Many popular apps and tools today are results of successful shifts from their original value propositions
Pivoting is no stranger to startups.
Nothing has boggled the brightest minds and entrepreneurs in the scene as much as pivoting has.
By definition, pivoting is the act of shifting business strategies to find product-market fit.
It is also a core concept of the lean startup methodology which revolves heavily around using a minimal viable product (MVP) to gauge the market.
Changing business models is inevitable in most. If not all startups.
Twitter started off as a podcast subscription platform.
Slack came from a popular, yet unprofitable video game.
Yelp was an email-based recommendations site before they hit the gold mine with local business reviews.
However, the romanticisation of pivoting has masked the harsh reality of pivoting and how much it affects startups if they fail.
For every successful pivot, hundreds of other startups crash and burn.
Over 90 per cent of startups fails to meet their projections while 30-40 per cent lose investors most of their capital, mainly due to poor demand and unsuccessful pivots.
That said, pivoting is absolutely necessary for startups to succeed.
Not a lot of ideas hit the nail on the head in terms of product-market fit, which is why founders need to be agile in adapting to the market’s reaction.
How can startups determine when to pivot, and how does moving fast help in making more successful transitions?
Is pivoting a good business strategy?
The concern for startups when pivoting is this: is it a business strategy or a desperate attempt at saving a failing business?
Reacting to the latter scenario will almost always end badly.
A study by CB Insights showed 10 per cent of startups fail due to bad pivots, with 7 per cent citing a failure to pivot as the cause of their demise.
Although failed pivots are not as big of a challenge compared to say, unmet market needs or running out of cash. It is relevant enough to bring startups to the ground, which is why pivots must be planned meticulously instead of being a last-ditch attempt at salvation.
Also Read:3 ways startups should assess different financing options
When done right, pivots are an effective way to tweak business models and achieve growth opportunities that may have been overlooked or neglected.
Pivoting can also overcome challenges like product validation and adapting to the market—two of the most common challenges startups face today.
The answer is yes; pivoting is a good business strategy if founders have a clear idea about why they’re pivoting and how they’re going to do it.
Treat it as a get-out-of-jail-free card, however, and the success rate of pivots falls drastically.
When should startups pivot?
Finding the “aha!” moment is a challenge even for experienced entrepreneurs.
For starters, it’s hard to determine your startup needs a shift in its business model.
The other tough question to answer is, where are you pivoting towards?
Contrary to popular belief, pivots don’t happen just because the business is failing. Successful, profitable startups may find reasons to change their model as well if the founders feel like they’ve come across a stumbling block.
For example, a VC-backed startup may be clearing a couple of millions a year in profit, but it’s showing zero signs of growth.
With pressure from investors and competitors, the startup may decide to pivot to more profitable ventures even if it means risking their perfectly stable business.
When to pivot varies greatly between startups, but there are several guidelines they can use to make more timely transitions.
Hitting a plateau in the market
You may find yourself stuck in a limbo where it feels like there’s no space left to grow.
Your customer base is not increasing, revenue stays stagnant for a long time, and increased marketing spends only results in short-term boosts rather than retaining new customers.
In this case, pivoting to a market with the potential for higher returns is a wise choice.
Also Read: The way startups are finding out if there is a pain point to solve
You can continue reaping the benefits of a stable business, but the point of a startup is to grow, and you don’t achieve that by staying within the plateau.
Your core value proposition is not aligned with your users
Pivots often happen when founders realise users are focusing on an aspect of their product that is not their core value proposition.
It doesn’t have to be a misaligned feature; selling the product differently to what the market needs can also be a reason to pivot in startups.
This was exactly what happened with IMVU as retold by Eric Ries in his massively popular work, The Lean Startup.
IMVU tried to solve the problem of having too many social networks by building a platform on top of every social network. An idea that nearly caused the company to go bust.
Ries decided to hold one-on-one sessions with users to find out what they really wanted from a platform like IMVU, which slowly paved the way to the social network’s success until today.
When founders come across this moment of clarity, pivoting is, without doubt, the best decision to make.
Internal issues within the team
Paul Graham preaches three cardinal principles in successful startups: building a product that people want, spending as little as possible, and having good people to work on the team.
As a startup matures, moments of disagreements and fallout will occur as a result of different opinions on where and how should the company grow.
Depending on how the matters are resolved, founders may find themselves at a stalemate, which is never a good thing for growth.
Similarly, team members may find themselves being disillusioned and losing passion for what they’re building.
No matter how well it’s doing, a startup will never reach the next level if its founders don’t wake up every day to work on the product.
“Go slow to go fast” vs “move fast and break things”
Startups are expected to be nimble in their approach to the market.
This means moving fast in adapting to change, releasing new features, and catering to user feedback, leading to what is known today as “move fast and break things” (MFABT).
MFABT encourages rapid development and pivots in startups by embracing failure.
In fact, most ideas will fail, but it’s not a problem as the lessons learned from failures is valuable enough to offset the losses.
The best startups in the world move at a light speed, which serves an important lesson for aspiring founders. The quicker you are at executing your ideas, the higher your chance of success in today’s ultra-competitive landscape.
How can startups move fast?
Execute your ideas quickly.
When a build is done, ship it to your users and gather feedback. It doesn’t have to be perfect, but it does have to be usable enough for your users, akin to an MVP but in shipping updates instead.
The technology that startups have access to today is even more of a boost in helping them move fast.
Cloud software, for example, significantly improves the flexibility of startups by opening up opportunities for teams to work fully online, further echoing the mantra of MFABT.
A developer in Seattle can collaborate with a designer in Bangkok and have their tasks managed and delivered by a project manager in Bangalore—all with the use of cloud-based tools.
What about “go slow to go fast”? Isn’t it the exact opposite of what MFABT is?
Not exactly.
Startups should only go slow at the beginning when they’re finding their footing.
Things like negotiating deals for funding and interviewing customers to understand their wants and needs must be taken step by step to avoid easily avoidable mistakes down the road.
Also Read: 5 lessons I learned from a startup failure
Remember the big picture
Every aspiring founder dreams of landing Forbes-worthy VC deals and kicking off their ventures with a bang.
But, it’s really easy to lose track of the big picture when you’re approaching for deals left and right without even having a clue of what your value is to the market.
In the beginning, take it slow
Once you’ve gotten sufficient customer feedback, take some time to settle on a clear idea of what your product is and its value to the market.
Then, you can start approaching investors for funding.
After you’ve secured funding, go full speed ahead.
Fortune favours the bold, and for startups, nothing is more audacious than moving fast and pivoting when the time is right.
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