What does it mean for a business to pivot?
While many business’ response to the pandemic has been about changing processes to accommodate restrictions and adapt to changed customer behaviour, for many organisations this is just rapid evolution.
Pivoting is more than just tweaking a system, it requires a whole shift in business strategy. That can range from a change of product or service to an entirely new target market.
The business post-pivot may be recognisable as its predecessor – perhaps in its systems, the knowledge or connections of its staff or its access to particular resources – but its offering is distinct.
So what are the signs that pivoting might be a good move for your business? And how can you evaluate the opportunity when it knocks?
Businesses pivot for many reasons. Some do it proactively, when they realise the product or service of their original offering serves a different purpose or customer base than when they first started.
Communications platform Slack, for example, began as a way for a game development team to message each other.
The messaging function turned out to be way more successful than the game they were trying to make, so they pivoted.
However, a large number of businesses pivot due to push factors: their product becomes obsolete or they find it hard to differentiate themselves in a competitive market.
Netflix began as a DVD rental service that sent discs through the post. When DVD rental slowed, they successfully pivoted to streaming. Today, it’s clear that a global pandemic has drastically changed the business environment.
For us, it was the global financial crisis in 2008. My co-founder and I had a profitable business called Tied Up, selling ties, cufflinks and men’s accessories in retail locations across Melbourne and Sydney.
Then two things happened: wearing neckties became unfashionable and the GFC recession hit. Suddenly, we had massive overheads from retail leases and barely a trickle in sales.
Then we had two multinationals approach our retail stores about ties for uniforms.
Evaluating an opportunity
It was an opportunity that ended up being the genesis for Good Things, our branded merchandise agency, but it wasn’t a direct leap. Listening to the market was really key here.
The market didn’t want more ties – we had a 90% drop in sales to prove that.
We started evaluating what made the ties attractive to these customers and began to view ties differently, not just as officewear or a fashion accessory, but realising they had a marketing purpose.
When you evaluate an opportunity, find the overlap of your current business, and the potential future business you can see if you did take the opportunity presented.
What do the current and future businesses have in common? This will give you an idea of what you can leverage to make the transition smoother.
In our case, once we viewed ties with a different marketing lens, we saw the opportunity to pivot to branded merchandise, leveraging the clients and supply network we already had to open up this new market.
Also, look at the benefits the opportunity represents from both the proactive and reactive angles. Will this address the issues your business is dealing with?
Are you now providing a more sought-after product or service? Serving a bigger market or better clientele?
For us, branded merchandise broadened our offering compared to ties and changed our market from many public customers to B2B clients who are higher value.
Weighing up risks
Opportunities also have risks and can often be filled with self-doubt and second-guessing yourself.
If you have a reputation or clientele in a particular area, pivoting could mean having to let go of some of what you’ve built and that can fill many business owners with trepidation.
When we moved from Tied Up to Good Things, we left behind the name and reputation of the old business and the retail locations and customers we’d established.
Ultimately, however, the pivot solved a lot of the problems we were having with the business environment and customer sentiment, so we deemed those risks worthwhile.
Another important thing that really helped was forgetting the ‘old normal’ with regard to performance. You can’t compare the height of your previous business to the beginning of your pivoted venture.
It’s easy to remember old targets or numbers and fixate on them but focusing on the ‘new reality’ will help you move forward instead of flogging an old horse.
We found forecasting new business as challenging as it was helpful. The forecasts would include the best, worst, and ‘expected’ scenarios and our actual situation would usually fall in the middle of that range.
If you’re pivoting due to the current pandemic, I’d encourage you to understand the context of the current situation; if you hadn’t pivoted, you may no longer be in business at all.
Pivoting is a way for a business to seize new opportunities in related areas. While there are risks to moving away from your former core business, there are also risks in doing nothing.
Pivoting is also less risky than starting another business from scratch. By carefully evaluating a good pivot opportunity, you can leverage many of the salvageable aspects of your current business to grow a new venture with a brighter future.