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 you’re 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 - it’s 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, “start-ups that pivot at least once or twice raise 2.5x more money and have 3.6x better user growth…”

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

1. Market research is essential before pivoting to ensure you’re addressing real customer needs and market gaps.

2. Set clear goals and a strategic plan when pivoting to keep your business aligned and focused.

3. Communicate transparently with stakeholders to build trust and ensure everyone is on the same page during the pivot.

4. Remain flexible even after pivoting, as further adjustments may be needed based on market feedback.

5. Test your pivot with a pilot version to minimize risk and make necessary adjustments before a full-scale launch.

Let’s start-up!

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

  🔥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, it’s difficult to stand out.

  🔥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 doesn’t meet their long-term needs or expectations. This can happen because of:

  • poor product-market fit

  • user experience issues

  • better options

  🔥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

  🔥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:’

  • if investors are concerned about your growth

  • if advisors continuously suggest changes

  • if you’re struggling to raise more funds

  🔥Listening to these external voices can help you recognize when a pivot is necessary before it’s 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 don’t 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.

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 didn’t resolve TinyOwl’s 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 couldn’t fully adapt to.

Eventually, Runnr was acquired by Zomato in 2017, marking the end of TinyOwl’s 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 it’s 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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