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Pivoting – Successful Through a Radical Change in Strategy

Pivoting is a radical change in strategy that requires a fundamental change in the business model. Pivots can be triggered, for example, by market developments, technological progress or new regulations that influence the company’s own product and the demand for the product. Pivots do not necessarily have to be done out of desperation. Innovative products often reveal new opportunities, for example in the form of markets, target groups or channels. Thus, pivoting can lead to the timely recognition and use of growth opportunities.

Pivoting has probably been around ever since companies were in existence. However, the term was only introduced a few years ago with Eric Ries’ Lean Startup Model and has spread rapidly in the start-up scene ever since. According to the model, pivoting should be carried out regularly and customers should be involved in the development of the business model.

Pivoting is particularly popular with start-ups looking for investors. They are not only expected to be innovative and to have a scalable business model, but also to react agile to change.

Eric Ries defines ten types of pivots:

  • Zoom-in Pivot: A partial product or service of the original product becomes the core product.
  • Zoom-out Pivot: The original product becomes part of the new product.
  • Customer Segment Pivot: The same product is offered to a different target group.
  • Customer Need Pivot: A new product is offered to the same target group.
  • Platform Pivot: The company switches from an application to a platform.
  • Business Architecture Pivot: There is a switch from B2B (high margin and low volume) to B2C (low margin and high volume) or vice versa.
  • Value Capture Pivot: The entire added value of the company is transformed.
  • Engine of Growth Pivot: The growth strategy (e.g. viral or paid growth) is changed.
  • Channel Pivot: The sales and distribution strategy is fundamentally changed.
  • Technology Pivot: The technology is being fundamentally changed.

There are many well-known examples of successful pivoting. Over a hundred years ago, William Wrigley Jr. sold soap and baking powder and used chewing gum as a free gift with his products. When he realized that the free gum was more popular than his core products, he fundamentally changed his business model. Today, the company’s Doublemint, Spearmint and Juicy Fruit brands generate billions in sales with chewing gum.
A recent example of successful pivoting is Instagram. Instagram was originally launched as a check-in platform with gaming components under the name Burbn. When it became clear that the platform was mainly used for photo sharing, the company was realigned, paving the way for today’s success.

Pivoting in Practice

The right timing is the key to a pivot. If it is carried out too early, there is a risk that the current business model will be given too little time to prevail. If you stick to your business model for too long, you lose valuable time and the pivot can come too late. If you look at startups, you can often see both. In some start-ups, the business model is constantly being questioned and changed, making it difficult to build something. In other start-ups, the founders do not want to admit that the original business idea is not fruitful and continue to invest in a company that is not promising.

A pivot should always be well thought-out and ideally based on sound analysis, market research and honestly interpreted insights. It must be ensured that the new business model is more promising than the old model. A useful tool for pivoting is the Business Model Canvas, with which you get a very good overview of the key factors of your business model and can clearly illustrate changes in the environment and their effects.

Furthermore, it is important to question the existing company structure. Under certain circumstances, the skills and working methods of the founding team or the employees may no longer fit the new business model. Transparency and communication play an important role in pivoting, both internally and externally, for example towards investors.

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