Before Pokémon Go became a global sensation, Nintendo was peddling playing cards. Before Howard Schultz put a coffee shop on every corner, Starbucks was a storefront selling coffee beans at Pike Place Market in Seattle. Like their predecessors throughout history, many now-iconic companies have changed trajectories — or pivoted — before achieving success. While relentless pivoting has become part of the startup gospel, new perspectives have started to emerge.
The term “pivot” entered the business lexicon relatively recently, popularized by entrepreneurs Steve Blank and Eric Ries in their blogs and in Ries’ 2011 best-selling book The Lean Startup1. Ries has defined the pivot as “structured course correction,” made after customer feedback invalidates a firm’s business hypothesis2. Unlike a simple iteration, a pivot is a substantive change to one or more components of the business model, such as the customer segment or value proposition.
Darden Professor Saras Sarasvathy, a leading scholar of entrepreneurship, has challenged the conventional wisdom about pivots, and points to the potential dangers of pivot-thinking. “Pivots can be useful,” she has said, “but they can also mask a lot of things. What if you’re completely wrong as to who the customer is? What if the people you’re talking to aren’t really your customers? What if there are customers to whom you’re not talking?”
Expert entrepreneurs whom Sarasvathy has studied “talk to everybody and anybody,” she said. “They don’t assume they know who the customer will be or what the product will be. Instead, they co-create the product with self-selecting stakeholders.”
PIVOTS AREN’T EASY
Although pivots have become commonplace, entrepreneurs should never underestimate their costs. Pivoting out of challenging situations can be similar to shutting down one business and starting a brand-new one.
Take Contraline, a company that launched with a novel “pet contraceptive.” A polymer hydrogel developed at the University of Virginia blocked the flow of sperm in the vas deferens, offering a reversible, nonsurgical alternative to neutering. “Pet owners were interested in the humane aspects of our product,” said co-founder and CEO Kevin Eisenfrats, a graduate of UVA’s School of Engineering and Applied Science.
The idea was promising at first. Eisenfrats and his team won several early-venture competitions at their university and were finalists in the Collegiate Inventors Competition. However, the product had a hard time getting traction. “While speaking to veterinarians, we realized that it would be a niche product requiring significant education,” Eisenfrats recalled. “Neutering pets is deeply rooted in the United States.” It turned out that neutering was also quick and profitable for veterinarians, who had little incentive to change their practices.
So, in 2015, three months after launching, Eisenfrats made a strategic pivot. He leveraged his company’s hydrogel technology and adapted it for a new, much bigger market: people. Today, Contraline is focused on developing the first long-lasting, reversible contraceptive for men. “This time,” said Eisenfrats, “we have buy-in from the necessary stakeholders: Couples are eager to adopt our product, and urologists are excited to perform the procedure.”
Having pivoted, the startup has since attracted more than $6 million in venture funding, catapulting Eisenfrats to the 2018 edition of the prestigious Forbes 30 Under 30 list of disruptive innovators in health care.
For Eisenfrats, pivoting took three months and was neither easy nor painless. “I still remember how difficult it was for me to tell the team that we were completely changing our mission,” Eisenfrats said. “The strategy had to change: our milestones, our regulatory approach, our timeline and how much capital we needed to raise. It’s extremely difficult to develop a first-in-class medical device, but luckily we’ve been able to recruit executives and scientists with experience in bringing these types of devices to market.”
According to Sarasvathy, rapid testing and pivoting work for a lot of Silicon Valley startups, because they can be done relatively cheaply. “You’re writing code,” she said, “and it costs virtually nothing.” Not all ideas, however, can be evaluated in a series of fast, inexpensive experiments. Some concepts require significant upfront expenditures. “To start a coffee shop in Pike Place Market,” said Sarasvathy, “is not as simple as writing code. It requires taking the plunge.”
HOW VENTURES ACTUALLY PIVOT
Findings from a recent study conducted by Siobhan O’Mahony, professor of strategy and innovation at Boston University’s Questrom School of Business and a Fellow of UVA Darden’s Batten Institute for Entrepreneurship and Innovation, shed new light on entrepreneurial pivots3. O’Mahony and her research collaborator, Jacqueline Kirtley, assistant professor of management at Wharton, followed seven early-stage energy and cleantech hardware firms in the Boston-metro area over a one- to three-year period. She found that companies in her study rarely pivoted. The three firms that did pivot made multiple decisions that cumulatively reoriented their strategic direction over time. This finding contradicts the common understanding that what constitutes a pivot is a single choice to “spin on a dime,” as O’Mahony put it, that leads to a “swift change.”4
Pivoting to a new direction based on feedback from the marketplace can certainly help early-stage ventures fine-tune their products and business models. Insights from expert entrepreneurs and those who study them can help, too, but, ultimately, only the founders can know if, when, and how to change their firms’ strategies.
INSIGHTS FROM Saras D. Sarasvathy, Siobhan O’Mahony
WRITTEN BY Gosia Glinska
- 1.Eric Ries, The Lean Startup (New York: Crown Business, 2011), 150.
- 2.Ibid., p. 113.
- 3.Jacqueline Kirtley and Siobhan O’Mahony. “What Is a Pivot? Explaining When and How Entrepreneurial Firms Decide to Make Strategic Change and Pivot,” (September, 2018), Under Review.
Source: Rethinking The Pivot