PIVOT: WHAT DOES IT MEAN IN ENTREPRENEURSHIP?

Marketing Manager

Anastasia Shevchuk

Every entrepreneur needs to be completely convinced that their solution is the perfect match for their target market, and yet almost every single one eventually admits to needing a "pivot" before finding their niche. Course corrections, or pivots, are normal for new ventures, so you should always expect them and be ready to implement new ideas and move in new directions.

Failure is the unwillingness to learn and adapt based on new and better information.

There are innumerable types of pivot, but some are simply more effective, and every early startup should contemplate pivots regularly during their early growth period.

Let's dive into the business pivot world to see how they work and what helps startups succeed.

In terms of business, a pivot is a fundamental change of direction after the realization that your current products or services aren't meeting the needs of the market.

A pivot like this will often test fundamental hypotheses about the product, your business model, and growth mechanisms.

Customers are the foundation of every startup. The problem you are solving, the product you are building, and the technology it's built with will all depend on who makes up your customer base.

There can be many reasons for a customer need pivot. For instance, the initial requirements of your customer might have changed or you could have made an alteration to your product during the building process which resonates more with a different target group.

Be sure to evaluate the rest of the steps in the pyramid if you make any changes like this.

Let's take a look at the first of several successful pivot examples you will find throughout this article:

Facebook made a successful pivot by changing its user base from a semi-secret college club to a global party where everyone is invited, and went on to become one of the biggest companies in the world.

Maybe you have identified the right customer, but are solving a problem that doesn't exist or is relatively inconsequential. You can pivot in this case, but you'll need to re-evaluate and change your solution, tech, and growth strategy. If you have the customer and problem right — you have a market.

If you decide to pivot because of the problem, be sure to have a closer look at your solution, the technology, and your growth strategy as well.

Let's look at another example:

The retargeting campaign company, Criterio, started out as a recommendation system for online retailers, however, it turned out that this issue wasn't as important to retailers as another one.

Online retailers were struggling with large numbers of "almost-customers", who abandoned their shopping cart right before checkout, never to return. This was hurting retailers much more than the issue Criterio originally identified, so they made a customer need pivot to address the most pressing problems faced by their customers.

The solution you're offering will almost certainly go through a lot of changes before it reaches its final form.

Always be prepared to make updates, create new features, and offer new services.

You may also discover that people use one feature much more than the others, or that you've focused too much on one feature and your users are requesting others.

In this case, you could consider a value capture pivot to meet their wishes and increase your profitability. When you make changes to your solution, always remember to look closely at the technology you're using. Is it the right one? What adjustments could you make to keep growing after you've made the changes to your product?

Here's another example:

Nintendo started out as a playing card company, but as the market changed and technology evolved, so did the demand for new entertainment and games. Nintendo went on to revolutionize the gaming industry by making a very smart technology pivot.

They decided to stay in the field of games and entertainment by acquiring the rights to distribute the first-ever video game console in 1977, which was a resounding success and proved to be the catalyst for the video games industry as we know it today.

As your business grows, your tech needs will almost certainly change. The technology you chose in the beginning may not be good enough to keep your business growing.

Your users may not know what technology you use, but they will know if one of your products doesn't work, which is why you need to continuously assess your options for changing your tech.

Here's one more example:

When Facebook began to take off, its PHP programming couldn't keep up with the expanding scale, so they developed a technology called "HipHop" that converted PHP into a more scalable language (C++, C#, or "C-Sharp"). This pivot allowed them to keep up with the increasing demand and eventually get to where they are today.

If everything up to this point goes smoothly, you're really on the right track! So now is a great time to start experimenting with your growth strategy.

What are you doing to reach your customers? Are you getting enough users, or do you need to get more?

HAVE AN IDEA FOR A PRODUCT?

A zoom-in pivot is when a single feature of your product evolves into the entire product.

Sometimes one specific feature receives significantly more attention than the rest of your product. In these cases, channeling your resources into that feature alone can allow you to get your product onto the market much more quickly.

A zoom-out pivot is when your current product becomes a single feature of a bigger product.

This is the reverse of a zoom-in pivot. It means you've established that there's an interest in your product, but you also have reasons to believe it should be a part of a larger, more developed product in order to be successful.

A customer segment pivot is when a company realizes that the product it's building does solve a real customer's problem, but not the one it originally planned to. In other words, the product hypothesis is only partially confirmed.

In this case, you need to change more than just your target customer profile.

Sometimes early customer feedback indicates that the problem the product is designed to solve is not of the utmost importance, which can form the basis of a pivot.

A customer need pivot involves better understanding your client base's requirements in order to find a problem they would pay you to solve.

A platform pivot is a change from an application to a platform, or vice versa.

A value capture pivot refers to when you make changes to how you monetize or earn revenue. When you change the way you make money, this impacts the product, business, sales, marketing, and operational aspects of the business model.

Companies choose either a complex systems model (unique custom product for a relatively small market) or volume operations model (offering standard products to a big market). In practice, it means choosing between B2B and B2C models.

This pivot is about changing your growth strategy in order to achieve faster or more profitable growth.

Most startups use one of three primary growth engines:

▪️ Sticky growth — Attracting and retaining clients for a long period of time.
▪️ Viral growth — Spending marketing budget on acquiring new customers.
▪️ Paid growth — Increasing income per paid client (for example, those that come via AdWords) or decreasing the price of acquiring them.

A channel pivot is about changing the way you sell your products and services (in-store, online, through partners, in-app, etc), which is why channel pivots often require adjustments to many elements of the business model.

A channel pivot acknowledges that the same solution could be delivered more effectively through a different channel.

A technology pivot is about changing the technology your project is built upon.

This pivot is necessary when you know you can achieve the same outcome with a different technology, which is also lower cost and/or higher performance.

If your target audience is not interested in your offer because it doesn't address their "pain points", you should instead start catering to the audience which will find your solution most valuable, or identify the pain points of your current target audience.

Sometimes, a single feature of your product, service, or business model will perform considerably better than the others around it. If that's the case for your company, you should explore the possibility of pivoting to support that single aspect exclusively. This is known as a zoom-in pivot. Your goal is to be as efficient as you can be — so work smarter and get the best possible returns for your effort.

If demand for your product is falling or your business's gross profit margins are diminishing, you most likely need to pivot. There needs to be a strategy in place to expand and diversify your revenue base so that economic downturns are more manageable.

Your idea may seem unique and original at first, but there's always a chance that a bigger company with more resources, funding, and a built-in audience will come along and offer something similar to your own, only better. You won't have much of a choice in this situation, so your startup is probably better off doing something completely different.

If you notice slow progress in your company's development, then you may be in the midst of a plateau. This may be the result of boredom, an unmotivated team, or simply an inefficient strategy, but whatever the cause, a pivot should be considered. It doesn't need to be a major pivot, but take an honest, objective look at your company and identify something that could be changed.If you notice slow progress in your company's development, then it may be hit a plateau. This may be the result of boredom or an unmotivated team, or simply an inefficient strategy, but whatever the cause, a pivot should be considered. It doesn't need to be a major pivot, but take an honest, objective look at your company and identify something that can be changed.

One of the benefits of customer interviews and validation experiments is that you get many opportunities to test and validate both your solution and the riskiest assumptions of your business, even before building your startup product.

If you are thinking about pivoting a startup, develop a prototype first and see if people would use it and find it valuable, and request honest feedback. Feedback in the opening stages is important for determining where the product would make the greatest impact. A prototype will also enable you to identify whether the product is a good fit for the brand.

WANT TO BUILD A PROTOTYPE?

A pivot is not a complete revision of your strategic plans. It's important to find what's not working so you don't end up throwing the baby out with the bathwater. Make sure you definitely need to pivot before committing to it.

The feedback you receive from customers is a great indicator as to whether or not you should pivot. Occasional negative feedback is expected, but if you're constantly hearing criticism like "too expensive", "not enough features", "the purchasing process is too complex", "there are other, better products out there", or any other feedback along those lines, perhaps you might be ready for a pivot of some sort.

At every pivot stage, and when you are making the decision, be sure the investors are kept in the loop. If you think the company's mission and objective is going to fundamentally change, start talking about it with your internal stakeholders, including investors, at least six to eight months in advance. Any drastic change made without first being discussed with your investors can harm the relationship and make pivoting unachievable.

Instagram is one of the most famous software startup pivot stories.

Instagram is one of the biggest social media platforms in the world, but before becoming a social media platform with millions of users, Instagram was a prototype known as "Burbn", which had check-in features, photo post options, and had the ability to gain points, in addition to several other features.

The founders, Mike Krieger and Systrom, soon realized that the UI was too difficult to be practical and so decided to pivot. They limited their Instagram startup software development to posting, commenting, and liking features – making it one of the most simplistic visual platforms on the market.

The most legendary pivot in social media history is the transformation of Odeo into Twitter.

Odeo began as a network where people could find and subscribe to podcasts, but the founders feared for their company's future when iTunes began taking over the podcast industry.

After giving their employees two weeks to come up with new ideas, the company decided to make a drastic pivot and go with the idea of a status-updating micro-blogging platform, conceived by Jack Dorsey and Biz Stone.

Today it's the most popular video-sharing platform on the internet, but at its inception, YouTube was set up to be an online video dating site.

Launched on Valentine's Day 2005, their unofficial slogan: "Tune in, Hook up" didn't exactly reach worldwide appeal.

The YouTube team noticed that people were beginning to upload videos rather than dating profiles, such as planes randomly taking off and landing. This led to co-founder Jawed Karim posting "the first video on YouTube" titled: "Me at the zoo".

His silly, yet honest video inspired others to post their funny videos on the site, thereby providing proof of concept that people uploading videos of themselves online could be profitable.

Let's take a look at some startup pivot examples:

Summing up, a pivot is a change in direction for a business that is not easy to execute, but can be an important part of a successful business.

Launching and running a startup is a risky adventure. Many startups fail due to different reasons, and some of them survive by pivoting at the right time.

Pivoting is a secret to survival, and the closest you'll come to failure without actually failing.

Pivoting your startup could save your business from failure, and allow you to succeed in the long run.

DO YOU HAVE ANY QUESTIONS?