The decision to pivot (or persevere) can only be made once you have tested your central business hypothesis with a minimum viable product. This involves building a product and testing it against a pre-determined hypothesis. Remember that your aim is to build a product or service that your customer will find beneficial and therefore they will likely want to purchase it.
So why do we need to pivot? The truth is that many start-ups fail in their first iteration. If you are not making sufficient progress toward your predicted outcomes, this means your original strategic hypothesis is likely incorrect. This means you need to make a major change, or you risk getting nowhere. This decision to change strategic direction is known as a pivot. It enables you to test a new fundamental hypothesis about your product, strategy and/or engine of growth. This new hypothesis will require a new minimum viable product to test.
Even after a company achieves initial success, the market around it will continue to change and the company must adjust accordingly. This means that even a successful company will need to pivot at some point in the future.
Failure To Pivot
Failure to pivot usually occurs when entrepreneurs fail to heed the warning signs that their early efforts are not yielding progress.
As your start-up grows, you will move from early adopters to mainstream customers. Once this occurs, you need to adjust your product accordingly so you can begin to understand the mainstream customer’s different requirements and demands.
You must also pay attention to how your engine of growth is working. You can read more about engines of growth in our next article. Ensure the engine tuning isn’t leading to diminishing returns and make sure every change you make is about testing a clear hypothesis (whether it is about the product, strategy or engine of growth).
Reasons To Pivot Early
Without a clear hypothesis, it is impossible to test your central business strategy and therefore experience failure. Without failure there is no impetus for change. Therefore, launching early with a clear hypothesis to test will enable you to feel the pinch points earlier and adapt sooner.
A word of caution; vanity metrics can easily mislead teams and rob them of the belief they need to change. This is because it helps false conclusions form and lets the entrepreneur live in their own private reality. Fear of failure and changing course from your original vision is no reason to stop you from pivoting. Pivots serve only to improve the chance your business will be successful at providing value to your customers.
Types of Pivot
There are approximately ten different types of pivots. They are detailed here:
Zoom In Pivot
Re-focus the product on what had previously been considered as just one feature of a larger whole. This single feature now becomes the whole product.
Zoom Out Pivot
This is where a single feature is insufficient to support the whole product. What was previously considered the whole product now becomes a single feature of a much larger product.
Customer Segment Pivot
This keeps the product functionality the same, but changes the audience focus. An example would be changing from business-to-consumer sales towards business-to-business sales.
This pivot is suitable when you realise the product solves a real problem for real customers, but they are not the type of customer it had originally planned to serve.
Customer Need Pivot
This involves changing your product. This pivot occurs when it becomes apparent the problem you are trying to solve is not important to your customer. During your research you will usually uncover other related problems that are important and can be solved for them instead.
This involves changing how you sell. An example would be changing from selling to individual customers one-at-a-time to the adoption of a self-serve platform where anyone can become customer.
Business Architecture Pivot
Your business will either be a high margin and low volume business (complex systems model – usually associated with business-to-business sales) or a low margin and high volume (volume operations model – usually associated with consumer products).
Value Capture Pivot
There are many ways to capture the value a company creates. Traditional models include monetisation or revenue models. Changes to the way a business captures value can have knock on effects to the product and marketing strategies.
Engine of Growth Pivot
There are three engines of growth: viral, sticky and paid. This pivot involves changing strategy for faster or more profitable growth
This is the mechanism by which a company delivers its product to customers (sales or distribution channel). This pivot involves recognition of that your product/service can be offered through a different channel with greater effectiveness.
This pivot involves discovering a new way to achieve the same solution with a different technology. The technology will offer a better price point and/or performance. It is more common in established businesses and is used to sustain innovation.
- The Lean Startup; Eric Ries
- The $100 Startup; Chris Guillebeau