The Entrepreneurship Pivot: Knowing When It’s Time to Make a Move
It’s cliché to say that “nothing lasts forever,” but it’s still undeniably true-business cycles wax and wane. The Dow goes up. The Dow goes down. Twenty years ago, everybody was afraid of Wal-Mart taking over the world. Now, Wal-Mart is afraid of turning into the smallest, least-profitable sub-division of Amazon. When great empires throughout history transition from wearing Allen Edmonds to Uggs: watch out! … they’re going to fall and soon. You can’t just rest on your laurels. You have to keep iterating, inventing, and testing out new ideas.
The trick, of course, is recognizing when those once-green laurels are getting a bit stale. As much as it hurts, and psychologically it can really hurt, you nevertheless need to be willing to kill your darlings and move on. Adam Smith observed that humans have infinite wants and limited means to achieve their desires. This means that we — as a species — never settle. We’re never satisfied. Our desires are mercurial and ever-shifting. Today, we want a shiny pair of new shoes, while tomorrow we want a new BMW Alpina.
Now, there’s no single entrepreneur who makes a move from shoes to cars. Making such a radical shift in manufacturing and tooling demands such an organized refocusing that most businesses can’t bear the strain of making such a pivot. Likewise, advanced modeling and forecasting macro and micro-economic trends require vast input from thousands of suppliers, sources, and dedicated staff to crunch the numbers, which is out of reach for most smaller entrepreneurs.
That said, there are points in between where a nimble business owner can readily move into or exploit a vacant niche if he’s willing to make a move and take a risk. Several recent precedents back this assertion up. First, the market always gives signs as to when it’s time to make a pivot. Second, companies that we think of today as monolithic often began as small enterprises with the foresight to pivot at a crucial moment. And as the hippies said, “you don’t have to be a weatherman to see which way the wind is blowing.”
Entrepreneurs aren’t always visionary. Often, an entrepreneur will set out working in one direction, only to realize that they’re barking up the wrong tree. Of course, the reasons for the eventual pivots differ; however, the competition didn’t even see the change coming and neglected to make a decisive move because it would have been too painful to admit the reality of their situation-that the only constant changes.
Let’s explore an example business case where the opportunity to change directions arose and how different companies reacted to that change. Hubris is often a stumbling block for many business entrepreneurs. Remember Blockbuster Video? In another 15 years, nobody outside of an MBA course will; however, it is an excellent example of how “pride goeth before the fall.” In this case, Blockbuster was the 900lb gorilla of the 1990s-era home video rental market. There had been local video rental chains before, but nothing like Blockbuster. It was a social phenomenon, every Friday. You’d go to the video store, begging your mom to let you rent “Teenage Zombie Chopping Mall Massacre” and happily go home only to rinse and repeat every weekend. The business mushroomed overnight to overtake regional mom-and-pop video rental stores and leap from coast to coast to coast within a decade.
That didn’t last. A small startup called Netflix had an idea to peel off a few of Blockbuster’s members, rent them DVDs, and then deliver those movies to their doorstep. The business scaled well; a Netflix subscriber could rent several DVDs and keep those films as long as they wanted to-with no late fees; getting more new films once they returned their old ones to Netflix. Pretty spiffy. Now, what Netflix knew was that they would always be a small business compared to Blockbuster-a minnow living under a whale’s shadow. Or so they thought!
As Netflix expanded its user base, they began to notice a change in the video rental market: more and more people were going online to watch movies. It was very niche at first. First, only young college kids and techies were doing it online because, for the most part, it was kind of also, well, illegal. The infrastructure of the web was still a bit “laggy.” However, Netflix began to explore the idea further. Could they deliver a satisfying viewing experience to a new online market segment overlooked by other more conventional operations? Ironically, it was around this time that Netflix entered into talks with Blockbuster to sell their business.
The Blockbuster executives laughed at the notion. They couldn’t see the change coming because they didn’t want to see the coming change. They didn’t see how the change was already occurring as a threat because it was too painful to admit that this startup had beaten them, snatching the brass ring and completely invalidating their long-established billion-dollar business model. Netflix, for its part, dared to stick it out, make the hard changes, and secure the investors who could see that they were onto something. So now, we all binge-watch Netflix…and, outside of one town in Alaska, no one thinks of Blockbuster Video.
Adaptation to a changing market is just one example of a pivot that an entrepreneur might need to make to survive in a very competitive market where a dominant player seemingly holds all the cards. In a David versus Goliath situation, thinking outside of the box can be the key to success. However, Netflix’s willingness to re-envision how an existing service could be reshaped into a more modern and efficiently delivered product and then aggressively pursue that burgeoning revenue stream regardless of the ridicule of its competitor shows determination.
The willingness to stop, think, and reinvent has been the keystone for the success of many entrepreneurial endeavors. Nintendo wasn’t always the “Nintendo” we know today. For example, it was a hotel chain, a ramen noodle supplier, and a vacuum manufacturer, among other things. Play-Doh started as a soot remover from coal-fired stoves called “Kutol”; would you let your kids play with that? Necessity is the mother of reinvention. As gas stoves came in, the need for coal cleaning technology vanished, and a new revenue stream had to be found. Now every first-grader knows the smell (and taste) of Play-Doh.
At some point, every entrepreneur will face the need to make a pivot. Nothing lasts forever. The best companies in the world have had moments of real apprehension. The question is will you stand firm against the inevitable will of a dispassionate business universe, or will your business succeed by bending to the will of changing times, tastes, and consumer demand?
View this article in the December 2021 issue of MP.
Originally published at https://modernprofessional.co on December 10, 2021.
