Pivoting for Startups

 Whys and wherefores of Pivoting for Startups is a critical skill?

A startup sets up a business on spotting opportunities in the environment. The customer acquisition process begins. Suddenly, one may discover that the product or service is not getting customer acceptance. The feedback indicates that certain must- have features have to be added. The entrepreneur faces the above moments of truth during interactions with his customers.

The startup entrepreneur’s ability to be agile and react quickly in effecting a change is a critical skill.  Pivoting is adding new features or changing the business model, based on the moments of truth for the  growth of  business.

Customer feedback or market dynamics like technology changes, new competition can all lead to pivots..

Image Source:: stuart miles

Pivoting for Startups- Definition

When used in relation to entrepreneurship, pivot (which generally refers to a shift in strategy) describes the tortured path that most start-ups go through to find the right customer, value proposition, and positioning. 

Pivoting is a strategy for iteratively searching for a repeatable and scalable business model. 

Pivoting for Startups-  Why Pivoting

“Pivoting” is a familiar word in the startup world.  When your first business model isn’t working (and this happens more often than not), the team pivots to plan B.  These are deep breath moments!

“Startups are nimble. Plan A assumptions rarely survive their first interaction with users. Most startups succeed with their version 3 (if lucky).”- nextbigwhat.com

The growth can happen by discovering new uses or new segment of customers.

Market Changes also forces pivoting.

Pivoting for Startups- Global Examples

   Groupon famously pivoted from their original aim to organize social advocacy campaigns and turned into a billion-dollar daily deal site

      Norwegian media group Schibsted made the bold move to offer classifieds online—for free.      Netflix “disrupted itself” in 2011 by shifting its focus from DVD rentals to online streaming.      Grocery retailer Aldi of UK may have disrupted numerous incumbents globally with its low-price model.

      Pinterest-When women shunned shopping app Tote, CEO Ben Silbermann put a pin in it, and created social media’s fastest growing website.

Pivoting for Startups- Indian Examples

Source: Quora / Indian Express

I Snapdeal

Started as a discount coupon service which allowed users to get discount coupons for restaurants, spas, etc.  After a near death experience when they ran out of cash in early 2013 they pivoted to an online marketplace in the current avatar.

II Washing Machine 

An interesting example is of a company selling washing machines in India. A new company struggling to make its numbers suddenly saw an upward trend in rural Haryana, contrary to market dynamics where sales are higher in cities, which have more steady electricity and water supply. When the company sent its marketing executives on the ground, they found local eateries were using the machines to make a local drink "lassi" which involves churning massive amounts of curd, water and sugar together. Happily, the company changed its marketing message, sales and distribution model and branding to cater to this industry.

III Instagram:

The story of Instagram is a great example of successful pivot. Prior to the pivot this service was html5-foursquare-like something. After the pivot they became one of the most popular photo apps ever. 

IV RedBus (was an early pivot) : B2B to B2C

Bus ticketing service,’ redBus’ initial concept was around selling bus booking software to operators. The company totally changed the business model and focused more on consumer segment to gain traction.

Why we think it worked: The bus operators had existing ways of doing things, and no real reason to change. Clearly the pain points at the consumer level were stronger and would prove to eventually drive change in the whole industry.

V Webklipper to WebEngage

 Source; highbeam.com

Started as a WebKlipping system, WebEngage pivoted to a customer engagement tool/feedback service and raised funding from IAN and GTI Capital.

Cofounder, Avlesh shares his candid thoughts behind the decision to pivot:

“Pivoting is one of the most difficult decisions for a company – for two reasons, first the world labels you a failure and second, the world doesn’t believe that you’d be able to make it either with the new product. At Webklipper, we didn’t care about the world. That’s the only difference. We were the first ones to realize that this (annotation) product is not going to make money for us. It needed a far bigger gestation period than we imagined. We needed to pay office bills. Hence the pivot. Simple.”

WebEngage, was our second product idea and worked well. We are the feedback, survey and notification backbone of over 3200 businesses worldwide as of this morning. We have raised money twice. If these stats were not as great, we’d have pivoted again. Simple!

Image source:stuart miles

Pivoting for Startups- Conclusion

Startups pivot all the time. Some are forced to, some are not.

The pivot can also lead to growth in business by discovering new uses or new markets.

The startups which are unable to pivot to change direction fade away. It is not surprising only 10% of the startup businesses survive at the end of the first year.

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