Back in 2009 Silicon Valley entrepreneur Eric Ries (@ericries) had coined the term “pivot” for the technique used by tech startups to change the strategic direction of their companies based on what they had learned (see his original post here). The theory goes that by doing you are actually learning something along the way (see my previous post on learning from feedback loops in systems thinking) and that you might find the “something” that you had learned has a better chance of success than your original strategy. The alternative is that at least it will enable you to extend your organization’s runway further out into the future in search of success.
At these pivot points the survival of the organization may hinge on changing course rather than running the risk of ramming the ship into the approaching shoreline based on your current course. Ries had reframed failure as a positive and captured the media’s attention in doing so. He went on to author the book The Lean Startup and there were scores of articles highlighting the importance of the pivot, from VentureBeat, Forbes, and Fast Company.
Fast company recently did a series of blog posts (here is a link to the archived posts) focused on the art of the pivot with plenty of examples including some big names like Twitter, Groupon, and PayPal. Sometimes these startups made a pivot because there was a better opportunity for growth with a new business model but often times it is because they recognize the limitations of their current course and want to avoid complete failure. It is also interesting how by framing the shift as a pivot one is able to soften the mental blow from calling it what it really is… a failure. It makes it much easier for an entrepreneur (or an intrepreneur) to explain that they have pivoted into a new business model rather than admitting that their original strategy failed and they are moving on to a new idea.
In one community in Boulder, Colorado the community of entrepreneurs goes a step further in helping to soften the mental anguish for a colleague when their business fails – they gather together for dinner and attend a “startup wake” where they can all grieve together. This maybe sound a little over the top for some but it points to the emotional discomfort we all feel when we fail and we want to either avoid this feeling altogether or we try to dissipate the effects by sharing our pain with friends. Brad Feld (@bfeld) the managing director at the Foundry Group, a VC group in Boulder, describes it as “the community’s way of showing these young, fragile entrepreneurs that it was okay to fail – that the honor was in trying.”
It is worth noting that the pivot is not just unique to the startup world but happens as well in organizations: large companies, small companies, and even non-profits (keep watching as this will be the topic for a future blog post). To this point, Intuit recently reported that 53% of companies pivoted in the last two years to stay alive (see article).
Food for thought:
- Does the pivot prevent a necessary function of startup lifecycle – failure?
- For every successful startup pivot how many are they that weren’t successful?
- Does the pivot create complexity for original investors? Fail now and maybe I get back some of my original investment but fail tomorrow and I am unlikely to get anything back.
- Are you willing to share any of your pivot stories where you changed directions? Leave a comment.