According to research from the Startup Genome report, “startups that pivot once or twice raise 2.5 times more money, have 3.6 times better user growth, and are 52% less likely to scale prematurely than startups that pivot more than two times or not at all.” The coronavirus pandemic is a perfect example of why strategies need to be adaptable in a fast-paced and unpredictable world. COVID-19 aside, the speed of business has exponentially increased given the internet, digital marketing, and technology. What used to take months of planning and discussion, now must be decided and made manifest within weeks or risk being left behind. In the ‘old’ days, a strategic pivot was seen as death or a sign of impending failure. Now, it’s a standard on the pathway to success and an essential business requirement.
What Is A Strategic Pivot
One of my favorite examples of a strategic pivot is Netflix. In the book, That Will Never Work* by Marc Randolph, co-founder and first CEO of Netflix, describes what happened when they found themselves on the verge of bankruptcy. Reed Hastings, one of the Netflix founders, met with Blockbuster to propose a partnership. For those who don’t know or don’t remember, Netflix began by shipping DVD rentals through the mail. Once the member returned a movie, the next one was shipped automatically. There was online content, but they were betting on the home delivery portion of the business to hit big.
Hastings’ proposal was for Netflix to promote Blockbuster online, while Blockbuster promoted Netflix in the store. According to the retelling of the story, Hastings was ‘laughed out of the room’. But instead of giving up, they looked at their problem from a different angle and concluded that the initial premise of sending DVDs through the mail wasn’t a good one. They pivoted to streaming and, eventually, producing original content.
In short, a strategic pivot is a sudden change in direction that can take a mediocre idea and transform it into a model of success. Every pivot doesn’t result in a Netlix’esque level of success. However, if executed correctly, it can pave the way for an organization to turn the ship around, if they’re willing and able to capitalize on change.
When, Why And How To Execute A Successful Pivot
The most important aspect of executing a successful strategic pivot is to know when. If you act too soon or too late, you’ll miss the opportunity. Please don’t confuse this point, a pivot is not an excuse to give up. You may have to work at your idea for years before it takes off.
First, rely on data-driven decisions, not decision-driven data. Emotions are high when you’re getting started. It’s crucial to have metrics and key performance indicators (KPIs) to let you know how you’re doing. Data-driven decisions remove emotion from the equation. When I work with teams, I always start with gaining clarity. Then set goals and track them. Interpret the data; don’t change it to justify your actions (decision-driven data). And never let your systems become so automated or efficient that you aren’t looking at the horizon and taking in new information.
Second, be honest with yourself and l’eggo your ego. Once you have the data, which should include the voice of the customer, employee feedback, and market research, let it wash over you. If the data says your idea is terrible, accept that your idea is terrible. Don’t allow your ego to push you to pursue a losing idea. Introspection is never easy. Look in the mirror and take note of the mistakes and address them before it’s too late.
Third, if you believe you can meet or change the market demand, then pivot. Meaning, Netflix had everything it needed to change direction. That doesn’t mean it would be easy, but they possessed most of what they needed and could acquire everything else to fill the gaps. They already had a streaming platform, the right mindset, and once they accepted their initial idea was flawed, they could move forward.
Fourth, layout a plan and go for it. Hopefully, you’re plan doesn’t require a reduction in force. If it does, communicate clearly, be transparent, and be human. Don’t spend too much time thinking, instead start executing as soon as possible. The key is to fail early. You may have to pivot again before you lock in on your ideal business model and strategy.
Do You Have What It Takes To Pivot?
There are two things you need to pull off a successful transformation – the right people and the right mindset. Returning to the Netflix example, the founders were so, ahem, annoyed with Blockbuster for passing on the partnership proposition that they made a promise to do whatever it took to turn Netflix around. They looked at the original model and realized they were operating within the confines of the current home movie model. Alternatively, they decided to turn it on its head by streaming content directly to people’s living rooms and mobile devices. In a single pivot, not only did they save their company, they disrupted at least three entire industries – brick and mortar movie rentals, DVD/Blu-ray manufacturing, and production of DVD/Blu-ray players.
The right people were in place because they had grit and were motivated by the word ‘no’. And they were ready to fail. They embraced the suck. Another thing that made them the right people with the right mindset is they weren’t so married to their original idea that they would sink with it. They had no ego about forcing the market to accept their original model. Instead of forcing the market, they changed the market. They studied the trend and realized the internet was where they should double-down.
Other pivots include Apple, whose strategy was predicated primarily on selling personal computers and laptops (Macs). It wasn’t until they were near failure and brought back founder Steve Jobs that their pivot into iPods paved the way to dominate the smartphone market. Twitter was a pivot from a podcast startup. PayPal was originally created to send money between two devices, such as phones and Palm Pilots. Groupon didn’t start as a coupon service, it’s original purpose was to facilitate collective action by people.
Reflecting on Netflix versus Blockbuster, who eventually filed for bankruptcy, what ultimately separates these two companies was the ability to pivot. It wasn’t that Blockbuster didn’t want to jump on the streaming bandwagon, it’s that it acted too late. And its leadership didn’t make room for new information nor was it adaptable to the streaming trend. Social media was in its infancy. Blockbuster made most of its money through late fees, and it was an operational powerhouse. To pivot to streaming media, it would have had to change its model that included ending late fees. But the financial impact of no late fees wouldn’t allow it to transition to online.
It’s a balancing act. The point of a strategic pivot is not to bail when things get hard. You have to put in work to bring ideas to life. But once you realize that the original idea doesn’t suit the market’s desires, a pivot may be in order. If you can identify that point early and expertly execute, you can capitalize on change.
Let me know your thoughts in the comments below and share with your community. My promise is to create content that is inspirational, informational, and implementable. If you’re craving more excellent material on how to gain clarity, set goals, and get things done, subscribe below and follow me at @iamnileharris on Twitter, Instagram, and Facebook.
