The Art of the Pivot: How-to Avert Disaster and Avoid Business Failure
By Julie King | May 1, 2013
The world of business is in transition.
We are seeing the globalization of niche markets driven by changes in technology, the emergence of crowdsourcing and easy access to cheaper workers in other countries.
Customers are also in transition. In the buying cycle, personal selling is being deemphasized. The availability of information, user feedback, and "findability" online are now very important.
Because of this, some businesses are experiencing laggings sales, finding it difficult to bring on new clients and maintain a viable revenue base. Tried and true business tactics aren't as effective as they once were.
When this happens something needs to change. It's time for a pivot.
What is a pivot?
Pivot is term commonly used in start-up communities, where entrepreneurs have an idea, but are still looking for a proven market willing to pay for their product or service. Mike Betts, Executive in Residence for VentureLAB, a regional innovation centre, summed it up nicely. "A pivot is a change in direction, without a change in strategy."
A pivot could involve changing the marketing message, selling to a different customer group, or realigning the offering to be more in line with what customers want.
Some people assert that a pivot is a complete change of strategic direction, but if we look to basketball for the origins of the term, we see that this is not the case. With a pivot, you are still in the same game, but now you have shifted directions to try to find a new way to get to the net and score.
Pivoting in a successful business
History is littered with stories of large, successful companies that failed to pivot, and failed.
A Wikipedia list of business failures amongst well-known brand names includes 282 entries over the past decade. This includes companies like Borders bookstores, Silicon Graphics computer systems, Hostess Brands bakeries and Canwest communications.
For seasoned business leaders, past success can make it difficult to recognize when markets shift and a change is needed. What's more, the process can be tough on the ego. So the challenge to an existing business is to capitalize on your strengths, yet also create a culture that is adaptable and in tune with shifting needs of your customers.
These seven tips will help you get your business pivot-ready.
Think like a start-up.
Thomas Kuhn, a philosopher of science who coined the term "paradigm shift", described science as having times of normal and revolutionary research. Each time requires a different approach.
In a business, during "normal" times the team proceeds on the assumption that your business model is valid. It is a time to refine what is working and build on strengths.
During "revolutionary" times a potential crisis is looming. These are times to be on guard for swings in how and what people buy.
While it is important to maintain the things you do well, it also helps to adopt a start-up mindset and be aware that change may be needed so that you can continue providing valuable, needed products and services to your customers.
Watch for industry-wide shifts and trends.
To stay on top of trends, it is important to monitor news and innovations. Keep on top of your industry as well as other sectors.
Twitter lists are one of the most effective ways to do this. Select a small but targeted group of people, news agencies and organizations and then add these people to a custom Twitter list. You can then monitor this list, which eliminates the clutter from your full Twitter stream and helps you gain a high-level overview of important news and trends.
Create a customer-alignment culture.
Existing businesses have something start-ups are hoping to gain: customers. Think of them as a crowd of people who can help your company understand market shifts and utilize your crowd.
The obvious option is to connect with your customers to find out if and how their needs may be shifting. Less obvious is the opportunity to test out potential pivots with smaller segments of your customer base. Whether your plan is to try out a new sales approach or a brand new product idea, you can use segments of your customer base to pilot your pivot before going ahead with a full implementation.
Use cashflow forecasts and KPIs to detect and avert problems
Are your company's income targets off or your expenses up?
The cashflow forecast is an important tool that help your business spot problems before they become too difficult to resolve. Especially when the business has accounting data from past years, these forecasts and other key performance indicators (KPIs) can act as an early warning system.
Despite their obvious value, many small business owners would rather do anything other than set-up and track this data. That is an opportunity lost.
Just as you would invest in your marketing and sales systems, spend the time and money needed to set-up and track your cashflow and KPIs. Then monitor and maintain them. The goal is to be able to identify potential problems as quickly as possible, to give the company time to adapt.
When change is needed, think laterally.
If you believe that a pivot is needed, it can be difficult to apply out of the box thinking to find innovative and unusual solutions. This is where lateral, right-brain thinking helps.
The challenge is not to focus on particular ideas or use left-brain thinking, which causes our attention to focus more narrowly and discover the obvious. Creative brainstorm activities, where any idea is encouraged and no judgement is levied, can be very helpful.
Evaluate Your Effectiveness with A/B Testing and Analytics
Dan Ariely, a world renowned expert in behavioural economics, advises businesses to design small tests to determine whether the things they believe to be most effective are, in fact so.
Web designers do this all the time and call it A/B testing. For example, a designer might want to see whether a red or green button will generate more sales leads. They set-up both options in A/B testing software and then monitor the results to see which one performs better.
I would encourage business leaders to expand on this and design simple tests that will help you evaluate everything from hiring and employee motivation to your sales and marketing messages.
For example, a marketing and sales team tasked with increasing sales might test a few different conditions. They might alter the script within their target market and measure results to see which message was more effective. They might also test their assumptions about who their ideal target market is, using the same script across several prospect groups.
Website and social media analytics provide readily-available tools that can provide important information about how people interact with your organization online. Set-up these tools and use them.
Adopt an Adaptable Mindset
The final point is to open your viewpoint to enable you to see new opportunities.
Windows of opportunity open and close on a regular basis. It helps to align your thinking so that you can recognize and capitalize on opportunities as they emerge.
Thanks to Karen Dubeau for helping me understand the sports roots for the term "pivot" and to Jane Gertner, also an Executive in Residence for ventureLAB, for the snappy phrase: "globalization of niche markets"!
For Ontario-based information, communications and technology (ICT) companies in York Region and Simcoe County, VentureLab runs a BUILD program that helps companies learn about pivoting and other aspects of starting and growing an ICT business.