Listening To Our Customers Almost Killed Our Startup

“Fail Fast, Fail Often” and “Fail Better” are phrases that startups always hear from their mentors, and many live by (especially after reading The Lean Startup). Here at Digsy, failing fast gets mentioned at least once a day. Even though we’ve fully embraced the “fail fast” mantra to help our business succeed, the fear of complete failure is still there. Any startup has fears of failure. At Digsy we have gone through our set of failures, but it’s how we push through to the other side of our failures that keeps us going. Failing fast and quickly learning from our failures helped us get closer to product-market-fit before we went down in flames.

This is going to sound crazy, but one of our biggest failures occurred when we listened to our customers.

We’re a startup in the commercial real estate industry so we built our product based on many, many conversations with our potential customers: commercial real estate brokers. In every conversation, we would ask them about their pain points, business processes and how technology could help them accomplish their goals more easily. We would hear the same things over and over, so we decided to build a product that solved these pain points and addressed their wants and needs. We did this twice, and we crashed and burned. Twice.

It was ugly.

Experimenting constantly and failing fast is a constant cycle for us (and it should be for any entrepreneur). Every week, we try something new; if it fails (which it usually does), we try something else. We are always optimizing, both on a micro- and a macro-scale. From minor messaging changes to entirely new concepts of how we do business, everything is an experiment. It was through the series of small failures that kept our minds in the game, allowing us to see the big failure. The keys to successfully living the “Fail Fast” mantra are perseverance, urgency and validated learning . Failure is a depressing waste of time and money — if you don’t quickly learn something you can leverage toward success.

Our goal from the beginning has been to improve the commercial real estate industry and change it for the better. Our first product, BrokerRoster, was a tool intended to help commercial real estate (CRE) listing brokers find tenant rep brokers looking for space so they could pitch them their listings. While researching how we could improve the product to generate revenue through innumerable conversations with brokers and other CRE professionals, we kept hearing essentially the same thing: “keeping track of leads and deal opportunities is too hard”. So we expanded BrokerRoster to solve that pain point.

Big mistake.

We spent months building a suite of CRM-like tools giving them what they asked for: a way to get more leads and a better way to manage deal opportunities. After all the hard work and late nights, the product enhancements failed. Very few used it and even fewer wanted to buy it. While our techie users/early adopters wanted these tools, no one else saw their current paper-driven workflow as “broken”, or at least “broken enough to change”. So we were back to square one.

Our second big failure came with our next iteration of BrokerRoster.  We did more research and customer interviews and found that our listing broker users kept telling us: “if you could find us more small tenants and buyers looking for space, that would be great.” Tenants and buyers that are in the market for commercial space are the lifeblood of listing brokers. Since our SaaS CRM product was failing, we again listened to our customers and decided to start focusing on tenant lead generation.

This time, we re-branded and built Digsy. We had two goals: help smaller, unrepresented tenants quickly find space AND help listing brokers to find tenants looking for properties like theirs.  It was a win for the tenants — they could find space faster and easier — and it was a win for the brokers (at least, so we thought). Since the tenants were unrepresented, the listing broker would make more money, by not having to split the commission with another agent.

We built a new service that our customers asked for — a way to find more prospects for their listings — and in the process we figured out a way for them to even make MORE money. In exchange, we would take a small referral fee when they closed a deal. In the first few weeks, we had many tenants using the service, going on tours and everything seemed to be going great.

But as time went by, we noticed that hardly any of the listing brokers who initially adopted the service were sending their listings to the tenants on our platform. This was of great concern, because it meant our tenants were not getting serviced and, worse, that we were failing.

What the hell happened?

We were sitting in awe and scratching our heads. Every time we explained the idea of what we were doing to a listing broker, they loved it and seemed enthusiastic, yet when we would send them leads they ignored them. Our startup was in a nosedive toward oblivion. Our “Fail Fast” mentality was working against us. If we kept following it, it would have told us that by optimizing the messaging and UX we would eventually find the path to getting the brokers to change their current behavior.

Eventually, we wised up and realized we had failed big time. Crashed and burned. Kablooie. This product we spent five months on failed. The product all our customers asked for failed; they never used something they were so enthusiastic about.

This time, we shut down for three days and sat in front of a whiteboard to discuss the state of our business and explored the successes of every marketplace from Uber to 99designs. We dissected why tenants and buyers were using our product, while our listing brokers could not care less. Three full days is a lot of time for a startup to put everything on hold, yet it was the defining moment for us. We had a history of failing fast, but by taking a step back we saw the big picture.

We learned that the brokers using our system the most were not listing brokers. They were tenant rep brokers trying to find new tenants to represent. With our newfound knowledge, we reworked our service offering and started connecting tenants with a personal market expert (broker) to help them save time & money finding commercial space. We created an on-demand network of the best market experts to help tenants & buyers find space, where the first expert to respond to a tenant or buyer request would get the business. Through our trials and tribulations, we stumbled on a product that was like Uber for commercial real estate. In our first week of modifying our service we closed two deals. In the previous five months we had closed zero. This is a trend that has held steady and our revenue is continuing to grow.

A fellow entrepreneur shared a similar experience with us,

“Tidy at one point tested a ‘Deep Clean’ service that stemmed from client feedback about wanting a more thorough cleaning of the home. We were excited and so were the clients! While we thought we were delivering what the clients wanted, we weren’t. Clients expectations for our ‘Deep Clean’ service were not consistent with what we were able to provide in the time allotted. We ended up having to discontinue the Deep Clean and reworked it to create a Mighty TIDY.“ Andrew Hawkins, Advisor – Tidy, Inc.

Docstoc founder Jason Nazar recently shared his philosophy on failure:

“Failing, as other people may see it, for me and for many other entrepreneurs, is simply part of the process of iterating until you find that thing that is meaningful and worthwhile.”Jason Nazar, CEO – Docstoc

Being able to fail fast is necessary, but it was when we sat back and took a look at the big picture that made all the difference for us. Had we not freaked out and re-thought our business, I’m sure we would be in the deadpool. “Fail Fast, Fail Often” is talked about a lot in the startup community, and while we agree, most forget the part about urgently trying to find out who your real customer segment is. Without a fire under our asses to identify the needs of our real customer, failing fast and failing often would have just lead to catastrophic failure. It’s the desire for success that will see you through the thousands of failures you might encounter   in a startup— and hopefully, get you featured in Entrepreneur Magazine.  After all, it took Edison over 1,000 attempts to create a working light bulb.

We learned a big lesson: Your customers are everything, but failing fast is only great if it is for the sake of your real customers . Our big, overarching mistake was that we had identified the wrong customers, the listing brokers, from the get-go. Had we continued to try and optimize our product based on the feedback of the wrong customers we would probably be looking for new jobs today.

Have similar experiences? Disagree with us? Share your thoughts in the comments.

Written by Kyle Pinzon

Kyle is the Director of Customer Success at Digsy and also dabbles in Marketing at Digsy. Kyle started at Digsy in June of 2012, as a part-time contractor. Kyle became Digsy's first full-time employee in August of 2013. While new to the startup environment, Kyle is loving every minute of it and excelling. Kyle resides in Placentia, CA. He enjoys NASCAR and rooting for the Anaheim Ducks, Anaheim Angels, and the San Diego Chargers. Lover of all things tech-related. Science nerd.

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19 Comments

  1. As a consultant, I learned early on that what people tell you they want is rarely what they really want – or would even use if they got it. You have to dig (no pun intended!) – and you all did a lot of digging…something too many startups don’t do because they’re married to an idea instead of a solution.

    I’ve seen Digsy and it addresses a lot of issues with lead generation for both sides (the lead and the agent). Think you’ll find many agents will embrace it. Nice job.

  2. Great post! Sounds like the white-board, step-back approach was what did it for you, and ironically that was in a silo away from customers. Will keep this in mind as I push my own product next month.

    • Ya, the white-board, step-back approach worked. It was 3 full days, sitting in chair discussing all different types of marketplaces. Uber, 99designs, thumbtack, Commercial Real estate. We spent time discussing what worked for each one, why people used them, who their customers worked, etc…

      There were multiple moments during those 3 days of just talking where it got frustrating, especially on the 3rd day.

      But in the end it helped us realize who the real customer was, and how to service them correctly.

      Good luck on your product!

  3. Great post — This is a valuable story for people building other businesses to read. You have to listen, but listen with a special skepticism, not simply taking what’s said at face value.

    • Exactly. Thanks for reading! Really appreciate it.

    • Hey Steve, thanks man. I know you’ve been in the startup space for a while and have a lot of experience building startups. So the comment is very much appreciated from someone like you. Please share this article with your entrepreneur friends.

  4. So glad you wrote this post because all other posts out there are related to “listen to customer” feedbacks. There are not enough posts that teach entrepreneurs how to “ignore the noise” and filter these customers feedbacks or identify the “right” feedback at any given time. I, myself, made similar mistakes.

    • Thanks for the comments. Yup, there’s plenty of articles saying to “listen to your customers” but for a startup it’s important to take customer feedback with a grain of salt. Still listen, but try to solve their problems in your own way

  5. Great post Kyle. Clayton Christensen has this great line (among many), “people don’t want a quarter inch drill bit, they want quarter inch holes”. In my experience, many customers have trouble verbalizing the nature of their true problem. Instead, they tend to cite some byproducts of the core issue at hand. I think this is what tends to send us entrepreneurs on a wild goose chase.

    It sounds like your three day focus group session allowed you to identify the “real” problem your ideal customers are facing. Well done!

  6. Great post. I like to conceptualize what my take-away from the customer interaction will be. if I’m building a product, I like to listen to users to help me identify and characterize the problems, rather than the solutions. This is hard for me, but its also the challenge.

    • Thanks, Robin. That’s a great way to look at customer interactions. At the time, I think we felt like that’s what we were doing. Instead, we were either asking them leading questions (trying to hear what we wanted to hear) or trying to frame their problems in the context of what we thought our solution would/should be.

      We weren’t truly opening ourselves up to seeing the whole picture: just the slice that we thought was important. Once we broadened our view, we saw what was in front of us the whole time. A lesson learned the hard way.

  7. So, not my industry but the principle behind the article is near to my experience. Our main client had a 1000 employee users that were empowered to offer opinions and request changes to our services spread out over several years. So we made changes and more changes and more changes and….well you get it. After years of this process, we found, the base product of our services had improved a little, but the auxiliary services were practically unrecognizable. They were expensive, fancy, custom and largely UNUSED. CRAP!, we spent a million dollars giving them what they asked for and ultimately didn’t want. Not all was lost, we learned a very valuable lesson in reading between the lines of requests and now as we expand to many clients in the same industry we are much more prepared with a product and service that meats the real needs and wants, even if they haven’t been asked for.

    • Aaron sounds like after all the changes you made you had a Frankenstein product on your hands. It’s a great lesson to learn. Thanks for commenting, glad to hear you are more well prepared now

  8. … and this is why you observe not ask when looking at the jtbd – remember Fords faster horse quote 😉

  9. I skimmed over this article in 10 seconds.

    You have misidentified the problem. The problem is not the framework of decision making, it’s just the wrong solution.

    The problem is not that you tried to solve customers need for handling their contacts, it’s that you did so by building specific tools.

    Integration is the new Internet. You should have used Zapier, spent a couple weeks to integrate your service, and allowed users the option to import and export their contacts and information as they wish.

  10. Michael David Crawford

    December 16, 2014 at 4:01 pm

    A while back I met a science fiction writer. I happened to ask her what kind of computer she used.

    “I don’t use a computer. I use a typewriter.”

    This was roughly a year ago.

    “This is gold to me!” I said, “Please tell me why.”

    “I like paper.”

    Lots of people like paper. They might gripe about problems they have, but they like paper.

    Consider that the US air traffic control system has the controllers passing little slips of paper around among each other. It has an advantage over a computer – it’s reliable, it does not require electricity.