Six years ago this Sep. 13, with the publication of The Lean Startup, Eric Ries gave us a vocabulary for talking about efficient, cost-saving business startups and innovation. One of the key terms of the Lean Startup approach is the pivot.
The analogy comes from basketball, Ries has said: “One foot firmly rooted in what we’ve learned, changing one other thing about the business at a time.” He defines the pivot as “a change in strategy without a change in vision.”
It can be surprising to think that YouTube started out as a dating site; Flickr as an online video game. Twitter began as a podcasting directory, and PayPal as digital cybercash on your PDA. Pinterest debuted as a mobile shopping app; Android as an operating system for cameras. And the fastest-growing company in history, Groupon, was designed to organize petitions.
In his chapter “Pivot (or Persevere),” Ries describes 10 types of pivots, providing a framework for founders to understand the creativity that can inform the next step in the evolution of their vision. It’s a moment when testing the hypotheses underlying the endeavor results in the crucial decision whether to completely rethink the strategy or to persevere.
“I have not failed. I’ve just found 10,000 ways that don’t work.”
Here’s a rundown of Ries’s 10 pivot types, illustrated with what we think are inspirational examples.
- Zoom-in Pivot: When Flickr launched, users weren’t as interested in playing the video game as they were in posting videos. Flickr’s pivot zoomed in on the one part of the original product that customers liked and shrank the product down to just that one feature, video.
- Zoom-out Pivot: The opposite of the Zoom-in Pivot, this is when an early product becomes a single feature within a larger product. Yelp’s early iteration was an email system that allowed people to communicate recommendations on local businesses. The email feature was later subsumed into the larger service when Yelp pivoted to become a centralized business-review framework. Other examples of the Zoom-out Pivot include Facebook, which bailed on its Facemash origins in favor of … well, you know. And Chartbeat, which morphed from a provider of on-site chat functions to web-analytics software.
- Customer Segment Pivot: Fab.com, a flash-sale site for designer products was originally conceived as Fabulis, a site intended to help gay men meet people and find things to do. Today their primary customers are women.
- Platform Pivot & Customer Need Pivot: Both of these pivots can be seen in the legendary transition from Odeo to Twitter, as well as in YouTube’s pivot, mentioned above.
- Business Architecture Pivot: There are essentially two distinct business architectures: The complex-systems model describes selling a few high-margin items to relatively few customers (typically large enterprises) per year. Think IBM, Cisco, SAP, Boeing or Tektronix. The volume-operations model relies on many small, low-margin sales to a high volume of customers per year: Dell, Apple, Microsoft, Adobe, Google. The first model typically comprises B2B transactions; the latter, B2C (but not exclusively in either case). The former model relies on building relationships with customers; the latter on systemetizing transactions. It’s probably easier to find examples of companies that add one model to the other rather than companies that entirely pivot from one to the other; for example, Honeywell selling consumer products, or Microsoft selling enterprise solutions at the institutional level.
- Value Capture Pivot: Slideshare, when it took a wrong turn into creating custom channels intended for large businesses, underwent a Value Capture Pivot. Pandora as well: It started as a recommendation service that suggested only artists you might enjoy. Post pivot, it became a fully fledged internet radio station tailored to users’ stylistic tastes. Oh, and YouTube again!
- Engine of Growth Pivot: Ries identifies three engines of growth for businesses: Sticky, Viral, and Paid engines of growth. Sticky products or services retain customers for the long term. Viral growth relies on social interactions. Paid growth funnels profit from existing customers into the means of finding new customers. Indications are that Facebook is seeing a decline in original sharing among users in favor of sharing web content — arguably the “worst thing that could happen” to a social network. The platform’s audience-growth rate has been slowing for years. If these trends continue, might it portend a need to pivot from a viral-growth engine to paid?
- Channel Pivot: Apple Computer has long sold its products through its website and retail stores and through some companies like PC World. But to expand the reach of certain products (notably the iPod), they allowed resellers to carry their products too — in Ries’s words, “A channel pivot is a recognition that the same basic solution could be delivered through a different channel with greater effectiveness.”
- Technology Pivot: Nokia has turned the pivot into an art form. Founded as a pulp mill in 1865, the company soon moved into rubber production (including rubber footwear) and electrical generation. Bringing the two together led them into electrical cable and insulation manufacturing. Before the average American school kid could locate Finland on a map, Nokia had become the world’s largest producer of mobile telephones. Today’s intensely competitive cell phone market eroded Nokia’s dominance while leading it to continue pivoting, entering into satellite technology, networks, virtual reality and more, with no end in sight. No wonder that Nokia has been called called “the Mother of All Pivots.”
You’ll note from YouTube’s example that some companies pivot in more than one way. The options aren’t just a matter of creative imagination but especially of careful testing. How you sort out your particular opportunities as an entrepreneur may call for some mentoring and guidance, something we at tekMountain specialize in providing. One thing we’ll tell you is that speed really matters. As Eric Ries reminds us, “If we can reduce the time between pivots, we can increase the odds of success before we run out of money.”
Let us help you improve the odds of your startup’s success. When you’re ready to realize your startup vision, take a close look at tekMountain, an emerging and important innovation center based in Southeastern North Carolina.