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»Pause and Rethink; Pivot your Startup
Harshdeep Singh Rapal
Groupon, the most popular deals site, was launched in November 2008. Starting with a $1 million seed funding, it quickly reached a billion dollar valuation. But, the company did not start as we see it today. It started as a campaign website called “The Point.”
The Point lets one start a campaign asking people to give money or do something together, but only once a “tipping point” is achieved. Soon, the founders realized that they were not going anywhere with this venture. The idea itself was very vague and did not have a specific market segment or set of customers in mind. But, the founder—Andrew Mason realized, that one of the features of The Point was that it gave ‘bargaining power’ to the group of people. This clicked the idea for his next venture—The Groupon.
The site started by providing coupons for deals on different products and services. To get the vendors agree to the discounts, the Mason team used the 'tipping point' feature of The Point. The founders slowed down on The Point and launched Groupon—and in the process scripting the billion dollar success story.
This is not a one off instance where the original idea did not work as it was expected to. While launching a venture, majority of the times the things do not go as expected. Even if the entrepreneur has a detailed business plan, there are still many factors that he would have missed. There are chances that by the time the venture is launched, the economic conditions change, there are better and cheaper technologies in the market place or the customer demands have changed drastically. With all these factors working against it, the going might get tough for the venture. When the going gets tough, work on course correction or what is called “Pivoting” in the world of start-ups.
Course correction or pivoting is very important not only for the success of the venture but in many cases for the survival as well. Pivoting might in the form of a small change in the price of the product to a change in the features of the product or even to the extent of change the product altogether. In the extreme case, the founders might want to cut the losses, shut shop and go back to the drawing board again and redraw the plans.
If the venture is not working as you expected it to, you might want to pause and have a re-look. Most start-ups have limited amount of money for operations. There are four major ways in which one can try to pivot the startup.
Zoom-In Pivot: Many a times what was earlier considered a single feature of the product can actually become a whole new product in itself. Thus, what was actually a small part of the whole offering takes the center stage and changes the whole dynamics around the offering. This was the case with Flickr. The photo sharing application was a small feature of the massive multi-player online game, Game Neverending, which the team was developing. The photo sharing feature appealed so much that it was developed into a whole new offering—Flickr. The online game was dropped mid way.
Zoom-Out Pivot: Sometimes the product does not sell because there are no supporting services or products around the offering. This situation calls for zooming out and providing the whole package with some other products or services complementing the original offering. Thus what was originally the whole product might become a small part of the bigger offering.
Customer Focus Pivot: The product offered by the venture might be attracting customers but the customer segment might be different from the original vision of the venture. This means, the offering is solving a real problem but the customer segment is different. Thus the offering has to be tweaked/ optimized for the new segment to shift the focus to the new customer segment.
At other times, the customer segment might remain the same, but the needs of the customers change. The product then needs to be changed according to the changed needs of the customers.
Technology Driven Pivot: Sometimes the startup discovers a new way to achieve the same solution by using a completely different technology. This type of pivot is of advantage when the new technology can provide price and/or performance advantage over the existing process.
It is not mandatory for a startup to pivot to become successful. But, if one is facing challenges in the venture, he might think of stopping, pivoting and starting again. Pivoting should not be mistaken for failure of the startup, its reinventing the venture by part or all over again.
Even the startups that do not need to pivot must always keep scrutinizing their operations to check what is working and what is not and why something is working while the other is not. Pivoting works best when done in the early stages of the startup and done fast. The older the business gets the harder and costlier it is to pivot. The whole idea is to enhance the effects of what is working and minimize the effects of what is not.
Harshdeep Singh Rapal is a Managing Consultant with HCL-Axon and works in the IT/Business Strategy and CIO advisory space.