Pivot: How Changing Direction Can Lead to Success

By | 2016-12-01T19:13:56+00:00 January 26th, 2015|Startup Culture|

What should you do if your startup is in trouble?

Eric Ries, entrepreneur, author and pioneer of the Lean Startup movement, advises a changing direction, a pivot, so that “the failure of the initial idea isn’t the failure of the company.”

Many startups spend lots of time developing a product or service they think people want without ever getting feedback from their aspirational or prospective customer. Lean Startup is about making sure customers want and are willing to pay for a product or service by asking them—and adjusting a business model accordingly. Companies sensing it’s time to pivot may change any of number of different components in their business model in order to find success: a product, customer segment, distribution channel, revenue model, partners, etc.

Some of the most best known companies, including Twitter (started as a podcasting service), YouTube (started as dating service) and Groupon (started as political action site) changed course dramatically to achieve success. Other companies make smaller pivots, but the point is the same: change is an important part of the development of any product or service.

Even established companies can apply these principles. Perhaps if Blockbuster and Borders had done so, they would not have gone the way of the dinosaur. It takes a flexible business model to keep up with a rapidly evolving marketplace.

So where do you start?

Determine what problem you are solving and which metrics you will use to demonstrate cause and effect. Develop a minimal viable product (MVP) to test whether customers want your product or service and are willing to pay for it.

When Ilana Stern showed a paper version—her MVP—of a collaborative shopping experience to help bridesmaids find dresses they all liked and looked good in, people got people excited about Weddington Way. Later, she raised a $2.5 million in a seed round to build out a collaborative shopping website. Weddington Way sold 25,000 dresses in 2013 and matched that in the first half of 2014 alone. Not bad for having opened its doors in 2011. And it was no surprise that she was able to close a $9 million Series A round of venture funding in August of 2014.

Are you sensing it may be time for your company to pivot? Use the Five Whys technique to explore the cause and effect of a particular problem that your business is experiencing. A simple example: Your car won’t start (the problem).

Why? – The battery is dead.
Why? – The alternator is not functioning.
Why? – The alternator belt has broken.
Why? – The alternator belt was well beyond its useful service life and not replaced.
Why? – The vehicle was not maintained according to the recommended service schedule. (fifth why, a root cause)
Your “why” questions will differ depending on your product or service, but by asking five of them, the nature of the problem, as well as its solution, becomes clear. But don’t get frustrated if it takes more than one iteration of questioning to get where you need to be.

Entrepreneurs may need to go down a few rabbit holes before finding the right solution, said Georgianna Oliver of Package Concierge, which provides storage locker solutions for apartments and student housing communities. Her initial solution proved to be unworkable. Even though she had invested money in the idea, she pulled the plug relatively quickly.

Similarly, Dropbox CEO and Founder Drew Houston used Lean Startup to market its file sharing product by asking customers early and often what they really wanted. Using Lean Startup principles, Dropbox went from 100,000 registered users to over 4,000,000 in just 15 months.

Want to learn more about lean startup?

Check out The Lean Startup Series, a group of books curated by Ries and The Lean Startup Wiki. Participate in Lean Startup Meetup Groups, Lean Startup Circle or conference.

Geri Stengel is president of Ventureneer, a marketing research company targeting small business. Geri is a regular Forbes contributor, consultant, Kauffman facilitator and the author of Forget the Glass Ceiling: Building Your Business Without One.