Pivots are a common phenomenon in startups that can be made smoother by leveraging qualitative and quantitative best practices.
A pivot in a company is a significant change in direction for a number of reasons including economic conditions, market pull, customer feedback, no growth potential, too much competition, lack of passion, and many others.
Pivots are pervasive in the startups ecosystem and many famous companies have pivoted, including Twitter, YouTube, PayPal, Starbucks, Slack, and many more. I have a close friend whose startup pivoted three times over a period of 12 years, before finally getting acquired.
A pivot can be a stressful rollercoaster ride that can make anyone feel bi-polar due to the highs and lows. However, it’s worse to stick with a non-working business model.
The stress of a pivot can be eased with the help of methodical best practices such as Lean Startup, Design Thinking, minimum viable products (MVP), and Objectives and Key Results (OKRs).
If you are considering a pivot, I hope this post will help smoothen your journey.
I went through a customer segment pivot from a B2C to a B2B model, in my former SaaS startup.
In 2007, I founded an EdTech startup named Big Universe, Inc., a platform with thousands of high quality nonfiction and fiction e-books for young children to read, on desktop and mobile devices. We chased this, free, B2C model for the first two years. In 2009, we introduced a freemium, SaaS, model for a $4.95, monthly recurring subscription.
We immediately began getting inquiries from schools for “quotes” for the full version, so they could fax a purchase order. Fax? POs? Seriously! I had hoped to use an online credit card, automatic recurring billing mechanism. While purchase orders, faxes and paperwork wasn’t my preferred approach, that’s where the market pull was coming from and it is hard to argue with revenues.
Pivots often tend to be a gradual evolution versus one big event.
In 2009, we began building account management features. In 2010, we continued building more enterprise features to support school districts and slowly began phasing out consumer related features, marketing, billing, and so on.
Early 2007 through mid 2011 was an extremely rough period for us but in the end, we prevailed. Eventually, we grew to almost 1,000 schools across 30 countries, serving millions of students and teachers over a 10 year period before getting successfully acquired by a public company.
While pivoting, we applied many of the principles of Lean Startup and Design Thinking. Let’s take a closer look at each.
Lean Startup is about competent entrepreneurship, nimble organizations and achieving speed in managing uncertainty by learning faster, directly from the customers. Its five principles include:
- Entrepreneurs are everywhere
- Entrepreneurship as management
- Validated learning
- Innovation accounting
The gist of the last three points is to learn from customers, test out concepts and measure progress with the right metrics, all in the fastest, methodical, way possible. Imagine that! A logical, common sense, approach that promotes building products, which customers directly tell us they want, versus unproven business plans.
At Big Universe, we worked closely with our school customers to understand their frustrations, test out MVPs, and more, for a quick and constant feedback loop. The goal was to iteratively and incrementally build out a platform that customers valued enough to pay for and renew annually.
It was rewarding and fun learning about customer’s pain points, sometimes at their place of work and other times, remotely via screen sharing and/or video sessions. There’s no greater feeling in your work life than seeing an excited customer because you made their lives a bit easier.
We used the build-measure-learn principle which in my opinion, is where Lean Startup meets Design Thinking.
While Lean Startup takes a broader organizational and entrepreneurship view, Design Thinking is focused on the approach to solving a customer’s needs.
Design Thinking promotes working collaboratively with customers in their environment to understand their pain points and iteratively develop the best solution. It is a flexible approach for practical and creative problem-solving.
Given the flexibility of this approach, there are several variations of Design Thinking but most tend to share these five core steps:
- Empathize with customers by learning about them; e.g. who they are, what their frustrations are, how they work
- Define common user needs, problems, challenges, insights
- Ideate brainstorm your ideas/sketches, etc.
- Prototype top ideas (e.g. mockup/prototype facade)
- Test with real people (e.g. alpha/beta users)
The goal is to build your product, iteratively, incrementally and collaboratively with customers.
As you tell by now, MVPs are a great way to test a hypothesis in the fastest, cheapest and simplest way possible. They can range from simple videos to landing pages to crowdfunding to surveys and more.
For example, a MVP can be a “realistic prototype” as described in the The Design Sprint by GV (spinoff from Google Ventures):
“On Monday, you’ll map out the problem and pick an important place to focus. On Tuesday, you’ll sketch competing solutions on paper. On Wednesday, you’ll make difficult decisions and turn your ideas into a testable hypothesis. On Thursday, you’ll hammer out a high-fidelity prototype. And on Friday, you’ll test it with real live humans…
…we’ve run sprints with companies like Nest, Flatiron Health, and Medium—to help them enter new markets, design new products, develop new features for millions of users, define marketing strategies, and much more”
The goal of an MVP is to start the learning process with the bare minimum possible to test out concepts, as fast and resource efficient way possible. It can be refined with customer feedback along each stage and using lessons learned to continually optimize the development (and learning) process.
In my opinion, It is always better to invest time and effort in building a product over business plans that can’t compensate for collaboratively partnering with customers to solve their problems.
OKRs can also be a great way to measure MVPs, as recommended by both, Lean and Design. Using data to determine the path forward is always a recommended option. For example, these metrics could be used to determine what’s working: surveys, reviews/ratings, new customer sign ups, better NPS score, CPA, matching competitor features, and so on.
Bringing It All Together
Pivots are sometimes necessary because the original idea just didn’t have enough of a market need to build a sustainable business around. This is often because there wasn’t enough understanding of customer pain points during product design and development.
A pivot can be stressful, expensive, costly, and painful but it can be eased with the help of best practices.
Doing it methodically by using Lean Startup for the overall organization and entrepreneurship aspects, Design Thinking for the design process, MVP thinking in general, and OKRs to measure progress, you can have a winning combination.
Many entrepreneurs wait too long to pivot. If a pivot is unavoidable, have a pivot meeting to kick things off and decide how much time you want to invest pivoting your startup. Depending on how fast you need to pivot. It could range from a couple of dedicated hours a day to a dedicated week to an overnight do-or-die pivot.
Remember to stay grounded to what you learn, use the best practices we covered above and be frugal. Of course, don’t forget to apply your unique creativity to deliver an amazing user experience that helps differentiate you from your competitors (you need substance first but style is equally important).
Once you know what’s beginning to work, you can formulate a more formal product vision and strategy in your new and existing direction.