Pivoting belongs to the good tone of many companies. But what exactly is meant by this pivot and which companies have already completed a successful pivot? We provide answers to these and other questions and explain how the method can also help you!
What's a pivot?
Pivoting is a well-known word in the startup world. If a business model doesn't work (and this happens more often than expected), young companies in particular need to quickly develop a different plan and business model! The process is called Pivot.
Interestingly, however, pivots are not evidence of despair. In fact, innovative products often bring markets with them that were initially not known or seen as irrelevant. So pivoting can be a tool to discover additional growth - growth you might otherwise have overlooked.
Five well-known companies that have done pivots
- Wrigley: William Wrigley Jr. stumbled upon the value of chewing gum while giving it away for free. Wrigley Jr. moved to Chicago in the 1890s and started working as a soap and baking powder salesman. He came up with the idea of offering free chewing gum with his purchases, and chewing gum proved to be more popular than his actual product. Today, Juicy Fruit, Doublemint and Spearmint generate billions of dollars in sales. It is one of the best-known brands in American history.
- Groupon: Andrew Mason created a website called The Point, a social good fundraising site. Initiatives were not to be funded until the promised donations had reached a certain number. Mason started Groupon as a side project that applied a similar "Tipping Point" concept to local stores: If enough people committed themselves to an activity, they would activate a discount on it. The Groupon project quickly pushed The Point into the background and became the daily deal tycoon we know today.
- Starbucks: Howard Schultz (current chairman, president and CEO) sold espresso machines and coffee beans in 1971. However, many customers only came to try a coffee that tasted better than the usual vending machines - and Schultz used a pivot to his advantage.
- Nokia: Actually, Nokia started as a Finnish paper factory in 1865. Nokia developed a variety of products during the 20th century, including rubber goods, electronics and telecommunications equipment, and finally its first mobile phone in 1992.
- Flickr: Flickr actually began as an online role-playing game. The game also included a photo sharing tool, which turned out to be one of the most popular aspects of the game. The company decided to take advantage of this popularity and expand Flickr into today's most popular photo sharing platform.
And who invented it?
This time it weren't the Swiss. Pivoting has always existed. But the term was coined by Silicon Valley icon Eric Ries. Part of his method set (The Lean Startup) provides for permanent pivoting. Customers are to be actively integrated into the development of the business model. Business ideas are optimized or even rejected on the basis of customer opinions.
When is a pivot appropriate and what needs to be considered?
Most of the time, a pivot goes wrong when entrepreneurs don't want to admit to themselves that an idea is not working. They initiate changes too late. In the same way, however, a pivot can also come too early. E.g., when the business model has not yet been given a chance in the market. Four characteristics make a pivot successful:
- Include customer opinions: The most important thing for a successful pivot is to analyse and respect the opinions of customers and to incorporate them into the development process.
- Don´t carry Sunk cost as ballast: One of the biggest challenges in pivoting is the uncomfortable feeling that you may not have taken the right path. But this new path needs all your attention.
- Offering transparency: It is important that you talk openly and honestly about your decision-making process with investors and employees. Only then everyone can pull together in the new direction and lead the company into new realms.
- Consistent management: A pivot turns the entire company upside down. A transformation of this kind can only succeed with consistent management.
Falcon can help you to control your pivots in a targeted way and to lead them to success. Would you like to try it out? One e-mail is enough (info@nordantech.com).