What does it mean to pivot in business? Can you think a fundamental change coming to your industry that could spur you to make such a move?
According to Simon Sinek, the author of The Infinite Game, a business pivot is a purposeful, dramatic change that the business makes willingly in order to stay true to its Just Cause—the larger cause it exists to support. Further, it’s a move that you make when things are going well, but when you see that down the road, you’ll need to adjust.
Here’s why you need to be always prepared to pivot your business on a fundamental, existential level if you want to continue playing the game.
To Pivot or Not to Pivot
Sinek emphasizes that an existential business pivot is not a reactive move—a move that someone makes in order to stay alive in the face of difficult challenges. Instead, it’s a move made in anticipation of a future changing climate because you know that at some point, your organization will need to be positioned differently to survive.
|Nintendo’s Proactive Pivot|
Nintendo is an example of a company that was doing well in its established business but saw that by pivoting to a different business, it could be more successful over a longer period.
The company was founded in 1889 as a playing card company and was one of Japan’s leading companies throughout the first half of the twentieth century. However, in the 1950s, then-president Hiroshi Yamauchi realized that playing cards had limited potential in the long run, and in the 1960s, the company pivoted to making toys. In 1970, it pioneered a few electronic toys (which became blockbuster sellers) and in the late 1970s started developing and distributing video games, which Yamauchi recognized as a market with enormous potential. The pivot paid off, and Nintendo has since sold some of the most iconic products in the industry, including Donkey Kong, Pokémon, and Game Boy.
Sinek doesn’t address the role that luck may have played in Nintendo’s successful pivot. True, the company was aware of the desires of their market and responded appropriately, but it’s only in hindsight that an observer can say whether or not a company’s gamble on a new strategy was a good one. Many companies respond to changes in the market but don’t end up successful because they run into unexpected obstacles.
Nicholas Taleb discusses the role that luck plays in success in his book Fooled by Randomness. He argues that while thousands of companies and people have similar talents and intelligence, only a few of them will have the luck that allows their talents to flourish—for example, only a few will end up in the right place at the right time to get that first contract that leads to more contracts. He says that people tend to attribute wild success to skill only because they don’t see the multitude of equally skilled people who didn’t end up successful simply because they didn’t have the same fortune.
Taleb might argue that for every successful company like Nintendo, there are countless others that tried to adopt a new business strategy but failed. For example, when Google launched Google Glass, people debated whether they were forward-thinking pioneers or misguided hawkers of a flash-in-the-pan novelty item. The product turned out to be a mistake, but it might be argued that their move was a fundamental pivot that Sinek would have approved of (although he doesn’t mention it in his book).
Regardless, Sinek’s point is that you must be willing to pivot in order to stay relevant over the long run—pivoting is not a guarantee
of longevity, but being unwilling to pivot is a guarantee of transience.
Pivot to Follow Opportunities
Sinek argues that an existential pivot allows a leader to seek out the potential benefits of disruptive change, rather than just to avoid potential threats.
To illustrate, Sinek points to the decision of Steve Jobs, in the early 1980s, to develop a graphical user interface (GUI) for Apple even though the company had already invested millions of dollars in different technology. When Jobs was shown what computers could do with GUI, he recognized it as a technology that would advance his Just Cause: empowering regular people to use computers without needing to know complex, high-level computer language. Consequently, he re-set the direction of his company even though it meant abandoning his current business model and losing money in the process. Four years later, Apple introduced the Macintosh, a computer featuring a GUI, setting the standard for personal computing ever since.
|Types of Pivots|
Entrepreneur and start-up advisor Eric Ries writes about how a company can use a pivot to redirect its efforts to more profitable avenues in his book The Lean Startup. He notes that pivoting is especially important for start-up companies, as they usually have limited time and funds to find their footing. He also notes that even if your company isn’t outright failing but is instead just getting by, you may want to pivot in order to get on a track where you’re making more progress.
He outlines several different ways in which a company can pivot in order to better take advantage of opportunities:Zoom in or out: Narrow or expand your product’s focus.Target new customers or customer needs: Redirect to a different consumer segment or address a different specific problem they have.Change your sales channel: If you sell through stores, consider selling directly to consumers, or vice versa.Incorporate new technology: Your entire business model might change with innovative technology, like when Netflix started offering streaming services instead of mail-in DVD rentals.
Pivoting Lets You Blow Up Your Company Before Someone Else Does
Jobs’s willingness to abandon all the progress he’d already made in order to adopt a better long-term strategy is a hallmark of an infinite-minded leader, who recognizes that in the face of changing technology or business conditions, if you’re not willing to blow up your own company, someone else inevitably will.
Sinek notes that sometimes, when a company has found success through a certain business model, its leaders are reluctant to abandon that model, mistaking the model itself for their Just Cause (as if their Just Cause is to sell a particular product or service). This can lead them to cling to an outdated business model that has stopped serving their Just Cause, which gives competitors a chance to step in and steal business away from them.
|Blockbuster’s Inability to Pivot Led to Its Downfall|
In his book The Innovator’s Dilemma, Clayton Christensen discusses how difficult it is for established, well-run companies to pivot because they continue to rely on the same business practices that brought them success up to that point. These practices usually include upgrading their existing offerings to satisfy their existing customers and investing in projects that promise the highest immediate returns. However, in the face of change, these practices often aren’t effective anymore, because a company needs to instead look to serve new customers with new needs.
The rise and fall of video-rental superstore Blockbuster illustrates how relying on tried-and-true operating practices in this way falls into the trap of finite thinking. Blockbuster was founded in 1985 and for the next decade expanded quickly throughout the U.S., opening franchise stores and buying up competitors. In the early 1990s, co-founder Wayne Huizenga recognized the threat that emerging technology like video streaming posed to the company, but didn’t know how to counter it and so sold the company to Viacom. The next CEO, John Antioco, had an opportunity to partner with Netflix in 2000 but turned it down. A few years later, when Antioco finally realized the threat that Netflix posed to his business model, he tried to compete by eliminating late fees and building an online presence.
The online store might have led to a meaningful pivot. In fact, Netflix approached them a second time for a partnership. However, the Blockbuster board couldn’t break from their finite thinking. They were unhappy with the loss of late-fee revenue and the large monetary investment into Blockbuster Online. In 2007, they fired Antioco and replaced him with Jim Keyes, who raised the prices of their online rentals in an effort to claw back some profitability. As a result, Blockbuster Online, which had been quickly catching on with customers, suddenly stopped growing as customers balked at the higher prices, and in 2010, the company went bankrupt.
Because of its finite mindset and its inability to see the customers of the future, Blockbuster proved unable to pivot, let go of obsolete business practices, or see valuable opportunities when they presented themselves.