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.