Entrepreneurs Evolution, Entrepreneurs Dilemma
Every entrepreneur and business will at some point have to roll with the punches and pivoting is an essential part of adapting to the marketplace. Business pivoting can happen in the early stages of startup, mid term or even much longer term. It’s how we evolve our business over time and proactively adapt to market conditions.
Why do you Pivot?
There are four main reasons a business may want, or have, to pivot:
- A changing business climate can force us to consider different options.
- Competition can force us to look at various different avenues to drive the business and grow revenue.
- There can be unexpected demand that we might find on the way and we end up doing something different to what we originally intended to do.
- Customers may not be responding to your product or service, the business is not growing and you need to pivot to find the market sweetspot and really drive growth.
1 Changing Business Climate
As we have seen during and since the pandemic, there have been significant global challenges. Major supply chain disruption has led to shortages and big cost increases across business sectors. Many people have found their surplus income much reduced and despite government help offered in some western countries, market shrinkage in many areas has occurred. With so many changes and so many challenges, both logistics and supply chain, many businesses have been affected and found they have had to pivot to survive. Sometimes you have to adapt fast when your industry and market changes, whether this is to factor in cost parameter changes, or to take advantage of new opportunities in your space, adapting to a changing business climate is crucial if you are going to succeed.
When you embark on a new product or service journey, you may be looking to enter a market where there is plenty of scope for newcomers. Despite your best strategic planning, sometimes this is just not the case post launch and you find that your levels or competition are just too high and the market is saturated. This is when you need to explore different angles, and consider pivoting to a slightly different variant of that same market, maybe an element of that market that you hadn’t really explored previously, but where opportunity exists to build a new market segment. Even large corporations can face stiff competition from newcomers. A good example is when Wikipedia took market share from Microsoft Encarta. Encarta was a large on-line encyclopaedia with over 62,000 articles and a variety of other content. The rise in popularity of Wikipedia forced it to discontinue in 2009. Not pivoting can sometimes cost you dearly.
3 Unexpected Demand
Finding business opportunities in unexplored avenues is not always straightforward. Even if you throw millions of dollars into R&D, finding such opportunities requires a certain amount of crystal ball gazing. Most businesses will embark on a journey for solving a particular business problem but bump into an unmet customer demand.
A great example is Honda, a legendary motorcycle brand. They launched their bikes in the US during the 1950s with little success. Motorcyclists tended to ride big, powerful Harleys and Triumphs, and they weren’t impressed with the shiny, light, agile Japanese models. However, Honda found an unmet need. They noticed some American customers were using their lightweight and manoeuvrable bikes off-road. Their executives loved the idea of creating the off-road experience and trail biking in America was born. By the time the trail bike boom really took off in 1968, Hondas were everywhere. An amazing example of pivoting to a profitable business. There are numerous examples of entrepreneurs finding unexpected demand – our challenge is to recognise it and capitalise on the opportunity, building a successful company in the process.
4 Customer Response
It’s very common for businesses to launch what they believe to be a desirable product or service only to find when they try to acquire clients, they just don’t respond to the product or business, requiring a fundamental rethink. A good example is the story of YouTube. It originally launched as a video dating service, but the platform wasn’t adopted, clients just didn’t respond to the service. Then randomly someone posted a video of elephants, which was watched by a huge number of users. YouTube pivoted away from video dating to a platform for users around the world to share videos of anything and everything. The service is a global success, and a great example of how businesses benefit from listening to their customers and adapting to their wants and needs.
How do you Pivot?
There are two primary aspects you need to consider:
1.You need to understand your target audience and the business problem that you’re trying to solve. So your audience are your customers, your partners, your employees, but mostly it’s your customers that you’re trying to reach out to. You may originally have been wanting to solve a particular problem, like in the YouTube case, it was video dating, and you understood your market, built your proposition and launched it. When you did your product evaluation, your customers said “OK, it’s good to have, but I’m not ready to put my video up there for dating purposes.” So where do you go from there? You look at an alternative, which can be slightly different from the original idea, what about videos of animals, properties, cities, anything else…is there a demand for that? YouTube found out that was exactly what their users were after. So a perfect example of understanding the target audience’s problems and a slight pivot to information sharing through videos. There was only a very small change to modify the platform and adjust the campaign and you can expand into the new space.
2. Evolution in the world results in a demand for new capabilities and we need to pivot towards that new capability. There are so many examples of this, Pinterest was originally called Tote. The original business problem they sought to solve was creating an online list of retailers that customers wanted to buy from, they expressed an interest and were notified when the product was available. It wasn’t a big success, and they then identified there was a demand for a space where companies could publish details of items they were selling in a visual collection or catalogue and similarly customers wanted to see examples of items from their favourite retailers and others, that they could browse and share.
When should a business Pivot?
In my experience I have come across 3 different scenarios that could lead to a pivoting opportunity.
- Rapid change: everything is changing very fast around you and you can embrace that.
- Pivoting to a new revenue stream.
- Testing results, when your new best idea really works.
1. Rapid change
When the environment is rapidly changing around you, there are so many dynamic parameters you need to consider for your local, international and global market. Supply chain, competition, everything is in flux, you may need to evaluate what you might be able to do differently, go after unmet demand, and really make an impact. Going back to the Pinterest example when the company launched the Tote product for their retail customers the uptake wasn’t great, customers didn’t respond positively and then the market changed, becoming crowded. Pinterest came up with the idea to enable customers to see a collection of favourite items, from a variety of sources, in one virtual scrapbook. They adapted to the rapidly changing marketplace and came up with a new idea, tried the idea and launched it as a business. A scenario where embracing rapid change was very successful.
2. Pivoting to a new revenue stream
When you enter the market with a fresh idea, you try a certain business model and you expect a certain level of revenue, you will have a forecast for year 1 and 2, and if your forecast doesn’t materialise within 3-6 months of launching your product, you really should look at pivoting to a new revenue stream. AirBnB is a great example of this. When the two founders launched the business, they started by renting their mattress to conference attendees in San Francisco, turning that into a business model. They then realised that their model only worked when there were conferences happening; no conferences, no revenue. So they expanded the model, finding a new revenue source which was to connect those offering cheap accommodation with budget travellers around the world. The new revenue stream has become highly successful.
3 . Testing your new idea
If you try a new idea out on your customers and they respond positively, you should really pivot your business. YouTube is a great example, the elephant video worked so well, received such widespread positive feedback, that the pivot was embraced and the platform changed and the new business model launched. Not evolving your business can mean missed opportunities. Innocent had a novel way of testing their idea for starting a smoothie business.
I have worked in the technology business for the last 27 years, and my first job was as employee number 1 in a startup that grew into a US$2 billion global enterprise with over 25000 employees working with large NASDAQ and FTSE and ANZ companies. As the business grew it became increasingly difficult to connect with all the employees and ensure that they were having a positive employee experience. Using annual surveys and structured processes for collecting feedback certainly helped, but it’s difficult to ascertain what employees actually feel about the organisation, and the larger the organisation, the harder it is to have that information flow freely.
Recently, we built a platform that we called Dynamedics. It was a health and safety platform, designed to help employees working in large manufacturing environments to ensure they can provide proper feedback to the management on their own health and safety, services, information and support available. When we started talking to big manufacturing companies, particularly oil and gas sectors, we noted there has been considerable investment on the safety aspects, safety of facilities and machinery for example, but very little investment on the health and wellbeing side. We sold Dynamedics to a couple of hospitals in Australia, but found the red tape involved with selling to the NHS impossible to navigate. We understood the target audience, we understood their problems but customers were not responding, so we decided to pivot to an unmet demand.
We identified employee engagement in a corporate setting as a potential model. Traditionally managed by companies who conduct annual surveys, providing statistical analysis to the customers. However, the data is not dynamic, it’s usually undertaken once or at most, twice a year. So, how can I build a solution that can regularly listen to employees and create an anonymised, unbiased feedback mechanism to management. So we developed a new platform, called experienz, rebuilding a lot of the modules. We call it an employee engagement assessment platform, designed to listen to your people and we targeted complex organisations where the size can mean a disconnect between employees and management. We launched it with some success, but over a period of time we realised it’s a very crowded market as our product fits right into the Human Resource space, with hundreds of thousands of products already competing for customers.
We went back to the drawing board, and spent 3 weeks brainstorming internally to ascertain where the market opportunity is for experienz. It couldn’t have been clearer. We had developed the social aspect of what the world calls, Environmental, Social, Governance, or ESG. So having built the ‘S’ or social aspect of ESG our strategy was to build the Environmental and Governance aspects into our product. Since then we have built a full ESG product with much greater market acceptance, with experienz simplifying ESG governance for businesses. When you look at the market, many products focus on the environmental side, reducing the carbon footprint, recycling, driving sustainability, but there is very little on the social side, and governance is still evolving. Here’s an example where we had to pivot the product twice in a period of 2 years, responding to the changing work climate, pivoting to a new revenue, trying a new idea that worked really well, so we embraced it, and we are pursuing unmet demand.
This blog explores the Why, When and How of pivoting, all of which comes from our own practical experience of responding to the market. Hopefully there are some pointers here so you can look at your business and ask the question: is there an opportunity to pivot, to embrace change, meet unmet demand and grow revenue?
About the Author
CEO and CO-Founder of Mitra Innovation, Ashok is a gifted entrepreneur with a passion for helping clients. He transforms brilliant ideas into successful products and services through pioneering technology, driving transformative solutions. Ashok’s astute leadership and vision for digital enablement and product incubation are the foundations of Mitra’s commercial success.