The Power of the Pivot: A Primer

12/4/12Follow @wroush

Editor’s Note: Xconomy’s Power of the Pivot event took place on December 4, 2012, at the Pake Auditorium at PARC in Palo Alto, CA. The following essay was designed as an introduction to the event’s themes.

There’s been a big change in the way companies tell their origin stories. The old emphasis was on heroic narratives, in which the idea for the company burst upon the founders fully formed, the market responded immediately, and the product began its inevitable ascent to market domination. But that story was never very helpful to students of business strategy, since it papered over the change, learning, and “good mistakes” that occur inside all successful companies. On top of that, the heroic arc just isn’t an accurate representation of the way things usually happen. Look at PayPal, which started out as a secure mobile payment system for Palm Pilots; Flickr, which started out as a massively multiplayer online game; Twitter, which grew out of a failed podcasting platform; or Groupon, which started out as a community organizing tool (and maybe should have stayed one).

To the great good fortune of journalists like me, today’s founders are often much more willing to admit that they’re human and to share the stories of how they nearly failed or had to scrap entire parts of their business and start over. This kind of honesty and openness is a big plus for the whole entrepreneurial community, because it means that there are a lot more stories out there for early-stage entrepreneurs to study and learn from.

Which brings us to the purpose of today’s “Power of the Pivot” event. When we decided to dedicate a whole event to the subject, the idea was to find entrepreneurs who were willing to share their own pivot stories in an intimate and interactive setting. Our goal is send audience members home with some newfound learning that will serve them well the next time they or their companies are facing signs that it’s time to change something.

What are those signs? Being an entrepreneur, almost by definition, means coming up against unpleasant realities on a day-to-day basis. You might find out that:

• Your product isn’t delighting customers.

• The problem you’re solving just isn’t very important.

• Your product is delighting some customers, but they’re not the ones you wanted to reach, or they won’t pay for it.

• You’re scrambling to add new features that seem cool to you, but nobody else is excited about them.

• There’s only one feature on your product that people really like (so maybe you should focus on that).

• Your product doesn’t make sense except as a feature of something much bigger (so maybe you should develop a bunch of other features to flesh out the idea).

• You created a killer app, but it turns out the real money is in building platforms for other people’s apps.

• A better technology has come along.

The process of recognizing such signs and then actually planning and formulating a response is what has come to be called a strategic pivot.

But you can’t just start changing things willy-nilly and then claim to your investors or your friends or journalists that you’re “pivoting.” When the term was first appropriated for the business world a few years ago by people like Eric Ries and Mike Maples, it was supposed to mean a rational, experimental approach to finding a problem that your company can profitably solve. Ries calls a pivot “a special kind of change designed to test a new fundamental hypothesis about the product, business model, and engine of growth.” That test often, perhaps always, involves starting over at some level—going back to the drawing board and coming up with a new “minimum viable product” that you can show to customers.

But it doesn’t mean starting over from scratch. What does not count as a pivot is changing your product every week to fit the whims of the last customer you talked to. A real strategic pivot is a change that’s guided by your original vision, where you’re pretty sure that … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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