impacted revenue and profit. Suboptimal delivery routing increased costs. And negative employee experiences hurt morale. For the manager, it was hard to manage salespeople and drivers on the receiving end of constant customer complaints. Salespeople struggled to make delivery promises, and drivers knew that every day they were sure to disappoint a customer. No one felt good about any of it.

Tag the Limit-Busting Impact

The next step is to figure out what would happen if you were able to remove the limit. Would doing so deliver an incremental or transformational benefit? This impact may be financial, emotional or both. When you calculate the degree of impact that will result from removal of the limit, you clarify the magnitude of the problems and needs. Companies and people have problems — functional challenges encountered in trying to get a job done. Only people can have needs — emotional, physical and spiritual. You are in search of problems that are gaping, and needs that are screaming.

Eventually, Satish and Shailu concluded that if this problem could be solved, it would provide significant financial and emotional benefits. If a furniture store could better predict delivery, the store could better schedule and route that delivery. Optimized routes save money. And if a sofa could arrive at the customer’s doorstep at the time it was expected, customers would be happy. Happy customers would make happy drivers, happy salespeople and a happy owner and manager. Here was a problem that was gaping, invoking needs that were screaming. To solve it would be a big deal.

Study Hacks

What current tools are being used to attack these limits? These existing tools are your competitors. How capable are they of solving the problem? How much room have they left for you to better solve it? Consider too the personal hacks people use. What are they? How well do they work? Review social media. What is being said about these tools and hacks?

In this step, it’s helpful to search out the non-conformists and the innovators. The seed of a breakthrough product can often be found in the hack of a non-conformist. Look for analogous problems in other contexts, to consider whether they can teach you anything. Consider all use case scenarios. Be sure to ask “Five Why” questions.

Satish and Shailu soon realized that no existing tools provided end-to-end transparency within the workflow. To solve the problems, larger furniture stores attempted to string together multiple technical solutions into one. But these cobbled solutions were suboptimal, and furthermore such system integrations were beyond the capabilities of single-store operations.

Ideate

The next step is to brainstorm all conceivable ways to break down the limiting factor. This is a creative endeavor. It’s OK to have high variation in your initial ideas. Widen the aperture to consider all kinds of possibilities, including ones that might initially seem “off the wall”.

Satish and Shailu engaged their alpha visionary customers in many idea sessions. Interacting with owners, managers, salespeople and drivers, they tested idea after idea. At first they conceived just a routing solution. Only after many iterations did they begin to recognize they needed to build a complete last-mile logistics solution, centered on the customer experience. At first, they believed their solution could apply to almost any final-mile logistics scenario. Later they realized that certain segments (such as home painters, lawn care, plumbing and HVAC firms) didn’t make enough money to afford logistics software. However, it became clear that many other verticals (appliances, lumber, restaurant food delivery and health care) could benefit and, importantly, could also afford to pay for a solution.

Experiment

In this step, the time has come to narrow the aperture. Zone in on the most promising ideas, and put them to the test. Don’t be afraid to pursue ones that others have already discovered. You can learn from their mistakes. As you filter down to the handful of alternative solutions you will actively test, don’t ignore the wild ideas — the ones that arose from nonlinear connections and unexpected leaps.

Initially, Satish and Shailu thought consumers would want to know exactly where their delivery truck was on its way towards the home. So they conceived of a GPS-enabled application that gave consumers that visibility. But experiments made clear that the customer only wanted to know when the truck would arrive. This insight led to the decision to send a text to the customer when the truck was a half hour away. This feature ultimately proved to be key to their value breakthrough.

Design

The final step within the Immerse and Ideate stage is to initiate actual design. You have narrowed in on the most promising ideas. Now it’s time to develop a more complete design, one that you can present to your alpha visionary customers and others (perhaps rendered in clickable wireframe prototypes and drawings). This enables you to gauge reactions to something tangible. Expect to go through multiple iterations before it begins to feel “right”.

Satish and Shailu first entered that furniture store in June of 2009. Their first working prototype was up and running by October of that year. Through experimentation and iteration, they landed on a limited set of first features: a route planning and scheduling tool for the owner and manager, route visibility for the manager, and a predictive module that could provide the customer a four-hour window for delivery.

Ever Since

The six months spent progressing through the Immerse and Ideate stage paid off. Because they did it so well — because of their passionate commitment to understand the problem in all its depth and complexity — Satish and Shailu have been richly rewarded ever since.

Their initial product was released in March of 2009. Since, then, product functionality has continuously improved. Customers receive alerts when the truck is 30 minutes away, eliminating “when are you going to arrive” calls and significantly reducing “no show” events (in which the customer isn’t at home at the moment of delivery).

At first they grew more slowly than many rising startups, but this enabled them to spend more time making the product better and better. Customer satisfaction rose steadily. Churn vanished. As he began to hire salespeople, Satish chose to test them first in limited roles before awarding them expanded roles. He started with just one sales pod (with two SDRs and one sales executive), testing and iterating its messages and routines until he found a repeatable model.

Everything was tested: the ratio of SDR emails to phone calls, the frequency of SDR calls, the minimum required steps in the prospect journey — everything. Only once the first sales pod was working did he add the second, then the third. Whenever he saw a diminishment of performance, he stopped expanding and resumed testing and iterating.

As to the business model, Satish decided early on to violate SaaS pricing gospel (which calls for annual prepaid subscriptions), offering month-to-month pricing. Competitors charged customers annual subscriptions with upfront payments; they couldn’t match the DispatchTrack month-to-month business model because it would undermine cash flows. The DispatchTrack month-to-month pricing scheme proved to be a great “counter-positioning” move, yielding a significant early competitive advantage.

Logistics involve coordinated handoffs along the journey from initial source to final destination. As DispatchTrack grew, an interesting phenomenon emerged. The more trucks on the DispatchTrack platform, the more easily all trucks could coordinate handoffs amongst each other. Early on, Satish sensed the opportunity to build on this “network effect”. He discovered that by offering tools to facilitate handoff coordination from truck to truck, many non-customers became acquainted with DispatchTrack and the benefits of its platform. By this means more trucking companies became customers. Today, as the company continues to scale, this network effect grows and grows, becoming ever stronger — a rising competitive moat.

Because Satish and Shailu initially self-funded their business, it was of paramount importance to them to hold onto every customer. From the outset, they adopted a white-glove customer service culture. This commitment to customer service continues to this day. DispatchTrack now has a dominant leadership position in the furniture vertical. In the past few years the company has extended into other verticals — first appliances, and then on to building supplies, food delivery and health care delivery. Here too they have established themselves as the best-in-class solution; market share is on the rise in all verticals. More recently the company has gone global, with customers in Europe and Asia.

Today, DispatchTrack’s mission is clear: to optimize the customer delivery experience. In 2020, DispatchTrack raised a nine-figure funding round. It is well on its way towards iconic global enterprise status. The success Satish and Shailu have experienced has come in no small part by their methodical, step-by-step approach to company-building. They spent the time to deeply immerse, ideate and iterate until they were absolutely certain they understood the key personas, their jobs to be done and the solutions they most needed to address their gaping problems and screaming needs. In short they brought high competence and deep caring to a big problem. And that has made all the difference.

Summary

Many companies die quickly. Their founders hastily embrace an untested product vision, dive right into coding, and build out some misdirected product. They then try to sell this product, only to find no one wants it. Having spent all their cash building something no one wants, they find themselves out of money. Lacking a path forward, the founders quit. It’s painful, but at least it’s quick.

There’s a much worse way to die. You can die from “close but no cigar disease”. It goes like this. An early stage startup gets its initial product out the door. Low on cash and desperate for hints of product / market fit, the CEO finds she can sell it to a few early adopter customers. It seems to be compelling in the demo, so some prospects do decide to buy. But then they don’t experience the benefit they expected from the product, or they have big issues with missing features, or both. The CEO begins to receive calls from unhappy customers. She tries to smooth things over, and keeps a running list of the reported issues. By hook and crook she is able to retain existing customers just long enough to raise her next financing round.

Having sold investors on a glowing story of raving fan customers and exponential revenue growth, she pours the new cash into marketing and sales, figuring she can increase product and engineering resources when she raises her next, bigger round. Sales keep rising, because the initial pitch continues to seem compelling to new prospects. But as sales rise, so do complaints. Soon, complaints turn into cancellations. As the cancellation rate rises, the CEO is loath to reveal the product’s shortcomings to her brand new investors. So she doubles down on sales pressure, trying to sell her way out of a product problem. It works for a while, until it doesn’t. It’s not until her cash position is too precarious to fix the product that she realizes the error of her ways. This is “close but no cigar disease”. If not treated early, it can be fatal.

There is a much better way. Great companies start slowly. Before any software is built, thoughtful founders deeply immerse in the customer’s world. They are competent, and they care. They learn and learn and learn until they understand the gaping problems and screaming needs in great depth. Intuition by intuition, epiphany by epiphany, science project by science project, they then figure out how to solve it. That’s what DispatchTrack did.

___________

The power of immersion can also be seen in other contexts:

Consider the story of J.K. Rowling. In her Harry Potter book series, she created a story filled with captivating acts of good and evil. It was a breakthrough book (“product”), proven by its global success. The fantastical world she wove, with its muggles, magicians and creatures, felt vivid and compelling. If you’ve read the series, you will recall that Harry Potter encountered many moments of deep loss and pain. Rowling conjured these emotions through her prose, and they felt true. Remember the “dementors”? Dementor witchcraft could evoke in its victims powerful feelings of depression and despair. When victims voiced their feelings, they came across as authentic. Despite their fantastical natures, the characters and creatures rang true — book by book, throughout the seven books in the series.

That authenticity sprang from real life. While at Amnesty International, Rowling worked with victims of genocide and torture. In so doing, she was exposed to the reality of evil. She experienced first-hand its horrific impact on real people. One day, as she walked down a hallway, she heard a loud scream behind her. As she swung around, a distressed co-worker popped out of a room and asked her to get a glass of water. She was told, “I just broke the news. His mother was recently executed. The government took revenge on him by killing her.”

Rowling’s work with victims exposed her to the depths and dimensions of evil. It was while at Amnesty International that she first conceived the idea to write the Harry Potter series. Later, when her mother died, she fell into her own pit of depression and loss. A divorced mother, unemployed and penniless, having suffered a miscarriage, she was compelled to seek welfare benefits. It all brought her to the edge of suicide. Painful though these experiences were, they were not wasted. She infused them into the characters in her books. The drama and authenticity found in the pages of the Harry Potter series emerged from hard-won, genuine understanding.

In a commencement speech to Harvard University in 2008, Rowling said:

“Imagination is not only the uniquely human capacity to envision that which is not, and therefore the fount of all invention and innovation. In its most transformative and revelatory capacity, it is the power that enables us to empathize…. ”

— J.K. Rowling, Harvard University Commencement Address, June 5, 2008 (italics mine)