1CMO

Growth strategy | Advisory | Force multiplier

Vision

Knowing When to Pivot, Persevere, or Stop

by

You’ve got to know when to hold ’em

Know when to fold ’em

Know when to walk away

And know when to run…

– Kenny Rogers, chorus from The Gambler

The concept of “making a pivot” has become popular to use when talking about business growth strategy, but I have found it is commonly misunderstood. Moreover, there is often confusion about when to consider it, and how to evaluate the alternatives.

This article will explore the meaning and purpose of making a pivot, and the two common alternatives of persevering, or stopping.

Defining Business Pivot

In some respects, business is like the game of poker. It is full of uncertainty, some things are in our control and others are not, we learn from experience, and there are multiple players all trying to win. Your strategy is how you choose to handle all of those elements in order to create a winning hand. Over time, expert players learn when to double-down, hold, fold and when to walk away to realize the greatest odds of success.

Poker is a great metaphor for the concept of “pivot or persevere,” which comes from Eric Ries classic book, The Lean Startup. His definition of a pivot is a change in strategy without a change in vision. In the book, he goes on to explain, a pivot is a “structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.”

It is important to note that while a pivot is a change in strategy, it does not necessarily need to be a complete change in direction. In fact, pivoting is often about looking at what has worked, and seeing how you can make refinements or refocus your efforts using those insights. As Ries notes, “keep one foot rooted in what we’ve learned so far, while making a fundamental change in strategy in order to seek even greater validated learning.”

Where Pivot Fits in Growth Strategy

The search for Product/Market Fit is a structured process where a growth leader gains validated learnings by sharing a minimum viable product with prospects and listening to the feedback.

How does this work in practice?

Growth leaders and company founders always have a vision. To achieve their vision they need to define a strategy and objectives to get there. Classic strategic planning theory dictates that the chosen strategy can change over time (or with new learnings from the market) but the vision should remain the same. When deciding to make a pivot, the target market or the value proposition (features and benefits) of the product or service might change, but the vision for the problem to solve does not. Each pivot creates a new set of assumptions and features to validate, and the process repeats.

The objective for each cycle of this process is for growth leaders and their teams to make a decision by asking a simple question: Should we pivot, persevere, or stop?

  • Pivot: If all the feedback is negative (or even worse, indifferent) and the data does not support the leap of faith assumptions, then it may be time to pivot. As the definition states, this means to try a different strategy in pursuit of the original vision.
  • Persevere: If each experimentation cycle seems to be more productive than the last, meaning there are lessons gained and the data supports the leap of faith assumptions, then the obvious next step is to persevere for another round of refinement.
  • Stop: In extreme cases, typically driven by complete failure to validate any of the leap of faith assumptions, or running out of cash to continue funding the search for Product/Market Fit, growth leaders or company founders may conclude there are no other pivots to make and it is time to stop. The decision to walk away is never easy, but sometimes is the only rational decision left.

The 10 Most Common Business Pivots

Just as every business and solution offering is different, so are the potential business pivots. However, there are some common themes. Here are the ten most common business pivots as highlighted in The Lean Startup book:

1. Zoom-in pivot

In this pivot, a single feature of your product becomes the whole product. This might be because one specific feature gets significantly more traction 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.

2. Zoom-out pivot

This pivot is the exact opposite of the first example: Your current product becomes a single feature of a bigger product. In this case, it means you have established that there is an interest in your product, but there is reason to believe that it needs to be a part of a larger, more developed product in order to be successful.

3. Customer segment pivot

Based on your field research, you conclude that your product should be targeting a different type of customer. This comes from discovering that your product interests a different audience to the one you were originally pushing it to. You might not need to change your product much at all – only your customer persona.

4. Customer need pivot

Your solution is refined based on a greater understanding, or new revelations, about your customer’s needs. Sometimes this pivot is driven by the discovery that the problem you’re solving is not important enough to your customers, or they are unwilling to pay for it.

5. Platform pivot

This pivot refers to a change from an application to a platform, or vice versa. Most often, startups that aspire to create a new platform begin their journey by creating a single application as the foundation.

6. Business architecture pivot

This pivot was inspired by concept that a business can either be high-margin/low-volume (complex systems model, common in B2B solutions with complex sales cycles), or low-margin/high-volume (volume operations model, common in B2C solutions). Some organizations choose to pivot by switching architectures.

7. Value capture pivot

This pivot reflects a change in the way you make money from your product. An example of this pivot would be changing how you charge by switching to a subscription business model from a sale-by-sale e-commerce model.

8. Engine of growth pivot

In this pivot, you make a change in your growth strategy in order to achieve faster or more profitable growth. Most startups use one of three primary growth engines: (1) Viral growth, when current users recommend other users. (2) Paid growth, when you spend marketing budget on acquiring new customers. (3) And sticky growth, which is focused on customer retention and maintaining a low churn rate. In this pivot, you decide to change from one of these growth engines to another.

9. Channel pivot

In the Channel pivot, you change how and where you sell your products and/or services (for example, in stores, online, through partners, in-app, etc.) This pivot is typically in response to the learning that the same solution can be delivered more effectively through a different channel. In many cases, this will drive changes in the price, features, and competitive landscape of a product.

10. Technology pivot

In this pivot, you decided to change the technology that your project is built upon. This is often a result of learning you can achieve the same outcome with a different lower cost and/or better performing technology.

As you can see from these ten examples, business pivots can take many forms. Which pivot you choose will ultimately be driven by what you have learned from your market experiments.

The bigger challenge for growth leaders is determining when to pivot.

To Pivot, or Not to Pivot?

Deciding whether to pivot, persevere, or walk away is one of the classic entrepreneurial dilemmas. It is one of the most difficult decisions any growth leader, or company founder, will ever have to make.

Asking the honest question of “should we make a pivot?” is sometimes painful, but always important.

Making the pivot decision can be very stressful and difficult for teams to evaluate. To avoid the trauma, many growth leaders and company founders wait too long to consider a pivot, sometimes with dire consequences.

One easy way to avoid this “fire drill” is to schedule regular Pivot/Persevere decision-making meetings in advance. A best practice suggestion is to do this no more frequently than once a month, but not any less frequently than once a quarter.

The agenda for this meeting is simple: Ask yourself, and your team, what evidence do you have that your current strategy is getting you closer to achieving your vision? Are you making sufficient progress to believe that your original strategic hypothesis is correct, or do you need to make a major change?

If your product experiments are helping you make progress towards validating leap of faith assumptions, and the feedback you are receiving is resulting in material improvements to the product offering, then it makes sense to continue.

If there is no evidence of making progress, or it is insufficient, then a pivot may very well be the best course of action. In the words of Eric Ries, “If we’re not moving the drivers of our business model, we’re not making progress. That becomes a sure sign that it’s time to pivot.”

Sometimes all you need is more patience, additional capital, or a larger audience. Other times, you might need to make a strategy change. In these scenarios, you might have the right product but you are targeting the wrong customers, it’s too expensive, lacks essential features, or doesn’t solve the right problem. This is when you pivot, or if you cannot see any viable path forward, you choose to stop and walk away.

Danger Zone for Growth Leaders

There may be no bigger destroyer of creative potential or financial capital than the misguided decision to persevere in the face of negative or neutral market feedback.

Instead of pivoting, or walking away, some growth leaders are tempted to stay on course and try to power through the obstacles. By refusing to make a decision, or embrace market feedback, they run the risk running in neutral. This is a dire situation where they are neither growing enough nor dying – just consuming scarce human and financial capital, but not making progress.

Growth leaders and their teams should take comfort in the realization that failure is a prerequisite for learning. In this context, making successful pivots will put them on the path towards a commercially viable solution offering.

This is the reason that many successful entrepreneurs and corporate growth leaders who have decided to make a pivot will tell you that their only regret was not making the decision earlier and quicker!

Conclusion

If growth leaders take only one lesson from the economic turmoil of the last 24 months, it is that we are living in complex VUCA business environment. The best path forward is to develop a growth strategy, and then move quickly to execute it. This market-facing activity will sometimes result in the need to re-evaluate the plan.

The decision of whether to pivot, persevere, or stop challenges every growth leader and business founder at some point. Making a good decision regarding whether or not to pivot your business strategy can be the critical difference between success and failure.

-Onward

About the author: Kimball Norup is the founder of 1CMO Consulting, a business strategy and growth advisory firm based in Sonoma, California. To read prior articles, or sign up to receive future ones by email, click here.

Nine Things That Can Sink Your Growth Strategy (and Your Company)

by

Nine things that can sink your growth strategy

“You may not be able to control the waves of change, but you can build a different boat.”

– General Stanley McChrystal

As any seasoned entrepreneur or senior executive will quickly tell you, there are many things that can sink your growth strategy, and ultimately your company if you are not careful.

While it is almost impossible to predict the future, you can prepare for some of the most common growth challenges. It starts by recognizing factors that could negatively affect the growth trajectory of your organization, and then thinking strategically about your options for responding.

For those organizations, and leaders, who successfully navigated through the nightmare of 2020 there were many such learning opportunities. It was a year unlike any other, and for growth leaders it offered many lessons on how to survive and thrive in a true VUCA environment.

In this article, I will share a few of the more common challenges that I have witnessed.

Learning from the Example of Others

If you are really paying attention as a growth leader, you can learn many valuable lessons by observing the failure of others.

By understanding the elements that contributed to the failure, and identifying if they exist (or could potentially emerge) in your operating environment, you can make plans to prevent these challenges from derailing your organization.

The best part of this strategy? You do not have to endure the pain and suffering yourself!

Nine Common Growth Challenges (and how to avoid them)

Here are nine of the most common growth challenges, and suggestions on how to avoid them in your organization:

  1. No vision – A key element of strategic planning is to define your Envisioned Future. Without a defined vision and long-term goals, your organization will be aimless. During the pandemic, many organizations panicked but ultimately found their footing and a path forward. Some leaders reverted to “survivor mode” and did not uphold their envisioned future, losing sight of where they wanted to go, and likely losing the confidence of their team in the process.
  2. Strategy not aligned with core ideology – Most successful organizations have defined their Core Ideology (mission, values, and purpose.) In the past 12 months, many organizations failed to align their internal and external actions with their stated purpose and values. This misalignment might not show any immediate effect, but it creates a crack in the foundation that will only grow over time. The best growth organizations are consistently true to their purpose and values, in good times and in bad. Many organizations have some form of “honesty” and “integrity” in their stated corporate values…a great question for growth leaders to ask is, “Did our actions align with our values in the past 12 months?”
  3. Neglecting talent – Growth leaders recognize that most problems are ultimately people problems. As a result, they focus on getting the right people on the bus, sitting in the right seats. During the pandemic, many organizations downsized to protect their bottom line. While necessary to some degree, many organizations will discover they cut too far and are now unable to capitalize on a recovery ahead of more strategic competitors who kept their talent intact.
  4. Poor situational awareness – Let’s be honest, almost every organization was completely blindsided by the global pandemic. Very few saw that disruptive force coming. However, by paying better attention to their operating environment and developing better situational awareness, growth leaders can begin to anticipate other potentially disruptive forces.
  5. Lack of a plan – The side benefit to developing greater situational awareness, is that growth leaders can do scenario planning with their teams. While it is okay to be surprised, there is no excuse for being unprepared. Successful growth leaders are always asking questions like, “What is the worst case scenario?” and “How would our organization respond to that?”
  6. Failure to take decisive action – Successful growth leaders have a strong, and consistent, bias for action. During the pandemic, many organizations hunkered down, hitting the pause button on executing their growth strategies. While some slowdown was prudent – and in many cases necessary – to completely stop created a huge loss of momentum, and ultimately sent an inconsistent message to the market. Many of these organizations likely will not recover from the resulting loss of talent and market traction.
  7. Failure to pivot – Closely related to taking decisive action, is knowing when something is not working and it is time for a change. Growth leaders know that sometimes the best way to get through an obstacle is to chart a new course and go around it! They innovate new products or services, enter new markets, or find new ways to position what they are selling. In the startup world this is call a “pivot” and it is a vital life skill for any growth leader. The organization either adapts or dies as a result.
  8. Lack of liquidity – There is an old business finance rule that “cash is King.” In truth, it is King, and Queen, and probably the entire royal court. Liquidity is the fuel for any organization, and without it, the organization will likely fail. The obvious connotation of liquidity is money, but it also applies to people, and capacity. Every growth leader must ensure the organization has the required resources necessary to execute its growth plan.
  9. Failure to communicate – Finally, successful growth leaders are exceptional communicators. They have an open, honest, two-way dialogue with all their constituents – both internally and externally. They do not fall victim to the temptation of putting lipstick on a pig. This clear and consistent communication not only serves as a vehicle to share strategy, it also provides a continuous feedback loop, builds trust, and ultimately helps to sell whatever solutions the organization is providing.

Conclusion

The pandemic has taught us that if you do not take the time to imagine the worst, you might not be prepared when disaster strikes. Bad things come in many shapes and sizes, and they do happen. Even to the best organizations.

By thinking about these common growth strategy challenges ahead of time, growth leaders will have a big head start on how to avoid them. Others in the market might stick their heads in the sand and hope their challenges will go away. But not growth leaders.  They confront adversity head on.

The good news – you can learn from the experience of others and prevent them from happening in your organization.

The bad news – if you ignore them, they can be catastrophic.

-Onward

What is Your Envisioned Future?

by

“If you don’t know exactly where you’re going, how will you know when you get there?” – Steve Maraboli

In today’s disruptive VUCA (volatile, uncertain, complex, ambiguous) business environment it is critically important for organizations, teams, and individual contributors to have clarity on their vision of the future and what their long-term goals are.

This clear direction becomes a guiding beacon for building an effective VUCA strategic plan, one that clarifies your strategic intent and enables your organization to quickly make decisions and then take action in order to get there.

The Foundation for VUCA Strategic Planning

There are two foundational elements required effective VUCA strategic planning: Your core ideology and clarity around your envisioned future. Your long-term goals should be based on, and in alignment with, your mission, values, and purpose. Together these become the core ideology for your organization.

  • Core Ideology – defining the mission, values, and purpose of the organization. As a previous article explained, these elements describe why the organization exists and what it stands for. With this foundational framework you will have greater clarity when making critical business decisions that impact the future of your organization.

However, before any strategic VUCA planning can begin we must also have clarity around the envisioned future state of the organization:

  • Envisioned Future – defining a clear vision for what the organization aspires to become or achieve, and your long-term goals. These elements explain the desired future state of the organization, and the long-term goals you and your team are working towards achieving in order to get there.

Defining Your Envisioned Future: Vision and Goals

Articulating the envisioned future of your organization has two main components: a vision statement, and long-term goals:

  • Vision – Your vision statement defines what the organization aspires to become or achieve. Based on the current status of your organization, an effective vision will articulate where you want to take your organization in the future. Because of this future focus, your vision statement often sounds much different from what the organization is today (mission statement).

A specific and compelling vision statement can and should help drive decisions and goal setting. This description of what the desired future state looks can be extremely powerful for strategic planning because it provides inspiration and direction, and a focal point for the mission statement and an overall goal or destination for the organization. A clear vision will also help to identify and define potential strategies; and clarify what is within or outside of the organization’s limits.

  • Goals – The goals for your organization are brief, clear statements of significant outcomes to be accomplished within a longer timeframe, typically 3-5 years. A goal is defined with a broad, general, tangible, and descriptive statement – It does not say how to do something, but rather what the singular end-result will look like.

Goals are sometimes described as outcome statements that define what an organization is trying to accomplish both programmatically and organizationally. Some common examples of business goals are, grow profitability, maximize net income, improve customer loyalty, increase market share, etc. Note the brevity of these statements.

Goals are critical to your company’s success. Ultimately, your organization’s goals need to align with your vision, and support your mission, values and purpose. Together this planning foundation will propel each team member’s individual actions and decisions.

Goals Versus Objectives – What’s the Difference?

Business consultants love to develop complex models and invent proprietary terminology for each element of their frameworks. Strategic planning practitioners are no different. This often creates unnecessary confusion.

My bias is to keep things simple, defaulting to the most commonly used terms and definitions, and in the process hopefully making it easier to understand and adopt the VUCA strategic planning framework I’m proposing.

It has been my experience that most organizations, both large and small, public or private, do not understand the difference between a goal and an objective. As a result, they do not effectively communicate them to their teams. This has obvious negative ramifications when you think about the lost opportunity to cascade goals and objectives, and gain buy in, throughout an organization.

Here’s an explanation of the difference between goals and objectives to make sure there is no confusion or ambiguity when it comes to your long-term and short-term plans.

  • A goal is a broad and long-term desired result you want to achieve. You might use company goals to inform yearly strategies and guide the direction of all your efforts.
  • An objective, on the other hand, defines the specific, measurable actions individual employees or teams must take to achieve the overall goal. It is at the objective level that the ownership of the strategic plan shifts from organizational leaders to teams and individuals. This is where the actual work gets done!
  • A goal is where you want to be, and objectives are the steps taken to reach the goal.

Timeframe-based View of Vision, Goals, Objectives

In strategic planning, all the elements need to fit together, and build from one to the next. In other words, your vision statement should inform your goals, which should then inform your objectives. To eliminate any lingering confusion about the differences between vision, goals, and objectives, here’s another way to look at it. Since all strategic plans are time-based, that becomes the key differentiator between these sometimes contradictory and synonymous terms.

  • Vision – this is an aspirational statement that is not time-bounded. In fact, your vision may never actually be attained, but rather serves as an imagined picture of the future.
  • Goals – these are broader and longer-term, typically 2-5 years in timeframe. Your strategic VUCA plan will undoubtedly have several goals.
  • Objectives – the short-term, tactical action items to be accomplished within the next 12-24 months max. Each of your goals will have multiple objectives behind them, and they become a key component of the organization’s VUCA plan. Much more on that topic in future articles!

Next Step Towards Creating a VUCA Plan

In summary, your mission statement focuses on the present, and clarifies what the organization does and for whom. Your values define the core beliefs and provide moral guidance for the organization, becoming the operating system that determines how you get there. While your purpose defines “your why” to provide market-facing clarity on the value you deliver to your constituents.

Defining this core ideology for your organization creates a solid foundation and starting place for overall strategic planning to begin. It comes to life when you combine it with your envisioned future, to articulate a vision for what the organization aspires to become or achieve, and then defining your long-term goals in order to get there.

Organizations achieve their goals by creating strategic plans, within which they define the strategy, and key objectives the team must accomplish. Many organizations struggle with setting up actionable objectives. Next time I’ll share a methodology that I have successfully used for years – the SMARTER framework for setting objectives that get done.

-Onward