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How Silicon Valley Is Embracing the ‘Embedding’ Craze

When Lever, a San Francisco company that sells software for tracking job applicants and other HR tasks, launched three years ago, the founders got to know their first customer, Twitter (TWTR), well. Really well.

Lever co-founders Sarah Nahm and Nate Smith embedded themselves inside their client’s offices. They worked side by side with Twitter’s recruiters, watching firsthand how they did their jobs. Says Chris Shaw, a former Twitter manager who sat next to Nahm: “They felt like they were part of our team.”

The experience led Nahm and Smith to add software features, such as a button in clients’ Internet browsers that creates candidate profiles from any site on the web and a “snooze” tab that reminds users to follow up with a candidate later. Even though the improvements didn’t come fast enough to keep Twitter as a client—being fired was “the best thing that happened to us,” says Nahm—Lever’s team gleaned crucial insights, she says, that could come only from watching extreme users do their jobs.

Today, backed by $32.8 million from investors, Lever is growing, and it continues to learn up close. At least once a week, any of its 80 employees can be found camped out inside the offices of some of its 1,000 customers. “We just pull up a stool and watch them work,” says Josh Ackerman, an associate product manager. “We get some of our best insights doing just that.”

Tech startups that live by the algorithm are learning the value of intense human interaction of the sort that traditional businesses have long practiced. The code worshippers are putting employees into the trenches with customers to find ideas that don’t emerge from a string of ones and zeros. “They’re beginning to realize that one cannot survive on big data alone,” says Martin Lindstrom, author of Small Data: The Tiny Clues That Uncover Huge Trends. Lindstrom has encouraged his 60 client companies to spend extended time inside their customers’ habitats. “When you witness something firsthand, it’s much more believable than a report,” he says.

Some startups take that approach surprisingly far. Each night, any of the 60 employees of Reserve, which makes software for restaurant reservations, can be found inside restaurants, busing tables, running ­dishes, working at the host stand, and sometimes even spending time in the kitchen. They experience the stress of working in a restaurant and hear feedback from diners and workers, says Nadja Blagojevic, Reserve’s director of communications. “They watch them, ask questions, see how our software works in the operational flow of the restaurant,” she says. That feedback has helped drive the company’s explosive growth, Blagojevic says; Reserve has expanded to seven cities in just 18 months. (No word on how often a coder from Reserve has, say, incinerated a piece of salmon at a client’s restaurant.)

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A similar entrenchment takes place twice a year at videoconferencing company Highfive. CEO Shan Sinha requires his 75 employees to work in tech support to see firsthand how customers unbox equipment and set up the software. The result: 30 suggestions for changes to the software and subtle tweaks in marketing language. The company added 1,000 new customers in its first year. “Putting a face and a name to a customer,” says Sinha, “is our competitive advantage.”

A version of this article appears in the June 1, 2016 issue of Fortune with the headline “Getting Inside the Box.”