Pivot And Its Challenges
In the startup world, things rarely go as planned and in the corporate world things change that require the business to change. All organizations, startups and corporations, have to respond when something threatens their existence. Generally, the response is a change in direction of the organization i.e. doing something significantly different than the status quo. It has become common to call this change in direction as pivot.
Why pivot? There are four main reasons an organization needs to change direction:
1. Disproved Hypothesis: This reason is more applicable to startups and the corporations launching new products. Founders create a startup with an idea in mind and they believe that there is a market for that idea. When you start building the product, you figure out that that the idea can not be converted to a scalable product or the product development might go alright and you find out that there is no market for the product. What do you do then? You look at what you have learned and consider developing another new product or going after a different market than initially targeted. For example, for my startup, Friend in Cloud, the idea was to create a marketplace for people who want to talk about their problems related to love or work. The sessions occurred over video. After the beta launch, I learned that people don't feel comfortable being vulnerable with strangers if they can not look in each other's eyes during the conversation. How the camera is placed on the laptops and smartphones, people on video calls can not look into each other eyes. And, the technical solution to this problem is still a few years away. Hence, it was a reason to pivot.
2. Lack of People or Capital: Your hypothesis might not be disproven but you can not get capital to continue or you can not find people to develop the product. In corporations you also have to worry about political capital. If you lose that, what you can accomplish is limited. What are the alternatives? You start doing something that you can get funded. Ideally, that something is adjacent to your original idea so that you can pursue that idea after you have shown success with the new idea. If you can't find people to execute on the idea, try developing the product in a way that uses different skill set for which you can find people. For example, for my startup, Swedee, I wanted to develop a bracelet which allowed people to communicate with each other using custom vibration patterns. I could not find the right designers who had the capacity to materialize my vision without costing a few million dollars. Hence, it was time to pivot.
3. Change in Market: You have a running business or you might be developing a product for a market. And, you learn that the market has changed. Ernest Hemingway said something like you go bankrupt slowly and then suddenly. What happens in the corporations is that people are so focused on the current business that they don't pay attention to the signals that the market is changing. And, in the startup land, people are focused on the product development and miss the changes in the market. How do you overcome this? Constantly pay attention to the changes in the market and start testing alternatives to address the new market. For example, the telecom business used to be all about voice, when the Internet came along, the market slowly started moving to data. SIEMENS was a dominant player in the voice market and was too slow to change direction and address the data market. Eventually, SIEMENS exited the telecom business. Barnes & Nobles and Blockbuster are other examples of not responding fast enough to the change in market.
4. Change in Technology: Everything might be going fine for your organization and a new technology comes along and threatens how you do business. Just like the change in market, the technology change does not happen in a day. What's the right thing to do? Constantly monitor the technology landscape and understand what technologies can disrupt your business. Test how the new technology performs compared with your current technology. See how your customers respond to the new technology. For example, when touchscreen came along, Blackberry was too slow to adopt the new technology. It had to get out of the hardware business. Another example is Intel which was so focused on its CISC (x86) architecture that it missed the mobile market where the RISC architecture is better suited.
Challenges
There is no formula you can apply to pivoting. It is a highly contextual decision. However, having been through multiple pivots, I noticed the following recurring challenges:
1. Timing: When do you pivot? Pivot is not an exact moment in time. When do you pull the plug on the current idea/business and move to the new idea? You might learn that what you have will not work but you don't know what to try next. This is limbo-time. This should be minimized. However, if you make a decision to pivot to something where the hypothesis is not vetted enough and in a few months you have to pivot again then it is worse than the limbo-time.
2. Morale: After you and your team have worked for years on something that did not work, how do you keep the team excited about the new thing? If you don't have a vetted and clear hypothesis on what to do next, try multiple options in parallel. And, start getting rid of the ideas when you find disproving data. Get buy-in from the team on the process and the decision criteria so that you don't have to pivot every few months before you settle on what to do next.
3. Bosses: You may want to keep going until the hypothesis is disproven. Remember that lack of proof is not disproof. However, your investors, board, or bosses might run out of patience. When you start, get buy-in on Key Performance Indicators (KPIs) so that you can continue to show progress.
4. Intellectual Honesty: If you have spent a year building something, can you still objectively see how you might have been wrong. Keep a decision log and learning log. When you make important decisions, write down why you are making them. When you are learning something new and important write it down. And, validate your assumptions every month or quarter.
5. Communication: How do you tell existing stakeholders outside the company - investors, board members, customers, and media about the change without losing credibility. Except media and customers, it should not be news to anybody. Get media excited about the new thing and provide customers support to transition to something else even if it costs you a lot of money.
Compared with startups, pivoting at a corporation is more complex because you have a running business that you have to keep running and keep people motivated while some people work on a new cool thing in parallel. How and when you allocate resources from the old business to new business is highly tricky. Many corporations will go through this dilemma with digitization.
Understanding context and staying objective under pressure and uncertainty are the two most important skills you will need for a successful pivot.
