From the distant nineties to the present day, most people have formed a classic series of associations with the word “startup”: a new company, a unique product, a breakthrough idea, rapid development, a young team or a garage project. For some, these are direct associations with companies like Instagram, Slack, or even Pied Piper.
The classic definition of a startup is generally considered to be the wording of the famous American startupper, the “Godfather of Silicon Valley,” Stephen Blank:
“A startup is a temporary structure that aims to find and implement a scalable business idea.”
So, in fact, a startup is a search for a working business model. Although this definition illustrates the main essence of the concept of “startup,” one important nuance must be pointed out. That is that the search is a process, and this process is not always strategically planned, and the endpoint does not always coincide with the vision that the startupper had at the beginning of the way.
You may or may not be surprised, but most startups that have become famous were first presented as products with completely different goals and functions. This change in product concept in the startup world has been called a “Pivot.”
Pivot is a change in the main course of a startup’s movement in order to test a new vector of development and keep the product viable.
There is an opinion that every startup goes through a Pivot someway. Sometimes this change is barely noticeable, and sometimes it is a drastic turnaround in activity. Ambitious companies always evaluate their market and modify their business model according to the evaluation. And it is precisely such companies that become successful because they understand that the world does not stand still, new technologies emerge and new needs arise. Flexibility is definitely one of the most important words for startups and many companies.
In our example of associations with companies, we did not choose Instagram and Slack by chance. These projects have already become an inseparable part of many people’s lives, and it’s hard to believe that they started out as completely different products.
What do we know about Instagram now?
- A photo-sharing app that gained 25,000 users on launch day, October 6, 2010.
- Today, it is one of the largest social networks with an audience of more than 1.4 billion active users per month;
- The 5th most visited site in the world;
- A platform used by over 80% of users to research services or products and make purchasing decisions.
But it started out as a service called Burbn, a location-based check-in app. It was developed by Kevin Systrom, a graduate of Stanford University.
The platform wasn’t very similar to the Instagram we know today. Inspired by the famous Foursquare at the time, Kevin spent a few months creating an app that allowed him to check in at different places, make plans to spend time with friends, and post photos from meetings.
The pivot of Instagram happened when Kevin’s friend from his university days, Mike Krieger, joined the startup team. Together they reevaluated the app and decided to focus on one thing: photos taken on the phone. After thorough research of popular apps, they turned their attention to Hipstamatic. It gave a lot of features to work with photos (filters in particular), but there was no way to share them. So, Systrom and Krieger decided to create a platform that combined Hipstamatic and Facebook features.
Therefore, they reduced the functionality to the photo, commenting, and liking functions and focused on improving the sharing feature. Well, in time the product we all know very well emerged.
It’s hard to believe that currently, the largest corporate messenger of 169k+ paid customers started out as an online game called Glitch.
In 2009, Stewart Butterfield, one of the co-founders of the photo hosting site Flickr, founded Tiny Speck, which was developing the game Glitch. It was the game’s built-in messaging system that laid the foundation for what later became Slack.
And, if you haven’t heard anything about Pied Piper, then you urgently need to watch Silicon Valley, a great series about the constant transformation of a startup.
When is the best time for Pivot?
There is an opinion that the best time to pivot is when the founder started to think about it. But if specific signals were to be highlighted, they are the following:
- One product feature stands out noticeably. It happens that after the launch of the project, the most popular feature among users was not the one the founders had laid out. In this case, you should redefine the value of the product itself and think about the selection of the main useful functionality and further development.
- The market response has not met expectations or the market is limited. This is probably the most common reason for a dramatic pivot. As people say: hurry up and open, the market will adjust everything. And that’s the truth. No matter how much research is done before a product launch, a lot of things can go wrong after it’s released. It may turn out that the market is not as large as expected or the market response is not as desired.
- Constantly losing to competitors or the competition is just too high. Everyone dreams of getting into the blue ocean, but almost no one succeeds the first time. Usually, success stories are associated with the blue ocean – it is the transformation of a product that could not compete or there were too many competitors.
- A period of stagnation and decline. There are also times when a product reaches its peak. Even if a product is perfect and stands out among competitors, it can reach its peak. Then further growth is simply not possible. This usually intersects with a limited market. Such products can exist in the market for a long time, but sometimes it is worth thinking about additional markets or changing activities. There may be something around one corner that you couldn’t have thought of before.
If you notice any of these red flags, it’s time to start thinking. Here I find it important to remind you that you should reevaluate your product on a regular basis. What does it get you? Well, at a minimum, you’ll always have up-to-date information about the state of the project. And in the context of a Pivot discussion, it will allow you not to miss a good moment for a pivot. The more things you’ve done, the harder it is to make a pivot later.
Don’t linger, because the truth may be somewhere nearby, perhaps even one step back.
The need for a Pivot indicates only that it is time to change something, and as the stories of famous startups show, it is not a failure, but only the next step. Each new attempt provides invaluable experience and brings you closer to a moment of success. Just remember that in the process of reaching one goal, you can discover “America” that you never knew existed before.
Different kinds of Pivot and how to make a pivot without harming the product
As a result of reevaluating your product, you should understand what is the problem and focus on a solution. Depending on the type of problem, there are the following types of pivots:
- Zoom-in pivot – converting one of the product features into a separate product.
- Zoom-out pivot – the original product becomes part of a multi-functional product.
- Customer segment pivot – the reorientation of a product from a predicted segment to one where it actually solves a problem.
- Customer need pivot – changing the main problem that the product needs to solve based on an analysis of user needs.
- Platform pivot – for example, replacing a mobile app with a web version or vice versa.
- Value capture pivot – changing the way you generate revenue (subscriptions, premium rates, advertising integrations, percentage of sales, etc.).
- Business architecture pivot – a startup pivot from a high-margin, low-volume model to a low-margin, high-volume model and vice versa. This roughly corresponds to the switching model between B2B and B2C.
- The engine of growth pivot – a startup pivot to change the way it grows. The possible options are means of viral or paid marketing.
- Channel pivot – a change in the channel of interaction between the product and the user.
- Technology pivot – a change in the technology of the product, while maintaining its functionality and the existing user base.
Since the startup sphere is a new ocean, this list is not canonical. However, it will be helpful to pay attention to these particular nuances. Also, while searching for a problem, don’t forget to highlight your strengths. You don’t have to burn all your bridges. Understanding your strengths will help you focus on things that work and on thoughts about how to develop them.
For a pivot to be successful, highlight the goals of the pivot. Don’t just do a pivot when something goes wrong. You need to analyze what’s working, and what’s not working, and make a thorough plan for the pivot.
Negative consequences of a Pivot are also possible
So, the level of negativity of each situation depends on the perception of everyone, and, as we wrote above, a pivot is not a failure, but a new opportunity. However, there is an objectively probable scenario of the negative consequences a startup may face after a U-turn. It concerns the reaction of investors to the change in vector. Possible reasons for discontent:
- Investors have invested in one product, and it may turn out to be quite different;
- Pivot is the recognition that the project they believed in and invested in has failed;
- And the most important thing – investors do not like pivots because they think that after that there can be a series of new pivots, i.e. the startup will turn into an endless churning of ideas and merging of budgets.
However, like customer objections during sales, these negative reactions can be prepared for in advance. It is important to convey the motivation for the change and illustrate the potential gain with data from research. This proves once again that it is necessary to thoroughly analyze your product in order to make a pivot.
Instead of conclusions, let us leave some simple but valuable advice:
- Don’t be afraid to make mistakes, don’t be scared of change – take risks and implement ideas;
- Don’t set limits, but set yourself a higher bar every time;
- Find your own work-life balance;
- Watch Silicon Valley. 😉
And remember – 1 step is better than 100 intentions.