Pivoting as a Strategy

Within the start-up ecosystem, the art of pivoting is legend. Here are a couple of examples that aspiring entrepreneurs often talk about:  

• Instagram pivoted from a location-based check-in app (Burbn) to a photo-sharing platform.
• YouTube was originally designed as a video dating platform before pivoting to general video hosting.

Today, both represent the outcomes of successful entrepreneurial action, including pivoting. Here are two examples. The first is a hypothetical example that demonstrates how a team may pivot based on market data. The second is an example drawing on a real company that summarizes a popular communication tool that grew from a successful pivot.

Example 1: A Mobile App to Track Water Intake 

• Scenario: A group of first-time entrepreneurs want to develop a mobile app to help people track water intake. They target young professionals who want to stay healthy. However, they realize that the most active users are elderly individuals concerned about dehydration.
• Pivot: Instead of continuing to market to young professionals, the team decides to refocus the app’s design and marketing toward older users, adding features like reminder alerts, simplified interfaces, and health tracking integrations.
• Outcome: By listening to user data and adjusting target audience, the team finds a profitable niche to grow their user base significantly.
• Lesson: Pivoting doesn’t always mean changing the product—it can mean finding the right audience or use case for your product.

Example 2: From Glitch to Slack

• Scenario: Slack, now one of the most popular team communication tools, started as part of an online game called "Glitch" developed by Tiny Speck. Despite strong creative efforts, the game failed to gain traction with enough users.
• Pivot: The team noticed that the internal chat tool they built to communicate during game development was incredibly effective. They decided to abandon the game and focus solely on refining and marketing the chat platform.
• Outcome: Slack became one of the most widely used workplace communication tools, eventually acquired by Salesforce for $27.7 billion.
• Lesson: Sometimes, the most valuable product emerges from a side project or internal tool. Recognizing this potential and pivoting accordingly can lead to remarkable success.

Additional Examples

1. Everyone Pivots: The truth about a startup pivot. https://www.startups.com/articles/startup-business-pivot 
2. Eisenmann, T. 2021. Why Startups Fail. Harvard Business Review. May-June 2021. https://hbr.org/2021/05/why-start-ups-fail 

Pivoting, not Fixating

We have defined pivoting as a strategic change in the business model, product, or target market to address issues like low customer adoption, intense competition, or unforeseen market challenges based on feedback, data, or market conditions. With Pivoting, a start-up team recognizes that the original plan is not achieving the desired outcomes and has the courage to adapt. 

This is a difficult choice. There is a lot of prior research that describes how designers often "fixate" on the ideas they generate. The phrase "design fixation" refers to the tendency to stick rigidly to an initial idea, solution, or concept, even when evidence suggests that it is not working. It is a psychological barrier and cognitive bias that prevents entrepreneurs from considering alternative approaches because of: 

• Emotional Attachment: Entrepreneurs often become emotionally invested in their original idea.
• Sunk Cost Fallacy: "We’ve already invested so much time and money; we can’t change now."
• Confirmation Bias: Seeking data that supports the original idea while ignoring contradictory evidence.
• Fear of Failure: A reluctance to admit that the initial direction might not work.

A first-time entrepreneurial team may find it useful to consider the following ways to think about Pivoting: 

• Project vs. Pivot: In a start-up, your goalposts are likely to shift (unlike a project where they have been specified for you). 
• Persist vs. Pivot: In a start-up, you must read the red flags and adapt (instead of persisting with a failing course of action).
• Panic vs. Pivot: In a start-up, if you are running out of time or money, consider pivot (instead of panicking). 
• Pray vs. Pivot: In a start-up, if the data is telling you that things are not working as planned, pivot (instead of praying that it will).

Different Types of Pivots

We have described a pivot as a substantive change to one or more of the nine components in your business model canvas, not just your product or service offering. Here are some specific ways to think about the different ways that a start-up team may consider a pivot:

• Zoom-In Pivot: A single feature of the product becomes the entire product because it provides the most value to customers.
  • Aha moment: One feature of the product is solving a specific problem exceptionally well. Instead of offering multiple features, the team focuses all their efforts on perfecting and scaling that one feature.
  • Example: Burbn was a location-based social app with multiple features, including check-ins, gaming, and photo sharing. After a pivot,  the team noticed users loved the photo-sharing feature the most, so they zoomed in and built Instagram around photo sharing. 
• Zoom-Out Pivot: What was previously the entire product becomes just one feature of a larger offering.
  • Aha moment: The product alone is not enough to meet customer needs. The team expands the product scope by incorporating additional features or services.
  • Example: Originally, Slack was an internal communication tool built for a gaming company. After a pivot, it became a comprehensive workplace communication platform, including chat, file sharing, and integrations with other productivity tools.
• Customer Segment Pivot: The product remains, but the target customer changes to a more profitable/higher demand segment.
  • Aha moment: The product appeals more strongly to a different customer base than initially intended. The team refocuses their marketing and sales efforts on the new customer segment.
  • Example: Initially PayPal was targeted as a digital wallet for consumers on PalmPilot devices. After a pivot, the team found greater success as a payment solution for eBay sellers.
• Customer Need Pivot: The initial problem identified is not as important to customers, a team identifies a new, more pressing problem.
  • Aha moment: The solution being envisioned for the initial problem changes to address a different pain point faced by the same customer segment.
  • Example: YouTube started as a video-based dating platform where users uploaded videos describing themselves. After a pivot, it became a general video-sharing platform because the team noticed a broader user interest.
• Platform Pivot: A shift from one technical platform to another, such as moving from web to mobile or vice versa.
  • Aha Moment: The team realizes their audience prefers a different platform for consuming or interacting with their product.
  • Example: Netflix initially operated as a DVD rental service by mail. After a pivot, it transitioned to an online streaming platform as internet bandwidth and digital content consumption increased.
• Business Architecture Pivot: A shift from/to high-margin, low-volume to/from low-margin, high-volume.
  • Aha moment:  The startup team realizes they are better suited to a different sales model based on customer behavior and revenue dynamics.
  • Example: Nintendo initially sold playing cards and niche toys to a small market. After a pivot, it became a mass-market gaming console company, targeting households worldwide.
• Value Capture Pivot: The way the startup makes money changes—shifting revenue models or monetization strategies.
  • Aha moment: The startup team discovers that their original revenue model isn’t sustainable or scalable. They adopt a new pricing strategy, subscription model, or freemium offering.
  • Example: LinkedIn initially relied on revenues primarily from ads. After a pivot, they introduced premium subscriptions and talent solutions, which became core revenue streams.
• Engine of Growth Pivot: The startup changes its growth strategy focusing on viral (word of mouth)/sticky (retention)/paid (advertising)
  • Aha moment: The company shifts its primary focus to a more effective growth strategy based on insights and analysis from user data.
  • Example: Facebook initially relied heavily on viral growth through friend invitations. After a pivot, they shifted to paid advertising to accelerate user acquisition and monetize effectively.
• Technology Pivot: The underlying technology is changed to improve performance, scalability, or cost-effectiveness.
  • Aha moment: The product remains largely the same, but the technology stack is replaced or upgraded.
  • Example: Twitter was initially built on Ruby on Rails, which struggled with scalability. After a pivot, the platform migrated critical parts of their backend to Java and other technologies to handle their growing user base.

Start with the Pivot mindset

• Acknowledge that your start-up idea and your work include several hypotheses, as yet untested! 
• Convince yourself that you need to make data-driven decisions as part of build-measure-learn iterations.
• Do everything you can to quickly build a proof of concept that will allow you to test your hypotheses.

Notice Red Flags

• Red Flag 1: Customers not excited about your product ⇒ No Product-Market Fit
• Red Flag 2: Customers try your product but don’t stick around  ⇒ High Churn
• Red Flag 3: Competitors, technology, or market needs have shifted ⇒ Changes in the Environment
• Red Flag 4: User growth, retention, or engagement are stagnating  ⇒ Flat or Declining Metrics
  • There may be other red flags you notice. Not all require a pivot. Some might just need you to persist.  

Gather Evidence

• Use customer feedback surveys and interviews to gain more data about the red flags you are starting to notice.
• Gather data with a focus on actionable metrics such as conversion rate, churn rate and others. 
• Do not be overly concerned about vanity metrics such as social media likes or total downloads.
  • Build a solid foundation of evidence from multiple sources, not just gut feelings.

Question Yourself 

• Are we solving a meaningful problem?
• Are we targeting the right customer segment?
• Is our solution delivering the promised value? 

Start Small before Pivoting Big 

• Don’t overhaul everything at once.
• Form a new hypothesis and run small experiments to test the new hypothesis.
• Use A/B testing to compare the old vs. new.
  • Example: Before pivoting to a subscription model, offer it to a small segment of users to see if they adopt it.

Communicate the Decision

• Be transparent with your team (as a well as customers and investors) about why you are pivoting.
• Emphasize the data-driven rationale behind the decision.
• Align your team around the new direction to maintain focus and motivation.

Pivot with Purpose

• Define a clear hypothesis for the pivot. 
• Set measurable success criteria for the pivot.
  • Example: “If we target small businesses instead of enterprises, we’ll increase adoption by 30% in 3 months.”
• Know when NOT to pivot 
  • Have we truly tested our assumptions?
  • Are we misinterpreting temporary setbacks as long-term failure?
  • Is there enough data to support a pivot?

Reflect

• Mindset Shift: "We didn’t fail; we just found another way that didn’t work."
• Embrace Failure as a Learning Tool
• Every failed experiment brings you closer to the right direction.
• Create a culture of resilience where failure is seen as an opportunity to grow.