Startup Scaling

In the Face of Change: An Entrepreneur's Guide to Startup Pivots

Pivot startup solved: Everything you need to know about how to pivot your startup, do a lean startup pivot, and more. We'll also share some examples and key metrics to consider.
Min Read
November 3, 2023

Embarking on the startup journey is always exciting and brimming with possibilities. Yet, unpredictable challenges may compel you to rethink your strategies or business model. This critical turning point in your startup's trajectory is known as a 'pivot'. Let's explore what a pivot startup means and why its significance shouldn't be underplayed.

Navigating the dynamic startup landscape, you may find yourself at a crossroads at various stages of your startup's life cycle. That's OK.

But what comes next is a decision. And while the decision to pivot may seem daunting, it often becomes necessary for the survival and growth of your venture. Our discussion today will help you understand the concepts and implications of startup pivots, setting a strong foundation for the following detailed exploration.

What is the Lean Startup Pivot?

In the startup world, the term "pivot" holds significant importance. It refers to a fundamental shift in business strategy that helps startups adapt to unforeseen changes or challenges.

The concept, popularized by Eric Ries in his book "The Lean Startup," encourages founders and entrepreneurs to change direction but stay grounded in what they've learned. This could mean exploring new target audiences, altering the product, or even completely overhauling your business model.

The key is to make these changes based on feedback and real-world experience, rather than hunches or assumptions. Data and reliable knowledge are your friends here. Remember, a successful pivot could be the difference between the rapid growth of your startup and its untimely demise. So, don't be afraid to embrace change when necessary!

Why Startups Pivot

Identifying the reasons for a switch equips you with the necessary insights and prepares you for the journey ahead.

The number one reason startups pivot is a disconnect between the product and the market. Despite having a fantastic product, your efforts could go in vain if your target market does not find it useful or is not ready for it. Likewise, a change in market trends (or fads) may also prompt a pivot. Constant evolution is the name of the game in the business world. You must stay agile and ahead of the curve to thrive and survive.

Secondly, a lack of sustainable growth may trigger the need for a pivot. If your startup is not achieving the expected growth, despite your best efforts and iterations, it may be time to rethink your business model or strategy. Remember, it's not just about surviving but growing and scaling.

Another factor lies in your competition. If your competition is gaining ground or if a new player disrupts the market with an innovative offering, a pivot may be necessary to reclaim your market position or differentiate yourself.

Internal factors also create a pivot - a new technological development, a shift in your resources, or even a change in your team's vision.  Brainstorm these all out on paper and see what you discover.

The reasons to pivot are varied, often profoundly personal, and closely tied to your unique startup story. Embracing the pivot means being open to change—reflecting on your journey, gauging the market pulse, and realigning your direction to the road of success.

Understanding How to Pivot Startup with Examples

Mastering the world of startups means mastering crucial functions: What is pivot in startup and why is it significant for your entrepreneurial journey?

A startup pivot is a structural course correction designed to find a new fundamental hypothesis about your product, business model, or the engine of growth. This new foundation will allow your startup to build revenue, growth, and success.

A 'pivot' could mean tweaking your product or changing your target market significantly so you can take advantage of a disruptive innovation. It could include redefining your brand's image or focusing on a new industry. You could think of it as swiveling a basketball player's foot - the pivot foot to explore and maneuver around potential blocks or hurdles.

Marrying theory with practice and reflecting on real-world examples will shed more light on the subject. Consider the widely known example of Twitter / X, which started as a podcast platform named "Odeo". Twitter existed only when the company decided to pivot because they were losing ground to their competitors.

There are many other examples such as Slack, which started as a gaming company, or even Groupon, which began as a platform for activist campaigns. These pivot stories serve to remind you that changing course is about something other than abandoning your initial idea. Instead, it is about adjusting your initial intuition to fit the market reality, leading to better product-market fit (PMF) and potential success.

If you want to think about 'what is pivot in startup' in another way, it is re-definiting the sales and strategy in your business model. This is often driven by market changes, changes in the economy, or a shift in focus on a particular market segment / PMF.  

Lean Startup Model: Pivot, Persevere, and Metrics

When you're immersed in building your startup using the Lean Startup model, you're essentially devoted to acknowledging when a change of direction is needed. This model propels you to build, measure, learn, and then either persevere with your current business model or pivot to a new one.

At the crux of it, the Lean Startup model, as we mentioned by Eric Ries, is all about being adaptable and responsive to feedback. It is about iterating quickly and making data-driven decisions to improve your product and business model.

Step One: You must identify when the current plan isn't working. If your key metrics aren't demonstrating the intended progress, it might be time for you to pause, reassess, and consider a pivot. Measure and review your metrics, including customer acquisition cost (CAC) , customer lifetime value (LTV), and conversion rate, the percentage of users who convert out of the total number of users that visited your site.  Time-critically, how much runway do you have?  How much runway have you burned?  And how much runway will you need to pivot and reach positive cash flow?

Yet the Lean Startup is not just about stats and numbers. It's about being lean in your approach and being innovative and flexible. For example, are you using in-house full time staff for certain skills, or do you outsource to a part-time resource?  Do you know where there's extra capacity, skills, or ideas in your team which you aren't taking advantage of at the moment?

This lean mentality helps you anticipate changes, react swiftly, and seize new opportunities, minimizing waste, leveraging your team, and improving chances of success.

Factors Influencing the Decision Between a Pivot and Perseverance

Drawing the line between when to persevere or pivot is often one of the most challenging decisions. Be sure to consider all the factors so you can make a sound decision.

One important variable to consider is the market response. It's crucial to listen to your customers. Are they genuinely happy with your product? Is there a market demand for your product or a similar one? In-depth customer interviews, user experience tests, and market surveys effectively gather this intelligence.

Another significant factor is the traction of your startup. It might indicate the need for a pivot if you struggle to gain momentum after a significant period. A lack of traction may be a symptom of different issues, such as an ineffective marketing strategy, a not-so-compelling value proposition, or a product that's too ahead of its time. A pivot might revitalize your startup.

Let financial indicators also inform your decision. If your burn rate is high, and the flow of capital is slow, carefully examining your current strategy and a potential pivot could be on the horizon.

And last, but by no means least, your passion for the direction of your company. If you, as founders, are losing motivation and no longer believe in your product or service, you likely won't be able to sell it to your customers either. Remember, you're the drivers of your startup. If you're not excited about your current trajectory, a pivot could bring back the enthusiasm and zest you initially had.

Understanding these factors will hopefully provide a clear picture of when a pivot might be the right move.

How to Pivot Your Startup Successfully

A pivot must be strategic and planned. You need to begin by evaluating your current situation, and understanding which aspects of your business are not working and why. Once you've identified the need to pivot, start brainstorming your options.

Ensure everyone on your team understands why the pivot is needed and how it will be carried out. This shared understanding will keep your team committed and motivated towards the new goal.

While a pivot is sometimes considered Plan B, it's essential to remember that it's not a makeshift or temporary plan. A pivot should not emulate a crisis mode but rather emerge as a strong, viable alternative to your original plan. A new strategy which stands on solid ground.

Follow the building, measuring, and learning cycle to ensure your pivoted strategy is well-optimised. In short, ensure your Plan B is not just an escape route but a fully-functional path which could potentially lead your startup to greater heights.

Is your startup is ready to grow?  We want to hear from you.

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Written by
Nora Alfen
Written by
Nora Alfen

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