Editor’s Note: The following is a guest post. Interested in collaborating on Product School’s blog? Email Gabriela Araujo at gaby(at)productschool.com
Back in 2018, I was meeting with friends and former colleagues every other week. We shared personal values and beliefs so the idea of building something together was present. After a lot of thinking, I made the decision to pursue my own startup — something that I wanted to do for a while.
One afternoon, a recurrent topic started to come up— Logistics. Logistics is the economy’s circulatory system of any country. It transports everything we eat, wear and use to almost anywhere and yet is one of the most old-fashioned industries in the world. With less than 30% of digitization, clients’ expectations for transparency were on the rise and yet logistics companies won’t invest in technology. Esther Ndichu has a great TED talk on this matter: how hunger isn’t a food issue, but a logistics issue.
My only experience so far was Cuevana, a site to watch movies and TV shows online that became very popular in Latin America, with over 12 million unique users every month. I learned a lot during that time. But this time it was going to be a deliberate attempt to build a sustainable business.
The question was, where to start? We had no idea. We spent a lot of time doing research and discussed the project with everyone we knew could help. After many interviews with local companies, we saw a tremendous opportunity.
Although Argentina’s data was poor or nonexistent, a local report said the trucks moved 90% of the 450M tons transported in a year. Unfortunately, trucking is the most inefficient and expensive transportation mode. They have high levels of informality and labor unions are very strong. Still, we believed the opportunity was worth a shot.
We founded Falcon Trail in January 2018 to make the process of moving goods easy and efficient.
The transportation market looked like a promising starting point. Logistics managers in the industry know operations by heart, turning them into a single point of failure. If a person was sick or unavailable, companies would lose money. They spent most of their time making phone calls to track shipments 24/7 and manage customers’ expectations. A common complaint among them was the lack of planning. It is a painful process.
The low level of digitization force company owners to look for solutions desperately. The lack of flexibility to implement these solutions prevent companies from investing in technology and therefore, end up solving nothing.
A regular logistic operation looks like this:
The challenge for us was to make this operation efficient and predictable. Shippers struggled to get visibility and control to better manage the costs of goods and meet internal and external customers’ expectations. Carriers didn’t have the technology or ability to provide this level of transparency and their margins were too low.
In order to make the process of moving goods easy and efficient, we need carriers and shippers to collaborate in a common platform. By doing so, all stakeholders would be on the same page sharing a single source of truth.
Our initial strategy was to start helping carriers by giving them access to new deals, real-time tracking, and document management. We would fill the technology gap so they could provide the visibility shippers needed.
The first MVP allowed carriers to plan a logistic operation ahead. They would create a new shipment with details about the destination and load, and truck drivers would have all the information needed in their phones. Drivers would take pictures to add digital documentation and every update would be notified to the stakeholders. In theory, this was great.
In practice, it didn’t work out. Logistics managers never had all the information beforehand to create a new shipment. And truck drivers didn’t want to download an app that would monitor them. They would crack any process and take advantage of their employers when possible.
The following iteration made this process more flexible. We made some information optional (bad idea) to create and edit shipments on the fly. This way they could at least try the product. After a successful onboarding, operators and truck drivers had no problem using the app. But after a few weeks, they stopped.
After getting similar feedback from other logistics companies, we decided to change the strategy. Logistics companies’ resistance to change was higher than the desire to improve their business in the long run. For them, our product was a vitamin, not a painkiller.
We also learned that big shipping companies have the leverage to negotiate terms. If we could convince Shippers to come on board, we could have gotten the carriers they already worked with.
Back to building, we created a completely different MVP with a different Persona in mind. Shippers would get visibility and control over shipments along with powerful analytics. Our product was meant to be the tech layer between them and carriers. They would ask for quotes and track shipments end-to-end. We knew the challenge was to convince carriers to agree. They needed to ask their truck drivers to use our product or we were not going to be able to track progress.
We launched the newer version, but again it didn’t work. Trust is important in the industry so rates and terms are usually a verbal agreement. Asking for quotes and getting them approved is an unnecessary process. As time passed, we end up removing most of the features and benefits. A super lightweight version to provide end-to-end shipment visibility.
But after 8 months, 5 different MVPs and 4 mid-sized logistics companies in private beta, we realized visibility wasn’t their top problem. And even though we decreased the delivery time from over a month to about 1-2 weeks and were learning valuable lessons we still had no revenue.
When you’re not scoring, morale starts to drop and soon you start to wonder if this is the right thing to do.
The 5 Mistakes We Made
1. No Industry Insight
Most of the logistics companies we talked to wanted to keep working “the way it has always been”. Our first reaction was “being outsiders is a strength”. We would bring a fresh perspective.
The downside of this scenario is the lack of domain expertise. Like Peter Thiel says, we didn’t have a “secret”, something that others didn’t know or have. With no domain edge and no specific user in mind, we would have to fail many times to get it right.
During interviews, I remember how hard it was to understand their needs. The jargon, the way they operated, and the mental models were very unfamiliar. I struggled to get meaningful conversations. Trying to solve problems you don’t understand is dangerous territory.
Product Discovery is the key to finding the right path. But before even starting, you need to know who your customers are and how to pick their interest. We chose the Transportation segment based on our own research. But maybe an expert would have seen it as a misstep.
2. No Real Market Need
After several pilots during private beta, we realized we were not solving a problem logistics companies cared about. They didn’t find our product valuable, no matter how well it worked.
Logistics companies wanted to keep doing business the same way. They wanted to keep working with the same people. Maybe pay fewer taxes and keep some operations outside the radar.
Digitization would bring light to every transaction and make it visible which wasn’t always ideal for them. The lack of digitization sometimes was an advantage, not a weakness.
Startups fail when they are not solving a real problem. And that’s what happened to us. We needed to pivot. The question was, where?
3. Unbalanced Team
None of us had a network in the industry to lean on. We needed a partner within the industry to run sanity checks for our business. Our attempt to bring an industry expert didn’t work out. I believe this would have made some difference in terms of traction.
The founding team couldn’t successfully market the product and close deals. Knowing your target market and turning them into paying customers is key. Most successful businesses have this important skill but none of us could fill the gap.
The team was formed by three engineers and a Product Manager. When you argue in a high uncertainty scenario, everyone is right and wrong until proven otherwise. That’s when Product Discovery comes in. When in doubt, always talk to your customers to test your hypothesis.
4. Bad Location
During 2018, Argentina headed to an economic crisis. The impact on logistics and transportation was immediate. Fuel and maintenance costs rose at a scary pace. The relationship between Labor Unions and companies started to heat up.
Several union strikes across the country were common. Small logistics companies were concerned when the situation started to see negative returns.
Logistics is already a challenging industry, but in Argentina, it is even more. That’s why we applied to Startup Chile, the leading accelerator in Latin America. Our research suggested that Chile would be more receptive to what we were trying to do for a number of reasons. Unfortunately, we didn’t get chosen.
5. A Half-Hearted Effort
Supplychain247 wasn’t the first thing we read in the morning before starting Falcon Trail. We wanted to build a sustainable business but I think is fair to say we didn’t care about logistics.
When people talk about passion as an entrepreneur, this is what they mean. When you’re not scoring and morale starts to drop you better be in love with the problem you’re trying to solve. I remember wondering “If this is starting to feel like a burden after just one year…how would it be in the future?” I clearly wasn’t passionate about this problem.
The market was hard? Yes. The timing wasn’t perfect? Probably not. Do we lack the industry expertise and network? Absolutely.
But if there was one thing that wasn’t negotiable was a half-hearted effort. If you don’t have the conviction to go through all this then you are wasting your time. It is not easy to come clean but we were not the right team for this startup.
You often read about how you have to persevere. But sometimes, quitting is a smarter move.
I hope you find this story valuable.
Meet the Author:
David Fernández is a curious Product Manager with extensive experience in Product Development. He currently works as Lead Product Manager at a startup looking to humanize work-relationships and raise people’s happiness. Prior that, he co-founded a logistics startup called Falcon Trail and worked as Engineering Manager during his transition to Product Management at Olapic. He loves working on side-projects like Readsmart, The Product Index, and Cuevana.
Product Manager. Former Engineering Manager. Curious. Doer. Prioritizer. Avid Reader. Fitness addict. Growth mindset.
Interested in collaborating on Product School’s blog? Email Gabriela at gaby(at)productschool.com