Pivot. We’re all familiar with the word — and many people now roll their eyes when they hear it. The word has been bastardized, overused, and taken out of context. But it doesn’t mean pivots aren’t important. Dont hate the word, hate the people that use it incorrectly and ignore its importance.
Pivot. Say it with me. Pivot. Pivot. Pivot.
Recently, I did a presentation on pivoting: what it means, why it’s important, and how to do it properly. In preparing the presentation, I came up with a definition that speaks to the core of pivoting:
A pivot is a shift in one aspect of your startup’s focus based on validated learning.
(Others of course have defined pivots before this, but this is how I described it.)
I’ve included the presentation as a Slideshare deck. Below that, I’ve shared some additional details on the 6 things you need to pivot successfully.
And yes, I hype the book, Lean Analytics — it’s coming out March 8th, and we’re hoping people will pre-order copies ASAP!
You can do so here: http://leananalyticsbook.com/buy-lean-analytics-book/
On to pivoting. So what do you need to at least try and pivot successfully?
- Big vision. Without a big vision — without knowing where you want to go and why you’re doing things — you simply can’t weave your way there. Without a big vision, you’re weaving (or pivoting!) aimlessly. Lean startup can help you achieve your big vision but it can’t create or define it for you.
- A deep understanding of the problem. Most entrepreneurs I speak with genuinely don’t understand the problem they’re trying to solve whether or not it’s worth solving. They haven’t dug into the problem enough. Or they’re trying to solve a universal truth. If you don’t understand the problems at their core, you can’t figure out how to pivot properly.
- Validated learning. A pivot without actual learning is basically a “lazy pivot”. You’re deciding — on a whim, with no real evidence — that you should go do something else. And usually that lack of learning means you pivot somewhere half-ass, ending up at about the same point in your startup’s progress as you were before (not very far!)
- Actual (falsifiable) hypotheses. Validated learning isn’t enough. You need falsifiable hypotheses that you can test against, otherwise it’s very difficult to know if your pivot is going well or not.
- Metrics and lines in the sand. A big part of Lean Analytics is our discussion of what to track and what to compare yourself against. You need to know your One Metric That Matters and ideally you’ve got a targetin mind. If you miss the target, you re-evaluate; if you hit that target, you have the confidence (and data) to move on to the next step.
- A passion for the pivot. Entrepreneurs live on passion. Without it, you’ll fail, it’s as simple as that. There’s nothing in Lean Startup or Lean Analytics that says you can automatically follow a process and win. You need passion and guts. So even if you have everything else ready to go for your pivot, if you don’t actually care about where you’re pivoting to, it won’t work.
I don’t have a problem with the word pivot. It means something important to me (and to many others) and shouldn’t be taken lightly. And when you see companies successfully pivot, the results are amazing. In the book we have a number of examples of companies that successfully pivoted.
- Backupify started as a B2C company offering consumers cloud-based digital storage. The company realized it was paying $243 to acquire a customer that only paid $39/year. The economics didn’t make sense. Backupify pivoted to providing (essentially) the same service to businesses. The company is now growing successfully, and has a Customer Lifetime Value (CLV) that’s 5-6x its Customer Acquisition Cost (CAC). That’s a fantastic ratio! (Typically in a SaaS business you’ll want to aim for 3x.)
- Parsely also started as a B2C company, providing a reading tool to consumers to help them find content they’d like. It had thousands of users, but not enough revenue. Parsely pivoted to a content suggestion tool for publishers, and then pivoted again to offer publishers analytics tools.
- Circle of Moms was originally called Circle of Friends. By leveraging the Facebook platform back in 2008, it grew its user base to 10 million. Except engagement was terrible. Mike Greenfield (one of the founders) did some exploratory analysis on the company’s data and discovered that moms were incredibly engaged users (in stark contrast to most others.) The company pivoted to focus on moms, and a few years later exited to Sugar, Inc.
Pivots aren’t “get out of startup failure free cards”, far from it. They lead to more intensity, more decisions, more uncertainty, and more hard work. But if you’ve decided it’s not time to quit, but time to pivot then do it properly and go for it.