Does your startup need to pivot? Is it at the brink of failure, and you need to find a new business model or customer segment?<\/p>\n\n\n\n
Figure out how to pivot your startup correctly in this guide from Lean Startup.<\/p>\n\n\n\n\n\n\n\n
One of the hardest challenges you\u2019ll face is deciding whether to continue in your current direction (persevere) or to change your fundamental hypothesis about your business (pivot). <\/p>\n\n\n\n
The answer is often unclear because you will seldom encounter complete, abject failure. The more insidious state is when you\u2019re barely limping along, not plummeting to the earth but also feeling like you\u2019re not really making progress.<\/p>\n\n\n\n
In The Lean Startup, Eric Ries recommends having a regular \u201cpivot or persevere\u201d meeting. The frequency should be between once every few weeks and once every few months, depending on your startup.<\/p>\n\n\n\n
Pivot or Persevere meetings should involve product development and business leadership teams. The product team must report on its product optimization efforts over time, and the business team must report on their conversations with customers.<\/p>\n\n\n\n
Because your startup has limited money and time, startup pivots are necessary to find a new direction when you\u2019re failing. Your startup\u2019s runway is the number of pivots it can make<\/strong> \u2013 so it\u2019s in your interest to get to the pivot point faster.<\/p>\n\n\n\n Yet many entrepreneurs who successfully pivoted which they had done so earlier. Why is it so hard to pivot?<\/strong><\/p>\n\n\n\n And yet the alternative is much worse \u2013 you run out of money and your company goes bankrupt.<\/p>\n\n\n\n Instead, you need to define what failure is in the context of your startup, and if you\u2019re failing, it\u2019s time to pivot or die.<\/p>\n\n\n\n Pivots in startups come in multiple flavors. Which type you make depends on what you learn in your experiments about customer needs.<\/p>\n\n\n\n Customers like a specific feature of your product. You pivot so your product now focuses entirely on delivering this feature.<\/p>\n\n\n\n Example: Justin.tv was a general live-streaming site, where anyone could stream whatever they were doing to an audience. They found that the most passionate users on their product were gamers streaming themselves playing videogames. Justin.tv pivoted to Twitch, a live-streaming site focused entirely on gaming.<\/p>\n\n\n\n Your customers aren\u2019t satisfied with the bare features in your product. You pivot your startup to expand the scope of your product and add many more features.<\/p>\n\n\n\n You have the right product, but you\u2019re solving it for the wrong people. You pivot to target this new type of customer. This can happen when you deplete your early adopter<\/a> userbase and expand to mainstream users, who have different preferences.<\/p>\n\n\n\n Example: Foursquare is an app that lets users check into locations like restaurants and leave reviews. It was popular in the early 2010\u2019s but fell out of favor with consumers. It pivoted to cater to enterprise customers and developers<\/a>, who can use the trove of check-in data to run business analytics or power their own apps.<\/p>\n\n\n\n You know your customers<\/a> well, and the problem you\u2019re solving for them is not very important. You pivot your startup to target a new customer need, which may entail an entirely new product.<\/p>\n\n\n\n Example: Potbelly Sandwich Shop started as an antique furniture store that sold sandwiches to generate traffic. It realized that more people wanted their sandwiches than their furniture.<\/p>\n\n\n\n Example: Odeo was a podcasting platform company. As Odeo was failing, the staff held a last-ditch hackathon, where Twitter caught fire and spun out into its own company.<\/p>\n\n\n\n This can work in two directions. You have an application, but you realize you\u2019d rather become a platform on which others can build their own products and applications. Or, you have a platform, but you realize you\u2019d rather create a dedicated application that solves the end-user\u2019s needs directly.<\/p>\n\n\n\n Example: Knewton was an education technology company building test prep programs that customized to the student. It pivoted to launch a general customization platform for schools developing their own online courses.<\/p>\n\n\n\n You pivot your startup to change between two types of businesses: high margin and low volume, or low margin and high volume. This roughly matches to a business to business (B2B) model, or a business to consumer (B2C) model.<\/p>\n\n\n\n Example: In the 1970s IBM was the leader in enterprise mainframe computers, but the personal computer began disrupting the industry. After failing to dominate the PC market, IBM pivoted from hardware to provide software and consulting services, including the Watson AI platform.<\/p>\n\n\n\n You pivot your startup to make money a different way. For example, you realize that instead of selling your product, you can offer it for free and make money on ads or partnerships.<\/p>\n\n\n\n Example: Duolingo, a language learning app<\/a>, was previously entirely free and made money through offering crowdsourced translation services. It introduced a subscription service<\/a> that removes ads and allows offline use.<\/p>\n\n\n\n You pivot your startup to change how you grow \u2013 through virality, engagement, or paying to get users. Commonly, changing the engine of growth also requires a change in the way you capture value – for instance, going from a viral strategy to a paid marketing strategy may necessitate that you go from a free model to a paid model, to fund the marketing.<\/p>\n\n\n\n A channel is how customers get your product. For example, Johnson & Johnson uses pharmacies to reach customers, and app developers use Apple and Google\u2019s app stores to reach users.<\/p>\n\n\n\n You pivot to deliver your product to users through a different channel. For example, at first you might think of building a product and listing it on Amazon to reach customers. You pivot to sell to customers directly through your own website, once you have the traction.<\/p>\n\n\n\n Example: Television shows were previously broadcast only on TV networks, which had specific properties limiting the content: advertisers were the main revenue source, so the shows couldn\u2019t be too edgy; the network had limited time slots, so shows had to cater to the widest audience possible, diluting quality. With streaming platforms like Netflix and Amazon, show producers now have new channels to bring their content. Furthermore, because Netflix is supported by subscriptions and not advertisers, shows are not beholden to the same restrictions as in TV.<\/p>\n\n\n\n You want to solve the same problem for the same users, but you pivot to use a different technology to do so. Often, this offers better price or performance.<\/p>\n\n\n\n Example: Netflix started out by shipping DVDs in the mail. When bandwidth increased, they pivoted to offering streaming of content over the Internet.<\/p>\n\n\n\n Example: Wealthfront started as a virtual trading league for amateur investors. The idea was to identify the best traders through their virtual portfolios, and get customers to invest in those traders. After failures on both fronts, Wealthfront pivoted to build a platform for professional managers instead of amateurs. This wasn\u2019t their last pivot, either \u2013 in a move taking place after The Lean Startup was published, Wealthfront is now a wealth manager itself, taking money directly from customers and investing it automatically through \u201crobo-traders.\u201d<\/p>\n\n\n\n Pivots are a natural part of business. You will almost certainly face less promising metrics than you had envisioned, and if you aren\u2019t able to improve these, you will have to choose to pivot or die. Even when you reach success, you need to stay vigilant for changing market conditions that necessitate a pivot.<\/p>\n\n\n\nTypes of Startup Pivots<\/h2>\n\n\n\n
Zoom-in Pivot<\/strong><\/h3>\n\n\n\n
Zoom-out Pivot<\/strong><\/h3>\n\n\n\n
Customer Segment Pivot<\/strong><\/h3>\n\n\n\n
Customer Need Pivot<\/strong><\/h3>\n\n\n\n
Platform Pivot<\/strong><\/h3>\n\n\n\n
Business Architecture Pivot<\/strong><\/h3>\n\n\n\n
Value Capture Pivot<\/strong><\/h3>\n\n\n\n
Engine of Growth Pivot<\/strong><\/h3>\n\n\n\n
Channel Pivot<\/strong><\/h3>\n\n\n\n
Technology Pivot<\/strong><\/h3>\n\n\n\n