WHEN IS IT TIME TO PIVOT?14 Jan 2016
9 out of every 10 startups fail. One of the biggest reasons for startup failure is failure to change and adapt quickly. These startups hit obstacles in attaining the right product-market fit, scaling, funding, or monetizing, there is always an option to alter their business strategy or pivot to stay afloat.
Deciding when to pivot is tough decision for a business. Consider these questions:
- Have we given the product enough time?
- Does the current business model not work or it is an optimization problem?
- Are there enough funds?
Understand customers, not just statistics
Know that customers actually have to convert. Just impressions are not enough. There is more to this than just understanding statistics, data, and click-through rates. You need to know them well enough to understand what’s important to them, what they care about, and how your product fits into their world. When you know your customers so well enough that you can visualize them using your product, you’ll have an intuitive sense for when it’s time to pivot.
Fail faster, and more often
Failing early and fast is one lesson all startups can take from Silicon Valley successes. The point is to fail as fast and cheap as possible. Getting feedback from your customers before you go to market is cheap and will not cost you a launch. Getting customers to use a prototype ad see how they use it is valuable feedback. An early pivot is exponentially cheaper than a late one.
Here are a few signs that it’s time to PIVOT
- There is more business opportunity when you pivot
If you can identify a significantly bigger opportunity than the one you are currently working on, then you must pivot quickly to capitalize on it. You will still be able to keep the core your product, but also will be able to develop something potentially bigger.
- Customers are willing to pay for other things
If you are unable to engage users enough or feel the market is too small, it’s crucial that you explore all other possibilities in the market place that you can monetize.
- A byproduct or an internal tool has more of a use-case that the current product.
A brilliant example of this is Slack. The company was building a multiplayer game, when they chanced upon one of their photo sharing features, which turned out to be the hugely successful Flickr. The game however did not take off. The second time they decided to build the game, another one of their features caught on with users. This was their internal chat tool. Slack is now one of the most successful companies in the world and is growing at a tremendous pace. If you build some tool or product to enable the core product, and that makes more sense as a product, it is an indication that there is a larger audience if you pivot. Customer feedback at every stage will help you realize there is a bigger market for it than what you are doing currently.
- Revenue is going down
The numbers are an excellent indication of whether you should stick with the current product or not. You will also be able to see if the business is viable. Market validation is crucial in this context.
- Growth has come to a standstill
Your growth stagnating is a very good sign that it is time to consider a pivot. But also if your current competitors growth is also stagnating, then you should take it as a definite indication that your product needs to be pivoted.
How far should the pivot go?
Sometimes start-ups raise so much money that they can take a the easy approach when it comes to pivoting – the new product is completely different from the older one and the only assets you are building on are your existing team and the money reserves you have.
But most startups don’t have that kind of freedom, so they will have to think about the direction that is more or less in line with what they have ben working on otherwise the time and money involved will be too steep to justify it. While consider the limits to which you can take your pivot, besides your team and remaining cash, is there a way you can provide a product to the market that no one else (or very few others) has done yet? Is your pivot going to result in a much more significantly profitable vertical?
Logical reasoning apart, you also have to consider your gut feeling and instincts as an entrepreneur to decide if you must pivot or not, when especially early on in the business, numbers may be misleading.