Pivoting - With change to success!

Dr. Jonas Steeger

For many companies, pivoting is a regular occurrence. But what exactly does the term pivoting mean, and which companies have already completed a successful pivot? We answer these and many other questions and explain how you can benefit from this method!

What is 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 need to develop a different plan and business model quickly! This process is called a pivot.

However, it is important to note that pivots are not a sign of despair. In fact, innovative products that tend to divide opinion often involve markets that were not initially known or seen as relevant. Thus, pivoting can be a tool to discover additional growth - growth you might otherwise have overlooked.

Five well-known companies that have done pivots

  1. 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. Juicy Fruit, Doublemint and Spearmint generate billions of dollars in sales today. It is one of the best-known brands in American history.
  2. 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 all know today.
  3. 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.
  4. 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.
  5. 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.

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And who invented it?

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?

A pivot often goes wrong when entrepreneurs do not want to admit to themselves that an idea is not working. They initiate changes too late. However, a pivot can also come too early, E.g., when the business model has not yet been given a chance in the market. There are four characteristics that make a pivot successful:

  1. Include customer opinions: The most important thing for a successful pivot is to analyze and respect the opinions of customers and to incorporate them into the development process.
  2. 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 in the past, having lost time and money. Beware of this trap. Just think: You needed to go through this to learn. Now the new path needs all your attention.
  3. Offering transparency: It is important that you talk openly and honestly about your decision-making process with investors and employees. Only then can everyone pull together in the new direction and lead the company into new realms.
  4. Consistent management: A pivot turns the entire company upside down. A transformation of this kind can only succeed with consistent management.

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