What We Talk About When We Talk About Pivoting

How To Know When to Pivot

“Pivot” is a famous word in the world of startups and tech companies. It’s generally associated with a massive change to a team’s product or business plan. It’s an important moment for many companies, because it typically results in an internal shakeup and reorganization of priorities. A pivot means drastically altering the direction of a product or company to course-correct when the company has become side-tracked or lost.

Even for nimble organizations, it’s often difficult to identify when you need to pivot. Organizations inherently lean toward the belief that they are on the best path. Choosing to undergo a tremendous change is risky, even when necessary. So how does a company or leader know when it’s time to hit the brakes and make a pivot?

Failure to Realize the Business Model is Broken

Many times, companies and product teams are so narrowly focused on themselves that they fail to realize when their entire business model is infeasible. Markets are fickle. Often a company will leap into a hot sector, trying to create a great product, only to find that their customer base has moved on to a better solution, or worse, was never there in the first place. There are a number of ways for the business model to break, but once that is identified, it must lead to a massive organizational shift. Blockbuster should serve as a warning to many companies. Though its business was being eroded by technology competitors (like Netflix), Blockbuster only viewed similar brick-and-mortar retail stores as its competitors and their business model was completely displaced.

Focus on a Successful Feature

For many companies, the pivot comes in the form of focusing on a specific aspect of their product. This narrowing of focus can help companies eliminate the “fluff” in their product and focus on the real human need. This is the what happened to Flickr, which started as a MMORPG (massively multiplayer online role playing game) and pivoted to focus on a photo sharing feature within the product. Companies can identify the need to pivot into a feature by examining user behavior and analytics. If you discover that an overwhelming percentage of usage and revenue occurs in one area of the product, it may be time to turn hard and focus on that feature.

Public Policy Challenges

Companies disrupting serious markets will often face public policy challenges that may force a pivot. Companies like Uber and Airbnb have faced severe public policy changes, but have chosen to persevere. FlyteNow failed to pivot around their government ban, and were forced to shut their doors.

A Saturated Market

Dominance by the competition may be the number one reason companies are forced to pivot. In the last few years, we’ve seen startups rush into the ride-sharing space; many of them forced to pivot once Uber cemented its dominance. Sidecar was an early player in the ride-sharing scene, but Uber’s ubiquity forced the company to pivot its focus to deliveries. Ultimately, Sidecar pivoted too late and was forced to shut its doors. Companies facing a saturated market must carefully analyze new or unrelated categories they may be able to enter by leveraging their core assets and technology they’ve already amassed.

So, When Do You Pivot?

Once a company recognizes the need to pivot, it’s vital not to become paralyzed. You must move quickly. Some companies pursue business model or brand pivots, attacking a new model for sustainability or market penetration. Some pivots include the resurrection of an older product or service that was prematurely shut down.

But the central risk is waiting too long to make a clear decision, and being unable to forge a clear, new path for the company. No matter how a company is forced to pivot, it is key to be ruthlessly decisive. Adaptive organizations can recover from major directional changes, but it is difficult to recover once the company has over-invested in pursuing the wrong solution.

Lab Notes is a publication of GoKart Labs

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