Many companies we know and love started as something completely different and switched gears at some point. For example, the predecessor of PayPal used to focus on building security for handheld devices. This kind of radical course correction is known as a pivot.
Today we’ll explain the meaning of startup pivot and what strategies determine a successful one. Including when and how to pivot a software startup while focusing on companies that have pivoted into explosive growth.
A pivot is a fundamental change in a business strategy. It involves testing a new approach after receiving direct or indirect feedback, and it’s generally dictated by factors beyond a company’s control. The goal of pivoting is to shift the company to a greater level of product-market fit and increase growth.
The term “pivot” is relatively fluid and can cover various processes in companies of different sizes. So, the answer to “what does pivot mean in business?” can refer to a startup pivot as much as it does to an enterprise pivot.
If a startup is growing too slowly, it risks ending up in the valley of death. In that case, the team may spend years working on a product or service, not generating enough revenue for their resilience.
Here are the signs that you might be heading into a death spiral and that it’s time to pivot:
Pivots in startups come in different forms. The type you implement depends on what your business needs to survive and thrive.
You identify a new segment of customers that are expected to pay more for or buy more of your product than your current customer base. This kind of startup pivot process doesn’t imply changing the functionality — the product stays the same but targets a different group.
You intend to stay in the same market segment but alter the functionality of the product or the specifics of the service. Early feedback may indicate that the problem being solved is not very important. Or, the team may find a real customer problem worth solving.
You discover a way to deliver the same solution but with new or different technology. It may also be a redesign of the technology you currently use that is made more marketable and capable of resolving customer problems.
This business model pivot refers to changing the monetization structure. For example, you can transition from offering free versions with an ad-based sales model to a transaction or subscription revenue model. It’s also common for software startups to pivot from the free model with minimal functionality, which doesn’t capture much value for the business.
You notice that the current product delivery channel shows poor effectiveness. In that case, you can pivot to a different channel, adopt a multi-channel sales tactic, or cut the middlemen and their distribution channels, just to give you a few startup business pivot examples in terms of sales.
Zoom in means focusing on a single feature, cutting away everything else. You may need this approach when a feature becomes more useful than the rest of the product.
Zoom out implies adding a stand-alone product into a much larger product as a feature. When a single-feature product isn’t gaining traction, i.e., is insufficient to support a customer set, it may make another product more expansive and profitable.
Let’s move on to the best strategies for pivoting a software startup.
Build a very basic prototype to see if it’s valuable and worth advancing. Even the conversations around the prototype may help you find new ways to enhance the product. So, you’ll get feedback without pouring a lot of resources into development.
This will also help you determine how to pivot your startup in a way that is a perfect fit for your brand and also for the market.
It’s not uncommon for startups to shift their original model response to competition. After all, you want to make your product so much better than the competition ensuring that customers will come to you and will not think of switching.
If your planned pivot will bring up new competitors, see what they are doing right and wrong, how big they are, etc. As a startup, you don’t want to offer the same products and services as successful businesses.
Get started immediately and be ready to redirect your resources.
Many companies pivot more than once. But each time, you still have to do it decisively and act as early as possible. This is, of course, not a recommendation to act in the heat of the moment. But once you decide to pivot, you should trust the data and insight that have led you to this point.
The change may require you to expand your team’s skill set, introduce new technology, and/or outsource. Whatever your internal processes may need — whether it’s big data analysis, a data storage system, cybersecurity software, financial management, etc. — you need to provide it.
A pivot may also require you to expand your workforce to ease the burden on employees wearing multiple hats.
Learning how to pivot a startup business may seem scary. But at the same time, the novelty and the freshness of innovation are what make the magic happen.
Even the most in-depth discovery may confirm the viability of your product at the ideation stage. But markets may shift. So, you should accept the calculated risk you’re taking and be flexible enough to respond to those shifts.
Your vision as a startup is critically important, even in changing markets. The backbone of the startup should not be impacted by trends alone.
When pivoting, it’s important to re-align your goals and objectives with your core mission. In other words, it’s about attributing meaning to the pivot in the context of the purpose behind the business. It helps everyone understand the business — those in charge, the team, and the customers.
Whether you’ve chosen these pivot strategies for your startup or some other approach, keep your investors and other stakeholders in the loop. In fact, it should be brought to their attention even before you begin to strategize for the pivot. Ideally, you should ensure at least a six-month window before the change is supposed to take place.
Changes that have not been discussed might be met with resistance, making pivoting unachievable.
Other companies’ success stories may teach you a lot about how to pivot your startup. For example, they show you that separating yourself and your business from your original idea can spark unprecedented growth.
One of the most successful startup pivot stories is Instagram, which shifted to simplicity. It started as Burbn, which offered check-in, photo-posting, and point-earning, among other functions. The team decided to rebrand, only keeping the posting, comment, and liking features.
Netflix operated as a mail-order DVD service. Over time, it entered the market of downloadable films, evolving to streaming films, and then ventured into producing its own original programming.
Slack has its root in a failed video game venture called Glitch. The platform was so effective in facilitating internal communication that the team grabbed the messaging feature and pivoted to launch Slack.
The last example of famous business pivots for today is Shopify, which used to be an online storefront for selling snowboarding gear. The shop itself didn’t gain much traction, but the founders realized the platform they built had potential for the entire ecommerce market.
If you’re not sure how to pivot your startup business, or if you need any other help with product development, we’re here for you. With us, you will be able to accelerate your startup, access specialized expertise and technologies, and increase your development capacity. We offer not only pivot startup consulting but also strategies for any business opportunity that requires expert technical implementation.
One of the projects we’re proud of is an NFT-based platform, Cloutchain. Will it pivot into a blockchain-based marketplace for fans and creators? We’ll see. But if pivoting is decided to be the best course of action, we’ll provide all the technical assistance necessary for success.
We also have full faith in the quality of our solutions, so much so that we can become your investors and guide the project together to success. This was the case with SWAG, an all-in-one design and mock-up solution for the custom branded apparel market that we have been working with since 2016.
Hopefully, this article serves as a good introduction to “what is pivoting” and how to successfully pivot your startup. If you’re considering making a move, it’s important for you to understand the difference between needing to pivot and needing to fine-tune your startup’s existing business model.
Should you confirm that pivoting is the right option for your startup, make sure to circle back here! There are many ways you can go about pivoting, but why not start with seven strategies that have been effective for so many startups?
How do I pivot at a startup?
It involves changing and redirecting the business strategy. For example, a startup launches a consumer activism site, which eventually morphs into a platform with daily coupon deals — Groupon.
What is a pivot strategy?
A pivot strategy describes a plan of action and guiding principles for testing out a new business approach.
How do you pivot successfully?
Prototype before launching, conduct market analysis, act decisively, expand the team’s skillset, don’t be afraid of change, and make sure the changes align with your business vision — these are some of the most effective strategies for startup businesses.
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