How To Evolve a Venture: A Brief Introduction to Pivoting
Written by Monique Boddington
Knowing when and how to pivot is a critical decision for any entrepreneur. Research has shown that ventures that don’t adapt their business model, as they develop, die. Pivoting is essential for entrepreneurs to navigate uncertainty and ensure success.
When first starting out and putting together an entrepreneurial idea, combining business model, strategy, and people, you build an initial plan. But, as the boxer Mike Tyson puts it, “Everyone has a plan until they get punched in the mouth”.
The process sounds straightforward: you have an idea, you go out and try it, and if you succeed, you keep going; if you fail, you pivot.
In practice, things are far murkier – when should you pivot? When have you failed “enough”?
What is a Pivot?
Pivoting has become somewhat of a buzzword in the entrepreneurial world. There was a time when nascent entrepreneurs would discuss their latest failed idea. Now you more frequently hear them discuss “pivoting”, celebrating how they have “pivoted” multiple times in the same week.
Pivot has become the term for any change, big or small. But what actually is a pivot?
An oft debated point is what degree of a change constitutes a pivot. When you search for archetypical pivots, examples include YouTube, which started as a video dating site, and Twitter, which was initially a podcast business called Odeo. When Apple launched iTunes in July 2005, it killed off Odeo before it had even begun and left entrepreneur Jack Dorsey needing a pivot, and a drastic one at that. After many days of working on projects in small groups, Dorsey proposed a different service altogether. Fast forward to March 2006, and the Twitter we have all come to know was officially launched and would go on to become one of the biggest social media platforms. However, such a large-scale idea reframing does not mirror the reality of most ventures.
Research is revealing a more accurate image of pivoting. While a pivot is a change in a firm’s strategy that reorientates the strategic direction of the venture, either through reallocating resources or restructuring activities, in most cases this does not happen overnight. While a venture may change a lot throughout its development, this is usually made up of multiple, more minor pivots.
Speed of Pivoting
The frequency with which an entrepreneur can pivot plays a significant role in their venture’s success. However, frequency alone, be it too often or too rarely, is not what separates a good entrepreneur from a bad one. Pivoting too slowly can lead to a failure to capture an opportunity; failing too quickly can cause a venture to go in circles. The best entrepreneurs know both when and how to pivot effectively. Pivoting happens quickly, but this does not mean it is a decision made without thought and a deep understanding of different scenarios. Pivoting too often means you may end up never sticking to a position long enough to test it out and apply that knowledge, while pivoting too rarely drains resources pursuing dead ends.
It is an entrepreneur’s ability to synthesise all the available information into a long-term vision that makes a difference. The best entrepreneurs will then be able to model many different scenarios while considering the key areas of a typical business model. Finally, they will be comfortable with the change, when it is needed, without losing sight of the bigger picture.
In other words, the frequency of pivoting is a tricky balance.
When to Pivot?
Pivots stem from a need to change some aspect of a business’ strategy, usually as a consequence of underperformance, feedback from customers, changes in the environment, or pressures from competitors. The reasons why these changes are needed, however, vary drastically depending on the stage a venture is at. At the start-up stage, ventures pivot to develop an idea that works, one that will sell to customers and make profits or attract investment.
At the earliest stages, shifting and iterating different parts of the business model, particularly around the market and the product, are critical in learning about the industry, customer and practice. When dealing with something new or innovative, a cutting-edge idea with a new market for example, you likely won’t know what works until you try it. This type of learning will be needed at every stage to understand evolving risks and opportunities. Returning to Twitter, even after pivoting away from being a podcasting platform, it took several pivots to produce the Twitter of today (a platform which continues to develop). Back in 2006, the original Twitter allowed users to post and receive tweets via SMS and the web; over time, as it grew, the platform pivoted towards real-time updates. Replies and hashtags, other format changes, and the use of third-party developers and apps all happened later.
At some point, however, in order to grow the basics need to be pinned down – the question here is “when to persevere?”. This is the product you are rolling out, this is the repeatable sales process, this is the market segment you will focus on, the market entry strategy, and the strategy to scale! So, while putting attention to experimentation and learning, also set standards for perseverance:
Have regular meetings to evaluate your strategy of experimentation and learning. What results are you seeing? What information do you still need? Is there anything that you are overlooking or experiments you are repeating? Set KPIs where possible to help objectively measure progress and guide future decisions. What are positive signals, what are negative ones, and what are your thresholds? Work toward a platform where you persevere on key elements of the venture. This, then, should be a foundation to continue to build the company.
Ultimately, a venture should build, measure, learn and pivot, but every so often, reflect and evaluate, move towards persevering, and then…repeat.
Monique Boddington
Monique Boddington is a Management Practice Associate Professor and Deputy Director of the MSt in Entrepreneurship programme at the Cambridge Judge Business School. Her research focuses on entrepreneurship, specifically the formation of new ventures, gender, and the application of sociological approaches to broaden our understanding of entrepreneurial activity, and entrepreneurial strategy. Monique is a mentor to E-Lab students as well as a coordinator of the popular Lego workshops.