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How to Pivot Your Startup Successfully | Practical Tips from Global Giants
Explore real-world examples of successful startup pivots, including Twitter and Slack, and gain actionable insights to help your startup navigate the pivot process.
TLDR;
Pivoting, or changing your business model based on feedback and challenges, can boost a startup's chances of success and lead to better funding and growth.
Globally, only 20% of start-ups survive beyond the first 5 years.
The rest 80%? They often fail due to no market need, lack of research, running out of money, pricing issues, or a lack of product-market fit, among other reasons.
If youâre thinking of creating a start-up, it might happen that the end product/service is completely different to the original idea.
This is called a pivot - itâs basically making a fundamental change to your business model, product, target market, or other core aspects of your business in response to market feedback, customer needs, or unforeseen challenges.
This is typically aimed at achieving a better product-market fit, where your product or service more closely aligns with what the market demands.
Essentially, pivoting is about changing your business strategy to keep it on track and growing.
According to a Forbes article, âstart-ups that pivot at least once or twice raise 2.5x more money and have 3.6x better user growthâŠâ
Pivoting often means rethinking what your customers need and adjusting your business to meet those needs better.
For some pivot stories, watch this:
Key Takeaways
Market research is essential before pivoting to ensure youâre addressing real customer needs and market gaps.
Set clear goals and a strategic plan when pivoting to keep your business aligned and focused.
Communicate transparently with stakeholders to build trust and ensure everyone is on the same page during the pivot.
Remain flexible even after pivoting, as further adjustments may be needed based on market feedback.
Test your pivot with a pilot version to minimize risk and make necessary adjustments before a full-scale launch.
Letâs start-up!
Some of our recent stories:
Building a Brand Like Nykaa
(From 60 sales to Rs 602.14 billion)Funding for First-Time Founders
(When and how should you do it?)How Jupiter is Leading Indiaâs Neobank Revolution
(Digital banking for Gen Z and Millennials)
When to Pivot?
Knowing when to pivot is crucial for the survival and growth of a startup.
The decision to pivot should not be taken lightly, as it can make or break your startup. Here are some common signs that it might be time to consider a pivot:
Lack of Market Demand
If your product or service isn't attracting enough customers, it could be because the market doesn't need what you're offering.
This could be because of:
an overestimation of the market size
misunderstanding customer needs
changing market conditions
đ„Here, you have to figure out what the market really needs, either by targeting a different segment, offering a different value proposition, or even creating an entirely new product.
Strong Competition
If your competitors are consistently outperforming you, it might indicate that your current strategy isn't working.
If your product is too similar to others on the market, itâs difficult to stand out.
đ„In such scenarios, a pivot might involve finding a unique selling proposition, exploring a different market segment, or leveraging new technology.
High Customer Churn
Customer churn is when customers stop using your product or service after a short time.
It might mean that though people are initially interested, your product doesnât meet their long-term needs or expectations. This can happen because of:
poor product-market fit
user experience issues
better options
đ„If this is the case, you can gather feedback to understand why customers are leaving to pivot in a direction that improves customer retention.
Revenue Stagnation
Stagnating revenue can mean that your current business model has reached its limits. This situation could arise from:
market saturation with little room for growth
pricing model not optimized for profits
limited product range
đ„Here, a pivot could involve expanding your product line, exploring new revenue models, or entering new markets.
Feedback from Investors and Advisors
These stakeholders often have a broader perspective and can spot issues that you might miss. Signs from their feedback include:â
if investors are concerned about your growth
if advisors continuously suggest changes
if youâre struggling to raise more funds
đ„Listening to these external voices can help you recognize when a pivot is necessary before itâs too late.
If you recognize any of the signs above with your own start-up, it might be time to consider a pivot.
But you should not pivot just because:
you donât want to do the hard work
the trends have changed and you wanna do the cool thing
changing ideas too quick without giving them time to work out.
These are bad pivots and you might get trapped in a loop of suboptimal effort and virtually no good results.
P.S. Here is Mark Cuban on how to pivot your business model:
Examples of Pivots:
Ola Cabs:
Ola Cabs initially focused on fleet management, which was more about managing a fleet of vehicles rather than directly catering to individual consumers.
Recognizing the rapidly growing demand for convenient transportation, the company leveraged the increasing penetration of smartphones and the internet in India to introduce an app-based ride-hailing service.
Because of this Pivot, today Ola stands as one of India's leading ride-hailing companies, competing closely with global giants like Uber.
Ola has expanded its services beyond cabs, including auto-rickshaws and bikes, further strengthening its market presence. These strategies have helped it make a revenue of INR 1988 Cr in FY23.
Slack:
Slack started as Tiny Speck, a gaming company founded by Stewart Butterfield and his team, who were behind the popular photo-sharing service Flickr.
Tiny Speck's focus was on developing a game called Glitch, which aimed to offer a unique, collaborative online gaming experience.
Despite a dedicated community of players, the game struggled to gain mainstream traction and eventually shut down.
After the closure of Glitch, the team at Tiny Speck realized that the internal communication tool they had developed to collaborate on the game could have broader applications.
This tool, initially designed to help team members communicate and share files more effectively, was reimagined as Slack, a messaging platform for workplace communication.
Did you know?
Slack is actually an acronym for âSearchable Log of All Conversation and Knowledge.â
Slack became a game-changer in workplace communication, offering a platform that integrated chat, file sharing, and app integrations in one place.
The pivot proved to be incredibly successful, with Slack becoming one of the leading tools in the team communication space.
In 2021, Slack was acquired by Salesforce for $27.7 billion.
However, pivots can also fail.
TinyOwl:
TinyOwl was launched in 2014 as a food delivery app, focused on connecting customers with local restaurants and quickly gained popularity in major cities like Mumbai and Bengaluru.
Facing stiff competition from players like Zomato and Swiggy, and struggling with operational challenges, the founders shifted their focus from food delivery to logistics by merging with RoadRunnr, a B2B delivery startup.
The new entity, called Runnr, aimed to provide on-demand delivery services for various sectors, not just food.
However, the pivot didnât resolve TinyOwlâs underlying issues.
Runnr struggled to gain a foothold in the crowded logistics space, facing competition from established players like Dunzo and Shadowfax.
Additionally, the transition from a B2C food delivery model to a B2B logistics platform required a different skill set and operational approach, which the team couldnât fully adapt to.
Eventually, Runnr was acquired by Zomato in 2017, marking the end of TinyOwlâs independent journey.
The Pivot Process:
Market Research:
You can start by examining customer needs, analyzing competitors, and spotting gaps in the market that your current model might not be addressing.
Use surveys, interviews, and social media to gather feedback.
What are their pain points? What do they wish your product could do better?Look at your competitors, both direct and indirect.
What are they doing that you aren't? Where are they succeeding, and where are they failing?Identify unmet needs within the market. Are there areas your current competitors are ignoring? Are there any underserved customer segments?
Strategic Planning:
This plan should outline new goals, how resources will be reallocated, and how the business model will change to align with the new direction.
Clearly define what you hope to achieve with the pivot.
Are you aiming for a new customer segment, launching a new product, or entering a new market?Assess your current resources - financial, human, and technological.
Determine what can be reused, what needs to be adjusted, and what must be acquired.Your business model will likely need adjustments to reflect the pivot with changes in your value proposition, revenue streams, or key partnerships.
Execution and Adaptation:
The pivot's success depends largely on how well itâs executed.
Minimizing disruption to your existing operations while introducing changes can be challenging, but it's essential to maintain business continuity during the transition.
Even after the pivot, remaining adaptable is key.
Being too rigid in your new approach can lead to missed opportunities or further difficulties.
Maintain transparent communication with employees, investors, and customers.
Share the reasons behind the pivot, the expected benefits, and how it will be executed.Set up mechanisms to continuously gather feedback during and after the pivot.
This will allow you to make real-time adjustments and ensure the pivot meets its intended goals.Consider starting with a pilot version of the pivot before a full-scale rollout to test assumptions and make necessary adjustments without overcommitting resources.
Recognizing when to pivot and doing it right can be the difference between a startup thriving or just getting by in a tough market.
Pay attention to changes in the market and what your customers need.
Be ready to pivot when needed, and remember that being flexible is often key to a startup's success.
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