Every startup eventually reaches a point in developing their product that leads them to this decision: “do we continue down the path we are on or is it time to make a change?”. In the book the “Lean Startup” this is called “Pivot or Persevere”.
It boils down to realizing if you are making sufficient progress on your current hypothesis to continue pursuing it or is it time to make and begin testing a new one.
Startups that cannot bring themselves to pivot into a new direction based on the feedback they are getting from the market can get caught in the “land of the living dead”. This is where you are neither growing nor shrinking. You are just slowly draining precious resources, runway and the patience of your employees and investors.
I am not saying that the decision to pivot should be taken lightly. It is inherently a very courageous act and the varying types of pivots can cause small to very large changes. But ask countless entrepreneurs who pivoted and they will all tell you they wish they did it sooner.
3 traps that make it hard to pivot
You focus on vanity metrics
Focusing on vanity metrics clouds your vision and makes you live in a false reality. It makes it hard to justify that change is needed and makes it hard to convince your team that it is time to pivot. For example only tracking website visitors and downloads vs. Repeat Usage metrics like Daily Active Users.
You don’t have a clear hypothesis.
You cannot experience failure if you have not defined what it is. I wrote about crafting a hypothesis in a previous post that I think is critical to address this pitfall.
It is Scary
Admitting that one direction has failed and abandoning it in some way takes guts. It can lead to low morale for you and your team until you startup see success from the pivot.
## Have a regular pivot or persevere meeting
Your decision to pivot should not just come out of the blue. It requires a disciplined and objective oriented approach. This means you need to have clear set goals and hypothesis based on what would represent success and failure for this particular direction and attach a due date to achieve it by (or at least to reevaluate by).
A clear sign that you need to pivot: decreasing effectiveness of product experiments
So what you need to do is set a regular meeting to address the objectives you set out to discuss whether you will pivot or persevere. Make sure both product development and business leadership teams are at the table and consider adding the perspective of outside advisors as well.
9 Types of Pivots
Pivots come in all different shapes and sizes. A pivot is a special kind of change designed to test a fundamentally new hypothesis about your product or your business model.
Zoom in Pivot
This is when something that was once considered a single feature in your product, becomes the entire offering. You are zooming in on only one feature. Sometimes simple is better and leads to clearer messaging and decreased customer confusion.
You can probably guess this one. Sometimes a single feature is not sufficient to support the entire offering. In this pivot your old offering becomes a single feature in your new product.
I dealt with this pivot a lot with Piksl. My initial thought was that founders only needed someone to make their screens and websites when in reality there are steps and processes that come before, during and after that help founders achieve their objectives or growing their startup that I could help with.
For example with websites I would ask founders to give me some copy before realizing that at times this was their first attempt at fully putting their offering into substantial wording. Not an easy task. So I added web copy writing into my offering as well. Now we can get from idea to fully functioning online presence even faster.
Customer Segment Pivot
This type of pivot occurs when you realize the product you are building solves a real problem for real customers but it is not the customers you originally planned to target. In this case your product hypothesis is only partially confirmed. You solve the right problem but for a different group than you originally thought.
Customer Need Pivot
This pivot occurs when you realize that the need you are solving for your customer is not the correct one. Similar to the Customer Segment pivot, you now have the right customer but the wrong need. Sometimes this adjustment is a simple tweak of your existing product and sometimes it is a complete redesign.
What helps make this pivot really smooth is having an intimate understanding of your customer and very close relationships with your initial users. Like the last pivot, your hypothesis is partially valid, your customer segment is correct but the product is not quite correct.
This pivot occurs when you pivot from offering a single application to become a platform for third parties to plug into, or vice-versa. Many companies start out with the goal of building the app that is going to take over the market only to realize that the real value and growth is in acting as a platform to help other players do that more efficiently.
Other companies start with the goal of developing a platform of this nature and then realize they can do it better than all of the players. Some companies make this pivot back and forth multiple times.
Business Architecture Pivot
To understand this pivot, let’s first broadly categorize all companies into two buckets. The first is high-margin and low-volume and the second is low-margin and high-volume. The first is more commonly associated with complex value delivery systems (like consulting or custom tech solutions in the B2B space with longer sales cycles). The second is more commonly associated with consumer products.
This type of pivot has the startup switching its architecture. For example switching from high-margin and low-volume to low-margin and high-volume or vice-versa. This can look like going from mass market to something more niche. Or for example when you thought it was mass market but the sales cycle is so long and expense that you need to charge more. Another way to do this one is if your product is tedious and complex and you find a way to create a Saas play out of it. Then the work behind it becomes less manual and you can afford to drop the price in order to extend your reach.
Another example is if you go from targeting the users (say university students) to targeting an intermediary that also has a vested interest in the user (the university).
Value Capture Pivot
This pivot deals with how you capture value or monetize your offering. This one is not be taken lightly. Changing how you capture value has intrinsic affects on all other areas of your business. An example can be offering individual products and then pivoting to offering all of those products at once based on a monthly subscription offering. In the first model your core value prop is based around developing products and then selling them (perhaps even passively) once they are live. Once you switch to a subscription model you can get benefits like extending the customer lifetime value of a customer (and making it easier to calculate) but now your fundamental offering is to continue pouring value into the subscription so that they continue to subscribe.
You can see this play out in companies like freepik which offers a subscription service to premium stock photos and vector graphics. I use freepik because it gets me those things, but I continue to pay the subscription because they add 1000s of new assets every week.
This pivot occurs when you realize you can deliver the same basic solution that you offer through a more effective channel. You can see this happen all the time with companies who abandon complex sales channels for a direct to consumer approach.
Other times you can’t get access to those customers and you need to pivot to a channel that has an intermediary that does have access to them (or even acts as a gatekeeper to them).
This one is for more stable companies and typically affects internal operations the most. You do this kind of pivot when you find a technology that can deliver the same value to the same people in the same or better at a better price. More established companies have an easier time doing this because they have their offering, delivery and value capture locked in and can play around with parameters like the tech.
An oversimplified example would be something like pivoting away from in-house product engineering around internal operations and linking together the various software you use and instead start implementing Saas tools like Zapier to do it automatically. For the customer, nothing changes but you now have 2 engineers freed up to put on product development.
Be smart about your pivots. Take time to discuss them with your team and advisors. Be careful with the analogies and conclusions you draw from these famous examples. Many of the companies in them are in different industry than yours and are working in a different landscape. These examples are not a substitute for strategic thinking. Keep a level head but know when it is time to change direction for the better.