5 Reasons Why Business Pivots Are Crucial
All businesses start with an idea. It might be a good one or a bad one. However, circumstances might make a business pivot necessary, even with a good one. Changing direction can turn a small company into a big one or save a business from ruin.
They say you should not “change horses in the middle of a stream.” This phrase refers to making significant changes in an ongoing situation.
However, a business is dynamic. Changes are part of the process. Sometimes you might have to go in an entirely new direction from what you planned. A business pivot is crucial for several reasons, which is the subject of this article.
What is a Pivot?
A business pivot is a shift to a new strategy, product, or market. The shift may be to address an issue, problem, or development. In some cases, it might involve changing one aspect of the business. In others, it might entail a transformation of the enterprise.
Entrepreneur Eric Ries first applied the term business pivot or pivot in his book The Lean Startup. He refers to pivots as “course corrections” in a business to accomplish goals. To Ries, a pivot was “making a change in strategy without a change of vision.” He was implying a shift in processes used in the enterprise.
However, that is not always the case. A business pivot means different things to different people. The main point is that a pivot keeps the business fresh and updated. To do that, entrepreneurs must monitor the market. They need to be ready to make changes when necessary.
Why is Market Data important?
Monitoring the market means gathering and analyzing data. Most companies get that from sales, marketing, and customers. For startups, these data types might not be available, so they might have to rely on market research and surveys.
In either case, information can give a clear picture of a product or service’s actual or potential traction and the effectiveness of a marketing strategy. The results will determine whether a business pivot is crucial. How that change or pivot might be will depend on the nature of the business itself.
In some cases, a change in marketing strategy might be all you need. In other cases, a complete revamp of the business might be necessary. Below are some examples of a business pivot involving just one aspect of a business:
- Making one feature of a product the product itself: Instagram started as a location-sharing app, but its photo-sharing feature was so popular that it became the whole product
- Shifting the target market: Starbucks initially targeted people who enjoyed high-quality coffee beans and tea at home in 1971 but shifted to the café-going crowd in 1987
- Going digital for brick-and-mortar businesses: Domino’s Pizza experienced a slump in 2008, so it launched a mobile app in 201B1 to improve sales
When should you consider a Business Pivot?
Seeing the importance of a business pivot is easy from these examples. However, that is in hindsight. To be successful in business, entrepreneurs must have a vision of the future. Most people resist change, and that can be fatal.
That said, a business pivot is not something to be taken lightly. Startups are most likely to pivot because they are essentially in flux anyway. Making changes is just par for the course. However, any business, even startups, should only consider if:
- Progress is too slow
- No progress
- High competition
- Limited traction
- Low market response
- Perspective change
Top Reasons for a Business Pivot
As mentioned above, market forces can make a business pivot crucial. It might seem like an acknowledgment of defeat, but it really isn’t. Given the right reasons, it is critical for business growth and development.
To respond to technological or other world changes
Many people witnessed the highly disruptive digital revolution that swept the world in the 1980s and 1990s with almost frightening speed. Before that, technological changes were relatively slow and predictable.
However, the advent of affordable computers and Internet access had digital technology taking over entire industries and made quite a few established ones obsolete.
Ericsson, for example, is a business founded in 1876 as a telegraph workshop. The company continued to be a pioneer in the telephony industry up to the 1990s with its mobile phones.
However, it failed to compete successfully with other companies with innovations in the mobile phone industry and sold its mobile phone business to Sony in 2012. Ericsson refocused on expanding its telecom infrastructure and is now a leading provider of 4G and 5G networks.
The case of Kodak is an example of the consequences of failing to pivot at the right time. Kodak had been synonymous with photography since 1888. Founded by George Eastman and Henry Strong, the purpose was to sell cameras. However, Kodak refused to take digital photography seriously. It filed for bankruptcy in 2012.
To increase revenue by market expansion
Technological advances have also opened markets for all businesses, big or small. Brick-and-mortar businesses such as bakeries and restaurants can now offer delivery through online apps such as DoorDash or GrubHub.
However, it is not just about distribution. You can also expand to new markets by offering new products and services. Starbucks is an excellent example of this. It initially sold coffee beans, then it started offering coffee, and a new obsession began.
Of course, expanding to new markets is not easy. If you are offering a new product or service, it is also costly. Consider a business pivot for this reason when you have exhausted your current market or you are not getting any traction in it.
The only way to know if a pivot is a good idea is to test the market and do the research. Gather data that will tell you if you should expand to new markets or take a different approach to your current one. Either way, you are taking steps to increase your revenue by pivoting in some form.
To maintain relevance
A business pivot is not just about shifts in the target market or product or services. Sometimes it pertains to the market strategy. Take print ads, for example.
Companies would invest significantly in full-page ads in newspapers or print out glossy brochures for the longest time to create brand awareness. That will not work today.
Very few people buy newspapers, and the prevailing social conscience will eschew paper-based promotional materials.
Instead of helping your brand, going the traditional route is most likely to tarnish it. Staying relevant now means investing in content marketing online through websites, social media, and digital ads.
It would be best if you also tailored your marketing strategy to target appropriate channels. For example, if you are in the IT outsourcing business, placing an ad on Facebook is not likely to get you any traction.
You would be better off uploading informative articles as a thought leader on LinkedIn, where your target audience lives.
That is not to say that you should only use online marketing strategies, however. Participating in conferences, trade shows, and other platforms might also help you sell your brand.
The point is you must monitor the pulse of your target market. Find out where they are, what they think, and what is important to them. When you know these things, you will find out how you can stay relevant.
Address market testing data
Innovation is critical to sustaining a business. While some people think it is bad to mess around with something that already works, look at what happened to Kodak.
The trick to pivoting is to test the market first while introducing new things and gathering the data. That will tell you if you should move forward with it or not. If the market data says you should, then gird up your loins for the pivot.
It will not always be a ride in the park and often entails many risks, but it might just mean long-term business success.
You only need to look at Apple to know that the risks are sometimes worth it. Steve Jobs recognized the potential of Steve Wozniak’s personal computer prototype and sold his van to fund its production.
He pitched it to Byte Shop for a purchase order and put it on the market. The computer, entirely made by hand, was not pretty and only sold 200 units. However, the market data confirmed demand for it, so Apple II was born. The rest, as they say, is history
Evolve the business through a business pivot
Change is inevitable in life as in business. Consumer behavior changes with the times, and you should, too. You can bring new life to your enterprise by pivoting as the market evolves.
A great example of business evolution is Amazon. Taking just one aspect of that massive company will see how pivoting kept it relevant and sustainable.
When former hedge fund executive Jeff Bezos first founded Amazon in 1994, he sold books. He did so because it was an established market, but he always intended it to be more than a retail company. He categorized it as a technology company for online selling.
Segue to Amazon Kindle, and you see books evolved into a digital product. The Kindle was not the first e-reader in the market, but it was the most popular because of its features.
As a result, Amazon continued to improve it. The company released the 10th generation of Kindle in 2019. About 90.5 million e-readers have been sold as of the latest figures, with Kindle owning 72% of that market.
Get Technical Help for a Business Pivot
In many cases, a business pivot requires some type of technological change. It could be as simple as migrating from one web hosting platform to another or as complex as developing software. In either scenario, Full Scale can provide solutions.
We routinely help businesses pivot through our development and digital marketing services.
Full Scale specializes in building IT teams quickly and affordably. We can also assist you in making changes to your marketing, customer service, and sales strategies. Learn how we can help you pivot successfully by getting in touch!