When to pivot? Founders and executives must remain vigilant, adaptable, and open to transforming business models when necessary.
Pivoting is not merely about reacting to failure; it is about recognising shifts in the market, anticipating challenges, and capitalising on new opportunities. But when should leaders pivot, and how should they do it?
In this free to access article let’s explore this in a way that feels less like an overtly dry strategy manual and more like a conversation over coffee. I’ll be drinking a Skinny Cappuccino, in case you’re wondering.
Recognising when to pivot
One of the toughest decisions a leader must make is determining whether to persevere with the current business model or pivot to something new.
Some signals suggest that change is necessary:
1. Market demand is shifting
Businesses exist to serve customers. When those customers’ needs and behaviors evolve, so must the businesses that cater to them. A great example is how Netflix pivoted from DVD rentals to streaming when it became clear that on-demand content would be the future. If your customers are moving in a different direction and your current model no longer meets their needs, it may be time to pivot.
2. Revenue growth has stagnated
Revenue plateaus or declines often indicate that the current model isn’t sustainable. This could stem from increased competition, changes in consumer preferences, or technological advancements that make your offering obsolete. If tweaking your marketing strategy or optimising costs doesn’t move the needle, it might be time for a bigger shift.
3. Customer feedback suggests a Mismatch
Listening to customers is crucial. If you constantly hear, “I love your product, but I wish it did this instead”, or “Your service is great, but it’s not solving my core problem” those are strong indicators that your current model isn’t fully aligned with market needs. Instead of dismissing this feedback, embrace it as a guide for potential change.
4. Competitors are innovating faster
In a rapidly evolving industry, staying ahead is essential. If competitors are consistently outpacing your company in terms of innovation, features, or customer satisfaction, you risk losing relevance. This happened to the fabled BlackBerry phone, which failed to pivot quickly enough when touchscreen smartphones became the standard. Ignoring competitive trends can be fatal.
5. The unit economics no longer make sense
A business might attract customers and even generate revenue, but if the cost of acquiring and serving those customers exceeds their lifetime value, sustainability becomes impossible. A pivot may be required to improve profitability, whether by shifting to a subscription model, automating key processes, or targeting a different customer base.
6. Internal passion and team alignment are lacking
Founders often start businesses with a specific vision in mind. However, over time, they may lose enthusiasm for their original model, or the team may struggle to stay motivated. If leadership and employees are disengaged, productivity and innovation will suffer. Sometimes, a pivot that realigns the company with its core mission and values can reinvigorate the team.
How and when to pivot successfully
Deciding to pivot is one thing, executing it effectively is another. A well-thought-out approach increases the likelihood of success. Think it thorough. Be clear and precise. Decide. No procrastinating.
1. Identify the fundamental strengths of your business
Pivoting doesn’t mean abandoning everything. Instead, it involves leveraging the assets, expertise, and strengths that have already been built. Consider what your company does exceptionally well. Airbnb, for example, started as a platform for renting air mattresses in apartments but quickly pivoted to a full-fledged home-sharing marketplace when they realised their core strength was connecting travellers with unique stays.
If an independent viewpoint is required, the analysis team at Platform Executive can help you identify your key strengths. Reach out to us, to learn more.
2. Define the new direction clearly
A vague pivot is a dangerous pivot. It’s essential to have a clear vision of what the new business model will be. This includes identifying your new target audience, redefining the value proposition, and ensuring the transition aligns with long-term goals.
The clearer the direction, the easier it will be to bring (1) employees; (2) investors; and (3) customers on board. This is effectively a new pitch deck for your own reference.
Keep it simple, execute well.
3. Test everything before you commit fully
Blindly diving into a new model without testing the waters is risky. Before making a full-scale transition, consider running a few small-scale experiments. This could mean launching a pilot product, testing a new pricing strategy, or targeting a niche segment before going all in.
Companies like Instagram, which started as a location-based check-in app called Burbn, pivoted to a photo-sharing platform only after testing and realising where true user engagement lay.
4. Communicate transparently with internal and external stakeholders
Pivots can be unsettling for employees, investors, and even customers. It’s crucial to communicate the reasoning behind the change, what it means for everyone involved, and how the transition will be managed. Employees need reassurance about job security, investors need confidence in future profitability, and customers need clarity on how the shift affects them.
Remember, transparency builds trust and minimises resistance.
5. Align your resources and capabilities with the new model
A pivot often requires a reallocation of resources, whether financial, human, or technological. Some employees may need to be retrained, new talent may need to be hired, and existing technology may need upgrades. Ensuring that the company’s resources align with the new direction is key to a smooth transition.
6. Be prepared for resistance and (numerous) challenges
Change is rarely easy. Some customers may be unhappy, employees may be skeptical, and competitors may attempt to capitalise on the shift. Being mentally and strategically prepared for these challenges is crucial. Founders must be resilient, adaptable, and open to refining their approach as they learn more about how the new model performs.
7. Measure success and adapt further (if needed)
A pivot isn’t a one-time event—it’s an ongoing process. Once the new model is in place, continuously track key performance indicators to assess its effectiveness. If certain aspects aren’t working, don’t hesitate to tweak and refine further.
Elon Musk’s X platform started as a podcast platform called Odeo before pivoting to become Twitter the microblogging platform, and even after the pivot, it continued to evolve based on user behaviour and feedback.
It is worth remembering that pivoting is as much an art as it is a science. It requires intuition, data-driven decision-making, and a willingness to embrace change.
The best founders and executives don’t wait for their businesses to fail before considering a pivot; they proactively assess market dynamics, listen to their customers, and adjust course when necessary. While pivoting comes with risks, failing to pivot when the writing is on the wall can be far riskier.
So, if you’re a business leader questioning whether your current model is still the best path forward, take a step back and assess the signs. If the signals point toward change, approach the pivot methodically, stay resilient through the challenges, and embrace the evolution that could ultimately lead to greater success.
Let me know if you need any further information, or advice on the how and when to pivot. Always happy to help.
