Navigating Change: The Art and Science of Pivoting in Business

Learn how to embrace change for business growth and resilience

Pivoting is a natural part of a company's growth.

It impacts startups that are in the search for product-market fit. However, well-established companies sometimes face circumstances that demand significant changes for survival.

Pivoting is a shift in the strategic direction of a business or a product, usually due to market, competitive or technology changes or shortcomings in the original strategy.

Pivoting isn't negative; it doesn't signal failure. It reflects a company's awareness and courage to change direction when necessary.

But the key is knowing when and how to pivot.

Done correctly, it can save a company and accelerate growth. But if mishandled, it can be a reason for a big failure.

The Need to Pivot Across the Product Lifecycle

Every product undergoes a lifecycle that typically follows a trajectory like this.

In the initial phase, the focus is discovering the product-market fit. Once that fit is established, the product transitions into a growth phase, followed by a maturity phase where a substantial market share is achieved. At some point in the lifecycle, the product may encounter a decline phase, prompting either a significant pivot or, in some instances, a product discontinuation.

Early Product Stage: Big pivots due to lack of experimentation

In the initial phases of a product, especially with startups, uncertainties are a given. Finding the product-market fit involves a series of tests, experiments, and adaptation. Pivoting is not just common but also necessary during this early stage.

This phase is all about experimentation. Once a goal is set as a hypothesis, it requires validation by implementing a few simple tests. If, after several repetitions, the approach doesn't yield the desired outcome, a pivot—a shift in direction—becomes a viable option.

Pivoting, when backed by data, seamlessly integrates into this journey. When integrated into a system of experimentation and validation, the pivots are small, ensuring a smoother trajectory in the right direction.

The issue arises when proper validation is lacking. This can lead to a significant gap between the product built and market needs. In such a scenario, changing course becomes costly, and a substantial amount of effort may be wasted because of persisting in the wrong direction for an extended period. Even more, recognising the need for a pivot later, without sufficient data, can be disorienting, leaving you uncertain about the direction to take.

Mature Stage: Big pivots due to lack of innovation

When a product enters the maturity stage, product market-fit is achieved, operations are more streamlined, and companies can reap the benefits with reduced efforts. However, a common pitfall at this stage is complacency— relaxing their focus and attention on the product and becoming unaware of potential risks.

But attaining product-market fit is an ongoing process. Market dynamics, user behaviour, competition, and technological advancements constantly evolve, sometimes much faster than expected.

Without sustained learning and innovation over time, companies may discover their product has become outdated, creating a substantial gap between their offering and market needs. The longer a product remains inert and stable, the more profound the challenges of transformation become. The consequence - the need for a significant pivot, which, with a mature product, entails substantial investment and high risk.

In recent years, numerous well-established brands that operated more traditionally encountered significant challenges due to technological advancements. They faced the need to undertake substantial digitalisation initiatives and modernisation of their technology portfolio. This shift was not easy, but necessary for them to survive.

Unpredictable need to pivot can happen at any time

Despite continuous validation and innovation, any company could still face the risk of substantial unforeseen shifts.

The COVID-19 pandemic is one great example. The impact on companies like travel agencies and sports clubs was huge; they faced the need for rapid adaptation.

Some companies leveraged this as an opportunity for accelerated innovation as a survival strategy, later enjoying long-term benefits. For example, some sports clubs quickly embraced the trend of digitising sports exercises, giving them a significant advantage even after the pandemic-related restrictions were lifted. But others who were not agile or hesitant to make bigger shifts were forced to shut down.

Sometimes, the unforeseen shifts from outside are so significant that a product cannot survive. The decline stage is a natural part of a product journey.

How to Stay Alert and Ready for Pivoting

Pivoting is an inevitable aspect of almost any company's journey. The best strategy is, therefore, to be prepared for necessary shifts.

1. Culture of Experimentation: The success of a pivot largely relies on people feeling confident about embracing change. That's why having a culture of experimentation is crucial. Companies that excel in experimentation have created a system that welcomes new ideas. They encourage employees to regularly try out and validate ideas, approving those that prove successful. In a culture where experimentation is the norm, people become more open to and accepting of changes.

2. Transparency: Leadership decisions, even when supported by data, should prioritise transparency. When a culture openly communicates the reasons behind a pivot, new decisions are much more welcomed. Transparency helps minimise hesitation and promotes the smoother acceptance of decisions.

3. Lean Mindset: Adopting a lean mindset is another factor that decreases the risk of costly pivots. When dealing with a large, complex product, pivoting becomes riskier, and the potential losses in investments become higher. This is particularly crucial for early startups, where the direction to achieving product-market fit is still unclear. A lean mindset is indispensable in this scenario. It involves investing only in essential, validated product features. Following Eric Ries' advice (the author of The Lean Startup): List down the features deemed necessary for your MVP, then cut the list in half, and once more in half.

Most people’s natural idea of what is necessary is significantly wrong. People are naturally off by usually one or two orders of magnitude. - Eric Ries

Agile Mindset: Consider embedding agility across every aspect of the product organisation. For instance, opt for adaptable product roadmaps. Assemble teams with diverse skills to enhance flexibility. On a technical front, incorporating modularity and maintaining code quality is an example of facilitating adaptability. Or establishing lean processes without excessive documentation. When making decisions, consider scenarios that may require change.

Continuous Learning and Innovation: Companies should continuously learn, stay sharp with market and competitive intelligence, and keep an eye on new technological innovations. Regularly assess whether your product aligns with market needs. Evaluate if new technologies could be accelerators or may pose a risk to your product. Encourage your team to adopt a learning-oriented approach by occasionally tackling challenging tasks to stay sharp. Prolonged comfort in the status quo can foster hesitancy towards change.

Key Principles for Successful Pivoting

One great definition of pivoting, as articulated by Ben Yoskovitz, is:

"A pivot is a shift in one aspect of the product focus, based on validated learning."

There are two great principles we can draw from Ben’s definition:

1. Pivoting is a shift in one aspect of the product focus: It entails changing a specific element of the product focus—whether it's the product itself, the target market, or the business model. Simultaneously altering all aspects is not a pivot but a complete restart, erasing valuable accumulated learning.

2. Pivoting is based on validated learning: Pivoting must be supported by validated learning. Deciding to pivot without data poses a considerable risk. Relying solely on intuition or following your competitors is insufficient. Consider pivoting only when data confirms that the current direction needs a change. Even the idea of pivoting is also an assumption. Clearly define this assumption, identify the riskiest hypotheses, and validate them before implementing any substantial change. If the data confirms your intuition, get the team on board and prepare for a change.

The Inspiring Story of Lego

Lego provides an inspiring example of a successful adaptation that has been necessary for its survival for almost a century.

The history of Lego started in 1932 as a Danish carpentry shop producing wooden toys. Surviving multiple challenging periods, Lego made a significant shift, transitioning to plastic material in 1947 and introducing innovative interlocking bricks in 1949. Despite facing challenges, Lego expanded globally and strategically shifted to survive difficult moments.

After almost a century, the company has remained the iconic brand for kids of all ages. What has stayed the same is their mission and vision - to inspire play and creativity, and to develop the builders of tomorrow.

However, they have never stopped innovating and making the changes necessary to stay relevant as the most beloved company for all kids. They align continuously with market trends, such as introducing sets featuring the latest kids' characters. They follow tech trends by introducing digital products or initiating Lego programming for young kids.

Lego's story shows resilience, adaptability, and commitment to their mission.

Final thoughts

Pivoting is a fundamental element in a company's growth journey, influencing businesses at every stage. Rather than something to avoid, it’s better to embrace it and prepare for when it becomes necessary. Establish a culture of experimentation, transparency, adopt a lean and agile mindset, and encourage continuous learning. When this is done effectively, the likelihood of needing a significant pivot is reduced; even if required, you'll be better prepared to manage it seamlessly.