The Pivot: Making a Change When Your Business Isn’t Working
“If you find yourself in a hole, stop digging.”
Most entrepreneurs I know have found themselves in this hole at one point or another, me included. In my situation, I had a very definite strategy in mind of how the company would move forward, so I plowed ahead with my original plan, determined to make it work with little or no knowledge of whether or not there was an actual place in the market for my idea. The wake-up call usually comes in the form of slowed or almost non-existent cash flow. Talk about putting the brakes on! My company didn’t fail, but only because I took the time to evaluate my original strategy and pivot to a model that was a better fit to my targeted audience.
Eric Ries originally discussed “the pivot” in his landmark book The Lean Startup
to discuss how entrepreneurs need to shift their approach to find a solution that succeeds in the marketplace. I think pivoting applies to most small business owners at every stage of growth, not just start-ups.
The pivot is not a total change of direction but, rather, a shift. Think of it as leaning more to the left or right to fine-tune the company’s solution. As Ries states, it’s “a change in strategy without a change in vision.” It is difficult for entrepreneurs to determine if they should pivot or keep going as planned. Impatient business owners can change direction too often (e.g., weekly or monthly) and not give a new strategy enough time to be effective. Remember that most business strategies take many months to succeed, not a few weeks.
Signs that your business plan may need to pivot:
• Sales are flat. You’re not meeting projected goals.
• Loss of market share because of new competitors or products in the industry
• Continuing gross margin erosion. Utilizing heavy discounts to move inventory or services.
• Loss of personal excitement about the company or large loss of key team members
Questions to ask before pivoting:
1. When was the last time your strategy changed? If it is less than a month, stay the course. If it is more than three months without a positive change, consider a pivot.
2. What type of pivot is it? This needs to be identified because it changes the strategy. Decide if it is a market pivot (same product to different customers), a technology pivot (new product with same technology base), a product pivot (new product to same customers), a sales model pivot (one-time purchase or subscription based), a market pivot (wholesale to retail), or a marketing channel pivot (direct to or from indirect).
When it’s time to pivot:
1. What are the exact steps that need to be taken to pivot? What resources inside and outside the company are needed to succeed? Who is responsible for which steps of the process? What needs to happen before the pivot even starts? Will new staff need to be brought in? Will the change need to be accounted for in specific areas of the budget?
2. Which stakeholders need to support the pivot? This can include shareholders, employees, customers, and vendors. Which group is the most important for the plan to succeed?
3. Articulate what would be accomplished by this change and what success looks like from an objective point of view. The answers to these questions need to be outlined in a shared document of no more than a few pages with all stakeholders. Keeping everyone in the loop can help instill confidence and buy-in of the new strategy.
Remember that too many pivots can result in whiplash and can damage the business.
Pivoting does not guarantee success. What it does is give every entrepreneur another chance at it.