Every business experiences considerable challenges and uncertainties on the road to success. But how an entrepreneur handles these difficult situations determines their success or failure. At some points, you may be compelled to make some strategic changes or “pivot” either to readjust to a significant technological shift or address some negative feedback from customers.
To maximize the benefits that come with pivoting, you must understand why and when to make key changes as well as how to implement those changes. In this article, you will learn some of the common reasons why businesses pivot, when to consider one and how to ensure that you get it right without wasting time or resources.
What Is Pivoting?
The term pivoting seems to have gained popularity and attracted diverse usage among entrepreneurs and non-entrepreneurs in the last few decades. The first usage of the term within the entrepreneurial space came from Eric Ries and Steve Blank in their books on what’s now referred to as “Lean Startup Movement.” They describe pivoting as the process of changing a part or parts of the business model to reflect reality.
Pivoting involves recognizing that your original business model is not (or no longer) working, deciding what changes to make and taking actions on those changes. One of the ways to understand when to make changes to your business model or product designing is by listening to your customers – customer development.
Unfortunately, many burgeoning startups focus more of their efforts and resources on designing products. Placing too much emphasis on product development without “getting out of the building” to test your hypothesis is a recipe for failure and will prevent you from welcoming changes when they’re necessary.
Pivoting has to do with changing something fundamental or consequential about what your company is doing or what you’re offering. Sometimes, the change could mean overhauling the entire company and some other times the change only affects a particular aspect of the business. Some of the examples of pivoting include:
- Changing from a product company to a service company
- Adding or removing a feature from a product
- Extracting a feature from an existing product and redesigning it to stand on its own as an independent product
- Adapting a different pricing tactics or revenue strategy
- Refocusing your business model to serve a different market
- Making funding decisions, for example, are you funding your business with grants or you’re turning to venture capitalists?
- Adding or removing a service offering to focus efforts elsewhere
- Changing who you do business with and whom you consider a perfect customer
Some of the real life examples of companies that have pivoted include Groupon and Instagram. Instagram pivoted from being a mobile microblogging platform into a photo sharing application while Groupon pivoted from a social advocacy campaign into a billion dollar deal site.
Why Is Pivoting Important?
A strategic Pivot is essential to ensure that your business meets the needs of your target market(s) and key stakeholders while building a sustainable business model. There’s a huge difference between researching or assuming that you know about an industry and experiencing it firsthand. When starting out, it’s assumed that you have many untested hypotheses about your business model in terms of who your customers are, the features they want, what channel to use and the pricing strategy to adopt.
The only way to validate or invalidate these hypotheses is by testing them. When your hypotheses are not valid (not in alignment with reality), you should change or pivot your business strategies. This enables you to reposition your business, attract more customers and generate more revenues. You must be open to make big changes given that these decisions are data-driven. Strategic changes are required at every point of new discovery of what’s going to work.
When Is The Right Time To Pivot?
Business pivoting should be done only when it’s absolutely necessary or clearly visible on moving in a new direction – usually after other available options have been explored and exhausted. No two businesses or startups are the same. As a result, there seems to be no one-size-fits-all approach to when a business should pivot. However, you may have to consider some major shift in your business strategy if one or more of the following points resonate with you:
When you discovered your belief or hypothesis was wrong
Many times, entrepreneurs are motivated by their strong convictions even when those convictions are not backed up by proven data or market insights. While it’s normal and acceptable to make wrong assumptions, it’s completely wrong to stick to your beliefs after you’ve been contradicted by reality.
Whether it’s about a product that failed to meet customers’ expectations or an approach that doesn’t align with your overall vision for the business, don’t be afraid to change where necessary.
When you’re making slow (or no) progress
When it looks like nothing is working after putting all of your efforts and the right amount of resources into a project, then it’s possible you’ve hit a plateau and it’s probably the best time to change your strategy. You have to be honest with yourself and identify what you can improve or revamp for the future success of the business
When you keep getting negative feedback from different customers
Bad reviews are inevitable in business no matter how helpful your product or service is. However, there’s a problem when your customers keep complaining about a specific area of your business. This is not the time to turn a deaf ear to their complaints and pretend all is well. If they think a feature is too complex to use, look for a way to simplify it for improved user-experience.
When you’re confronted with high competition
As a startup or small business, you will have to contend with higher forces. When starting out, it’s possible that your idea is solely yours and unique to you. But along the line, much bigger companies with more resources and funding may enter the market. In that case, you may have to consider reviewing your strategy to adapt to the competitive landscape or switch your market focus.
Pivoting Your Business The Right Way
Successful business pivoting requires considerable planning and thoughtful execution. Before you pivot, you should ensure that you’re working with trusted and proven data. You want to work with data that reveals the problem or shortcoming of your current strategy and what you can do to improve on the strategy to become better positioned to meet your customers’ needs.
Additionally, before embarking on a major strategic change, you have to make sure that the changes you’re about to implement will avail you the opportunities to grow. Pivoting shouldn’t only be about changing the direction of your business, it must help you achieve a considerable amount of growth and expansion. You don’t want to implement a change that will further shrink your customer base or cause your revenue to plummet. The code of the game is look before you leap.