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 the new thing you’re going to try will be an improvement, something that builds on what you’ve learned about your current product or business model.

There are two extremes to avoid here. You don’t want to wait too long to pivot, or you’ll become one of what Ries calls “the living dead”—companies that are “still expending energy but not really making progress, always hoping the next new feature will cause traction to magically materialize.” But if you change things too often or too much, you’re in danger of turning into “the compulsive jumper”—“never picking a single direction long enough to find out if there’s anything there.”

So, don’t be afraid to take the leap, but look before you do it. Below a few ideas, gleaned mostly from startup gurus like Ries and Steve Blank (one of our speakers today), that can help you land safely. At today’s event, you’ll hear more ideas, directly from the startup veterans who’ve tried them.

• Really, truly get to know your customers and their needs, and be honest with yourself about whether your product as currently configured is really meeting those needs.

• If it isn’t, ask whether your existing product might solve similar problems for a different set of customers.

• Or ask whether you might be good at solving a slightly different problem for the same customers.

• Be unafraid to throw out the work you’ve already done, however beautiful it is. But in the process, take advantage of what you’ve built or learned so far (e.g. why customers didn’t like your old idea). A pivot isn’t starting over, it’s recognizing that the next step is possible only because of what you’ve learned from previous steps.

• Don’t change the value proposition or the fundamental features of your product first. That’s really traumatic and should only be a last resort. Try changing other stuff (revenue model, pricing, customer segment) first.

• Test out new ideas as quickly and cheaply as possible. If you can prototype and test your product using Post-It Notes, do that. As Caroline O’Connor and Perry Klebahn have noted, “An early pivot is exponentially cheaper than a late one.”

• Be honest with yourself. Has your product attracted passionate fans? If not, it’s probably time to pivot.

I’ll leave you with an extended quote from the Eric Ries essay that started the whole pivot meme, back in 2009. It’s important because it reminds us that a successful pivot is about continuity as much as disruption; it’s an experiment guided by vision and learning.

“Successful startups change directions but stay grounded in what they’ve learned. They keep one foot in the past and place one foot in a new possible future. Over time, this pivoting may lead them far afield from their original vision, but if you look carefully, you’ll be able to detect common threads that link each iteration. By contrast, many unsuccessful startups simply jump outright from one vision to something completely different. These jumps are extremely risky, because they don’t leverage the validated learning about customers that came before.”

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

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