Pivoting: Changing the Direction of Business

Have you heard of pivoting?

In challenging times like these, during the COVID-19 pandemic, many companies are being forced to go in a new direction to survive. That is, they are facing the challenge of redesigning their business model.

The term “pivoting,” which has been incorporated into the jargon of startups, has spread to other business segments.

Pivoting is nothing more than changing business models or areas of activity, and it becomes even more important in times of crisis and rupture.

The term “pivot” was introduced by Eric Ries in the 2011 publication of his book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. The author was well known for his excellent developmental work with startups, in particular in high-tech ventures. He developed a management method that became known as “Lean Startup.”

The expression can be understood by observing the movement performed by the pivot player (also known as the forward or “topman”) in futsal: on receiving a pass, s/he spins. In basketball, most of a team’s offensive plays flow through the center, who acts as the pivot. Proof of this is that most leading scorers in NBA history played center. The pick and roll, or ball screen, is a play in which a player—often the center—sets a screen (the “pick”) so that the ballhandler—often the point guard—can penetrate the defense; if the screened defender chooses to guard the ballhandler, the screener pivots (“rolls”) toward the basket and is open for the pass.

Now that you and I are basketball experts, let’s get back to the business environment.

Changing strategy midway is not uncommon for companies—quite the opposite. Pivoting is, then, a change of direction in the product, in the segment served, or in any aspect of strategy.

The term comes from the 12th century Old French noun designating a “hinge pin” and was loaned to English for today’s verb, meaning to rotate on an exact spot, or make a sudden, swift change in strategy or business direction.

While pivoting in the world of startups usually means switching to a new strategy, it may mean changing the entire company. More often, a company has one major problem that needs to be solved, requiring a single aspect of the company be changed. According to Ries, some of the strategic actions pivoting can involve are:

. transforming what was once part of a product / service into the entire product / service

. the opposite of the above: transforming the whole product / service into a functionality or part of something new that will supply a market need

. customizing a product to the target audience

. focusing on a different segment of customers, positioning the company in a new market or niche

. adapting a product to the real needs of the customer

. modifying a platform: what was designed as a website, for example, may work better as an app for mobile devices

. redirecting what was thought of as a B2B business, i.e., for other companies, to end consumers, or vice versa

. modifying the income capture or monetization system of the business

. identifying alternatives for promoting a product: a product that was seen as something viral, spreading spontaneously to consumers, now needs another marketing strategy, such as targeted advertisements

. redesigning product distribution logistics or service delivery channels

. identifying a new technology that will make the business more competitive: employing new technology to develop a product, reduce manufacturing costs, or increase product reliability

Of course, pivoting can be done more easily by companies in the hi-tech segment because assets are largely intangible, costs are low, and the market changes very quickly. Therefore, it is easier to readapt a startup to a scalable model. However, other types and segments of companies can also pivot.

Think of pivoting not as giving up on one project to start another. When a project is abandoned, only the experience and lessons learned remain. With a pivot you get those AND you retool assets that you previously developed for use in the new strategy.

 

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