This is a guest post by Alistair Croll, global bestselling author of Lean Analytics from the Lean Startup book series.
The word “pivot” is synonymous with the Lean Startup movement. But since Eric Ries first coined the term to refer to making iterative course corrections based on what you’ve learned from customers, it’s been abused and misused. It’s time to correct some common misperceptions.
Not just for startups
Pivots are critical for organizations of any size. A common criticism of Lean Startup models is that they apply only to early-stage businesses that haven’t yet found their business model. Indeed, the word “startup” means an organization designed to search for a repeatable, sustainable business model in conditions of extreme uncertainty.
But these days, everyone should be a startup. The average lifespan of a company on the S&P 500 used to be over fifty years; today, it’s just over a decade. Most of today’s big companies didn’t exist a few years ago. Consider that Uber has more drivers than taxi firms—but no cars; that AirBnB has more rooms than hotels—but no real estate; that Netflix has more movies than any video store—but no shelf space.
The trick is to realize that while you may not be creating a new company, you need to innovate, and innovating in a vacuum is deadly. General Electric realized this:
“In January 2013, Chip Blankenship, CEO of GE Appliances issued a challenge to the newly formed team: ‘You’re going to change every part the customer sees. You won’t have a lot of money. There will be a very small team. There will be a working product in 3 months. And you will have a production product in 11 or 12 months.’”
GE usually builds a fridge in five years. This way, they built ten versions in two years instead, with much more customer involvement and an organization designed to learn and adapt.
Today, everyone pivots, because agility trumps scale
Random walks
Adopting a “pivot” mentality isn’t an excuse to randomly walk all over a market. As Eric Ries has explained, a pivot is an adjustment, akin to keeping one foot on ground as you rotate gradually. It’s iterative, honing in on the right product for the right market until it just clicks. Pivoting isn’t hopping.
The goal of the Lean model, whether it’s for a new company or an incumbent hoping to revitalize its business, is to learn, then optimize. That means iteration, a lesson Quirky learned the hard way. Quirky was the poster-child for innovation, a dream-team of founders and funders dedicated to launching hundreds of new products a year. But that desire for variety undermined the very real need to iterate on a product, learning each time.
For some people, it’s much more fun to hold court at a meetup proclaiming to all who’ll listen what your latest pivot is. Those are the people who’ll be looking for jobs when the next bubble bursts.
Lazy pivots
A close cousin of the random walk is the lazy pivot. Don’t pivot because you’re bored, or have a vague sense that something isn’t right. You shouldn’t make a change to your product, go-to-market strategy, or target customer unless you can articulate what you’ve learned from the past that is prompting that change. In other words, don’t pivot without knowing why.
Of course, this sounds like work. A corollary of not pivoting without knowing why is that everything you do must produce learnings. That means interviewing customers — and those who didn’t buy what you were selling. It means building experimentation into your product. It means analyzing results using metrics that drive your business plan, rather than meaningless vanity metrics.
Entrepreneurship is a weird mix of a Zen-like “child’s mind” that is open to everything, and stubborn curmudgeonry that perseveres when everyone else has lost faith. Many startups came close to failure, but kept at it and won out. What these companies have in common is that they weren’t just about the ego of the founders, but the belief in a vision that made sense along with a set of reasonable “baby steps” to get there.
Consider Uber:
Today, Uber has drivers around the world, and when a driver applies, they have an in-person interview, training video, vehicle inspection, police and driving record check, and more. That means teams in every city running in-person interviews, which isn’t very scalable.
But when the company started, it focused on cities with a surplus of black “limo car” services. The limo car drivers were already licensed and insured by others. They just weren’t allowed to pick people up on the street; limousine rentals need an agreed-upon rate and destination before they can accept a ride. So the founders rode in limousines and pitched drivers.
Only once they’d amassed a loyal customer following did they introduce the UberX ride-sharing angle and invite the wrath of taxi companies everywhere. Had they begun with this model, they wouldn’t have had the customer support and industry clout to flout local taxi laws and provide their own insurance.
Uber had a vision of disrupting taxi services, and stuck to it. But they also found a series of baby steps that let them unlock the market gradually.
Market/product fit
If you’re creating something, you have a lot of control over the product. It’s your baby; you build, design, and position it. But you have very little control over the fickle whims of the market, which is full of messy things like competitors, subjective opinions, and disgruntled, self-appointed social media experts.
Because of this, most entrepreneurs work on what they can control. They pick a target market, then focus on its needs, and adjust their product accordingly. This is good, wise work. But there are three words in “product-market fit”, and one of them is “market.”
It’s okay to try selling your product to a new market, with new positioning. Melamine foam is a white, spongy substance used to dampen noise in aircraft. But as Procter & Gamble discovered, it also scrubs out stains really well. So they launched the Mr. Clean Magic Eraser. Nearly the same product—with new size and packaging—for an entirely different target market.
That’s an extreme example, but it serves as a reminder: You can iterate on product and market.