For an entrepreneur the decision to pivot your business is not an easy one. It may feel like you’re giving up on your original vision, and a clear value to the world that you know needs to exist. But there are many ways to execute a successful pivot that can leave you proud of the business you’ve built.
Some studies have shown that as many as 70% of companies pivot throughout their journey. Early stage company data shows that in many cases, a major pivot can lead to a 70% higher chance of seeing growth in your business within 12 months.
While the data is encouraging, the hard part is knowing when it’s time to execute a pivot, and how to go about doing so successfully. While your expertise and knowledge of the market as a founder, as well as your intuition as to where the market is headed plays an important role in the decision, there are some best practices that can help you avoid time consuming mistakes.
Knowing when to pivot
The ultimate decision of changing your business is a deeply personal one. However, given the significant investment of time and resources that any venture requires, it’s important to understand when the time is right to make the leap.
The main factor to consider is you and your partners’ goals with the business.
Are you trying to build a venture scale business? If so, then slow growth and inability to attract venture investors could be a signal that the market opportunity you’re pursuing may not be big enough.
Are you trying to replace the income from your job? Then slow growth might be fine, but if you’ve spent years trying your idea and still have low to no sales, then it’s time to try a different approach.
Are you more driven by having a big impact? That may take longer than a traditional business would, but you need to have measurable goal posts to reach along the way that show you’re making progress toward the ultimate big goal. Tesla had to first succeed at selling a very expensive car to a wealthy consumer before realizing their mission of popularizing electric cars for the masses.
An underrated skill for an entrepreneur is the ability to understand how the market is reacting to what you’re building. If you’re seeing little to no indication of demand, whether through email sign ups, pilots, or growing contracts, and you feel like you’ve tried every approach of marketing or selling your product to your target audience, ask yourself whether it’s truly solving a problem for the customer.
Once you’ve decided that you have exhausted every possible way to market and sell your product or service, or that you don’t have the time or money to continue on the same path, here are three ways to approach a pivot to try to find success.
1) Change the target customer
Making a pivot does not mean you have to throw out the entire playbook and completely give up on your original vision. It could just be that your assumptions about who the product/service would resonate with the most, or who has the biggest need, were wrong.
No matter what you’re putting into the market, without customer adoption you don’t have a business. This is particularly true for anyone building an innovative solution in the market.
The book “Crossing the Chasm” by Geoffrey A. Moore talks at length about the distinction between people who will try your product before anyone else, vs. those who will wait until the product is proven.
This is one illustration of the importance of targeting the right customer at the right time, especially when you don’t yet have a recognizable brand. And oftentimes it’s a matter of trial and error of promoting to different customers until you land on the right one.
Say for example you have a handwashing device that you want to sell to hospitals. You try for months to get meetings with hospital administrators only to learn that while they say they are interested you can’t sell a single unit. This could be because they want to see the product proven in the market before taking a risk on it.
You may consider finding another customer profile that needs this device, but does not have to go through the complex regulatory or RFP process to approve it. In this case, small restaurant businesses can be a great place to start since you can deal directly with owners who can make a decision quickly and can be your early adopters before moving on to bigger customers.
The goal should be to find a customer who 1) has a big need for what you’re selling and 2) is relatively easy for you to reach. This will allow you to test several customer profiles until you find one that resonates with your product.
2) Change the business model
In some cases making a small adjustment to your target customer profile is not enough. In this case you may have to consider changing your business model entirely.
This can take on multiple forms, including changing your distribution model such as selling through a website vs. selling over the phone, going from a B2C to a B2B model, or changing the pricing model of your product or service.
For example, if you have a coffee delivery service that you’ve been trying to sell to typical coffeeshop going consumers in your local area, and you’re finding it hard to compete with existing options, you may try emailing a target list of 100 office managers of local companies who have a physical workforce in an office that needs to constantly restock on their coffee supply.
In fact that’s exactly how Wandering Bear Coffee started their business before they achieved the brand recognition and customer loyalty necessary to sell their coffee direct-to-consumer online and ultimately to convince stores like Costco and Whole Foods to carry their product.
3) Change the product/value proposition
If you’ve tried targeting every type of customer imaginable, and adjusted your business model several times to no avail, it might be that either the product isn’t good enough, or it’s simply not needed in the market.
In this case, you may consider making significant changes to the product itself and to the way you communicate your value proposition in the marketplace.
One way to approach this is by first making a decision about the customer you would ideally like to serve. If you have a passion, or at least a significant interest in serving a particular customer, it can go a long way in motivating you to figure out a product for them that they really need.
It can also help you have a focused approach to testing new ideas.
When attempting to make a major change to your product, you should first have a structured process to understand your customers’ needs. You’ve probably heard about the customer discovery process, however just as important as the process of interviewing potential customers is how you define your experiment to begin with.
To understand what product ideas to try, you need to make some assumptions about the various problems that your target customers have, then organize a series of interviews with those potential customers to prove whether the assumptions are true.
Your goal should be to ask good enough open-ended questions to really understand whether the problem exists, in what ways it manifests, and whether the customer is willing to solve it (they’ve tried in the past).
Some startups need dozens of these types of conversations to get an understanding of what their new product should be, but sometimes it can take just one impactful conversation with a customer who shows you they’re ready to spend money to solve their problem, to convince you that it’s worth trying a particular product vision now.
For an entrepreneur to have the stamina and followthrough necessary to build a successful company, conviction in what you’re building is a must. But if you’re not receiving consistent positive signals that what you’re doing is working, considering a pivot is not something to be afraid of.
It’s not that you’re giving up on your idea. It may just be the strategic decision you need to make to save your business and keep the entrepreneurial dream alive.
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