Pivoting Towards Growth

By John Mardlin

John Mardlin is the director of business development at PMRobot. He’s also the co-founder of TEDxVictoria and the founder of Coin Forest.  John believes that the practice marketing is inseparable from the practice of making creating something worth marketing.

This blog is all about helping you grow your company.  Here, and all over the internet, you can read endlessly about improving the metrics at various stages of your funnel, and opening up new channels for acquiring customers. That stuff is really sexy, because it’s easy to grasp and it presents a never-ending smorgasbord of small tweaks to “double your conversion rate”.

But what if those tweaks aren’t moving the needle?

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” -Warren Buffet

In our case, your vessel is your business model.

If you’re looking for real, rocket ship like growth, your model, your product, has to do a lot of the sales work itself. Did you see an advertisement for Facebook before you signed up? No, because Facebook’s product and its users were all the advertising it needed.

If growing your startup feels more like patching leaks, it’s time to talk about Pivoting.

What is a Pivot

The term was popularized in Eric Ries’ book, “The Lean Startup”, which has become a must read for any entrepreneur or startup employee.

According to Ries a pivot is a:

“Structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.”

I’ll walk you through some of the great pivots of recent years to see what lessons we can glean.

Knowing when to pivot

This might be the hardest part. You might suspect that your idea just isn’t working, but how do you know? And what if the right tweak is just around the corner? A certain kind of stubborn optimism is a prerequisite for any entrepreneurial venture. That same stubbornness can also cause you to keep gunning the engine, in hopes of lift off, even as you near the end of the runway.

“We couldn’t even get our friends to use it… That was the metric that really told us we needed to start over.”

– Bradford Shellhammer, Co-Founder of Fab on their previous app Fabulis.com

Of course, your friends don’t have to be your barometer. In keeping with lean startup methods, avoid emotional decisions and be scientific.

Set your criteria for success, and keep an eye out for repeatedly missed growth milestones.

Don’t throw it all away

The best pivots are the ones that take something from the previous business model. Not necessarily any of your code, or even your existing customers.

At the very least your pivot should be based on some unique insight that you learned in your journey to date. If you’re pivoting based on a generic lesson, like “we need to go after a niche market”, or “the best strategy is to start in the app ecosystem of [insert giant startup x]”, you aren’t taking full advantage of your unique learning.

Early on in it’s life, PayPal was named Confinity, and based on an idea of beaming IOUs between PalmPilots. The company took a winding path to finding the right model for growth, but each pivot was informed by their previous efforts and observations of their customers’ behaviour and never stopped focusing on electronic payments.

“We went from basically 0 in December of 1998 to 1.5 billion dollars in market cap value in 2002. There is all that learning, and evolution, and change, and for me, I don’t think I could have drawn a picture of exactly how that would work because I think we kind of discovered it together as we kind of ran madly into the future.”

-Reid Hoffman, Former Executive Vice President, PayPal

Allow space for new ideas

A founding CEO will often have a talent for generating ideas. The danger is in getting into a pattern of “a pivot a week”, returning from meetings with customers with a brilliant new vision of where to go next.

Even worse, a pivot can be used as an excuse to avoid the challenge of seeing a vision through to success or failure.

Steve Blank, retired serial tech entrepreneur and Stanford University professor of entrepreneurship has helped many young entrepreneurs avoid this problem. He has some great, specific suggestions.

“Sit on your great insights for 72 hours and see if they still seem good after reflection. Better, during that time, brainstorm them with someone you trust. If not your co-founders, someone outside the company.”

-Steve Blank

If you’re like me, by this time in your life you’ve learned to recognize that every shiny new idea will fade somewhat over time. It’s the good ones that stick with you, either until you do them or you see that someone else has. Before upending your team with your brilliant new vision, sleep on it, and see how good it sounds when you’re explaining it to an outsider.

“Your board members are not your brainstorm buddies — find others you trust.”

-Steve Blank

This is one of those things that when you hear it sounds like such common sense… but common sense is uncommon. Don’t go to your board with an idea you’re not mostly sure you want to pursue.. do this more than once and you’ll get a reputation for crying wolf.

Consider different parts of the model to pivot

A pivot doesn’t have to be a new product, it can be a change in any aspect of the business model. In 2008 Groupon was a failing startup, called ThePoint. It looked a lot like kickstarter does today, but the idea was too broad, as founder Andrew Mason told the WSJ:

The big problem with ThePoint is that it’s this huge, abstract idea. You can use this platform to do anything from boycotting a multinational company to getting 20% off a subscription to the Economist”

But in the dying hours of ThePoint, Mason and his team spotted a small piece that was working. That piece was group buying, and that of course gave us what we all know now as Groupon.

“It was largely built on top of The Point. The first version was still not pretty.”

Much of the product was kept, but the target market and the messaging was completely focused down.

Test the new model fast

By the time you find yourself in a pivot, you’re battle hardened and thick skinned. You’re probably also impatient, so this is no time to keep your new idea tucked inside, no time to hunker down and spend months building a complex app. But you know better than that by now.

Here’s where I get to toot Referral SaaSquatch’s horn so that they don’t have to. These guys started out as Yupiq, with the idea of helping brands to encourage sharing their material through social media. And it sounds like it was working to an extent, but not building the rocket ship that the team and their investors were looking for.

You should leave a comment asking CEO Will Fraser to give you the full story in a future post, but I’ll give you the coles notes.

• They recognized that they were moving sideways
• They stepped back, decompressed and considered their options
• They stuck to the idea of building a company around referrals
• They let the need to pivot soak in before jumping to conclusions about where to head next

The unique brilliance about their move was in identifying the two most exciting opportunities around referrals, and pursuing them both at once.

“We had one idea, which was helping e-commerce companies incentivize their customers to make referrals, and a similar idea for SaaS companies. We knew we couldn’t do them both. We split the company into two teams based around each model, and competed to see which team could sell their model, cash in hand, before the end of seven days.”

-Will Fraser, CEO, Referral SaaSquatch

We can see which team won that race.

Even if you don’t put two models head to head, please, prove out that there is some merit to your new model ASAP, to prevent a major pivot 3 months later.

Summary

Pivoting is scary, it means admitting that you were wrong about at least a few aspects of your business model. But rather than continually bailing water, it may well be the best way to capitalize on your most valuable assets: your learning.

Doing it right can put you back on the path, to where tweaking your funnel, and finding new paths for customer acquisition will start working again.