Captain’s Log, Stardate 10.14.2020
From Lean Startup by Eric Reís,
“[Pivoting] is what makes the companies that follow Lean Startup resilient in the face of mistakes: if we take a wrong turn, we have the tools we need to realize it and the agility to find another path.”
I love this quote because it helps us understand why willingness to pivot is so important. Pivoting is not always easy. It can take time and money to change the direction of your startup, even in small ways. It can also be somewhat ego-bruising realizing that we have to make changes that we didn’t foresee. But though pivoting is not easy, the willingness to pivot is vital to the success of a startup. Why is that?
Your idea might not be the unicorn you think it is
When starting, it’s easy to feel that your idea is the golden egg. The next big thing. But the reality is that rarely is your initial idea, or execution of an idea, what gets permanent traction.
I love this quote Eric Reís makes in his book Lean Startup.
“When I address groups of entrepreneurs at college business plan competitions or other venues, I often talk about their eventual need to pivot. This certainly surprises them, because they usually think their initial idea is perfect. Such conversations lead to blunt reality checks for entrepreneurs who need to reconsider their plans.”
Instagram is a great example of a company that pivoted. The makers of Instagram’s original app was Burbn. It had a lot of features and was too complex, so it didn’t gather much traction. But what they discovered is that people were using the sharing image feature like crazy. And so what did they do? They pivoted. And they pivoted hard.
They built an entirely new app, Instagram. And look at what happened because of it.
The reaction of your customers is not what you anticipated
At first, you might have thought that people would be down to spend money on your product. Now you have a ton of customers, but very few are paying. What do you do? Consider pivoting.
You can look at the few customers who are paying and see what similarities they have. (This is when analytics are so crucial, so make sure you’ve already set that up within your application)
You can ask your customers why they are not choosing to purchase through a survey? Or ask those who are purchasing what made them take that leap?
The point is, once you have that data, you can pivot. Start to focus on the direction the feedback takes you.
A great example of a Startup that did this is Votizon: (this story was taken from ‘The Lean Startup’). Notice what the CEO said about his experience after he received $1.5 million in funding after 4 pivots…
“In 2003 I started a company in roughly the same space as I’m in today. I had roughly the same domain expertise and industry credibility, fresh off the USA.gov success. But back then my company was a total failure (despite consuming significantly greater investment), while now I have a business making money and closing deals. Back then I did the traditional linear product development model, releasing an amazing product (it really was) after 12 months of development, only to that and no one would buy it. This time I produced four versions in twelve weeks and generated my first sale relatively soon after that. And it isn’t just market timing — two other companies that launched in a similar space in 2003 subsequently sold for tens of millions of dollars, and others in 2010 followed a linear model straight to the dead pool.”
Your cost increase with your revenue leading to negative profits
For every startup, there is a cost of growth. The cost of maintaining a startup with 1 million users will be far greater than if you have 1000 users. I know you already know that. But sometimes you have a situation where the amount you make per user is always less than the cost of each user. If that’s the case you may want to consider pivoting.
This is an instance where it’s a big ‘maybe’ though. The answer to this question may be to generate a revenue model. Or you may need to only increase prices. But, if after you’ve put in sufficient effort into increasing revenue and you’re still in the negative — Be willing to pivot.
A word of caution
Don’t pivot unnecessarily. It’s important that you be willing to pivot, not that you do pivot at the first sign of trouble. Sometimes you need to persevere, other times you need to pivot. That’s a decision that you have to make. Try to work through problems, but if you find you can’t fix a large problem on the path you’re on. Pivot.
Be willing to pivot. Sometimes it’s the difference between success and failure for your startup. Why? Because…
1. Your idea might not be the unicorn you think it is
2. The reaction of your customers is not what you anticipated
3. Your cost increase with your revenue leading to negative profits
But don’t be too quick to pivot. At times you need to persevere.