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At first blush, the decision whether or not to pivot can seem like a heartbreaking one for any startup founder.
She may have started her business with a golden idea only to realize, some months or even years down the road, that the only way to stay afloat is to make a major change. This pivot could save the startup—or not. She may find that she pivots the fledgling company into far more innovative territory than her original roadmap every planned for. Or, the pivot could leave her customers in the lurch and find her embarking on a new plan that alienates her core audience.
A startup founder’s most important job is not simply running the company. Instead, her most vital contribution to her company is her ability to learn and make changes—or not—based on the information she acquires. In the case of a pivot, timing is everything. A founder who fails to listen and learn from her startup’s current status will find herself unable to know when she’s making a reactionary and unnecessary pivot and when she’s stayed too long on the same course without making a needed change. In some ways, this process of evaluating whether or not to pivot never ends. As long as a company has some financial runway, the founders may choose to pivot when growth demands a change—even when the company is already successful. It is only once the money has run out that a pivot is no longer on the table.
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3 Examples of a Successful Business Pivot
- Starbucks – Many of today’s most successful brands are in existence thanks to a necessary pivot at some point in the past. Take Starbucks, for example. It may be hard to imagine but when the now ubiquitous coffee chain was founded in 1971 in Seattle, it did not sell cups of coffee—or Frappuccinos, for that matter—to caffeine-craving customers. Instead, the company was a retailer of espresso beans and coffee equipment. The only brewed coffee a customer could be lucky enough to enjoy there at that time would be, perhaps, a free sample. But after the company was sold to now CEO Howard Schultz in 1987, it was time for Starbucks to start brewing up a major pivot and a whole lot of coffee. With Schultz’s vision, Starbucks pivoted to become a coffeehouse and not just a retailer of supplies.
- Twitter – A more recent example of a successful company making a much-needed pivot comes from Twitter. In 2005, Odeo, a podcasting creation, and aggregation platform launched. But by the end of the year, Apple’s iTunes rendered Odeo obsolete and irrelevant, leaving the founders in a hurry to find a pivot. They engaged Odeo employee Jack Dorsey in a brainstorming session that led to Dorsey’s pitch for a social networking or microblogging platform based on text messages. Initially, the value of Twitter was so unclear that the investors of Odeo agreed to let the company’s founders buy back their shares, not believing this new pivot would be the right future for the company. Ultimately, they were wrong and today, Twitter is worth around $10 billion.
- Nintendo – Nintendo is a company that has repeatedly demonstrated that one pivot alone is not going to guarantee long-term success. Even as Nintendo made national news this week for its insanely popular launch of the Pokémon Go app, few gamers are aware that the company dates back to 1889 as a playing card manufacturer. Over the many decades since, the company has pivoted to becoming a taxi service and even a seedy motel chain before finding its footing in the toy industry by the 1960s. It was not until the mid-1970s, nearly a century after its founding, that Nintendo finally entered the video gaming industry which it is known for today.
But for every successful pivot, there is a company that failed to read the writing on the wall and make a major change.
Blockbuster Video’s descent into obsolescence is a prime example of a company that should have looked ahead. With some foresight, the company should have been able to see that while people would always want to watch movies at home, they would want to do so through the convenience of online, streaming video. Within a few years, Netflix killed Blockbuster and the era of Be Kind, Please Rewind was over.
Also read: Blinded by Success: Why Great Companies Stumble
For a startup founder or any person at the helm of a company, it’s important to recognize when a pivot is needed immediately and when it is best to stay the course. A reactionary pivot can be as dangerous to a company as no pivot at all. Other pivots will change a company’s entire customer base: in these risky cases, it’s best to be sure that such a major change is as close to a sure thing as possible. Smaller pivots that retain a core customer base can be more likely to succeed, such as when Starbucks remained in the coffee business but changed its way of serving customers from by the bean bag, to by the cup. Only by constantly learning and evaluating the company’s growth and market can a startup founder know when it’s time to make a change.