In 2011, Silicon Valley entrepreneur Eric Ries gave a name to a concept that has long since existed in the startup world: “pivot”. If a new business is struggling to survive and losing customers, it may be time for it to consider a “pivot”. To undergo a pivot means to make strategic changes in your company’s business model in order to turn a better profit.
Who can Pivot?
Many tech giants of today can actually trace their success back to critical pivoting moments when they were fledgling startups. Twitter, the popular micro-blogging social media website, started out as a site for audio podcasts; Groupon, a site offering daily coupon deals actually began as a platform to organize social advocacy campaigns; arguably one of the strongest pivot success stories is that of YouTube, which has its origins in an online video dating site.
When should you Pivot?
If your startup is facing one or more of the following setbacks, it may be time to consider a pivot:
- Decreased demand for your products/services
- Emergence of powerful new competitors
- If costs outweigh profits
It is important to understand that such setbacks are common in the early years of every startup. But if such setbacks start to threaten your business in the long term, then it is time to take the plunge and pivot your strategy. Quarterly and annual analyses of your product, employees, revenue, and distribution can help determine whether any fluctuations are likely to be damaging in the long run.
How can you Pivot?
To pivot means to make drastic changes to the unsatisfactory aspects of your business model while still keeping the successful parts firmly intact. To pivot does mean to start over. Instead, it means understanding what works for your target demographic and what does not, and using this information to steer your startup out of troubled waters.
Some guidelines to executing a successful pivot are:
- Focus on customers, not products: Consider the examples cited earlier. These companies were willingly to alter their products and services drastically to satisfy customer needs, and the risk paid off. In the fast-paced world of startups, there will always be newer and better innovation. A startup that is rigid and unwilling to change will not be successful.
- Know your customers: Be aware of your target demographic. Do not just rely on statistics and quantitative data. Instead, try to learn what your customers want and what they expect out of your products and services. The better you can anticipate their needs, the greater your chances of pivoting your product to deliver them successfully.
- Consider all your options, and discard nothing: An idea that is not feasible at the time can perhaps be incorporated into your plan at a later stage. For example, a startup running a music streaming website can consider adding in an option to allow customers to download registered content off their website once the company has started generating enough revenue.
- Failure is your friend: Do not be afraid to fail. Trial and error offers valuable insight that can help you tailor your pivot to maximize your potential.
Lots of companies find it necessary to pivot at least once in their lifetime. Even moderately successful companies may opt for a pivot in order to increase profits manifold. The key lies in identifying how and when to pivot successfully.