Guide to Startup Pivoting

Thoughtful businessman at laptop.

As an entrepreneur, building a company from the ground up comes with a certain amount of risk, and startup pivoting is something you will likely experience. Many incredibly successful companies like Starbucks, Nintendo, YouTube, and more have all had to pivot at some point in order to flourish. Read on for the ultimate guide to pivoting, including business pivot examples, creating a sound business model that supports your pivot, and more.

How to Pivot a Startup

Maybe you’ve identified a particular problem in your current startup and realized a pivot is necessary for the business to succeed in its market. But where to start? Before you overwhelm yourself with too much jargon or well-meaning advice, the following information can help take the stress out of this exciting yet nerve-wracking venture.

What Is a Startup Pivot?

A startup pivot is when a business or entrepreneur has to make fundamental changes to their product or service when it becomes clear that it won’t meet the needs of the market. The main reason for pivoting a startup is so that your business can survive rather than flounder, as well as ensure a proper product-market fit. Now, before you start feeling down, pivoting is not always a bad thing. In fact, it can often be the key to success. Corporate giants like Slack, Groupon, and even Yelp were all once startups that were forced to pivot in order to flourish. 

The other good news is that there is no one right way to pivot, but rather several different ways that can be applied to your current business model in order to best meet its needs. Instead of “starting over from scratch,” think of pivoting as a chance to realign your business goals. The outcome may just surprise you.

Different Types of Pivots 

Eric Ries, Silicon Valley entrepreneur and author of ‘The Lean Startup,’ is somewhat of a startup pivoting specialist and startup expert. He created The Lean Startup methodology, which includes the different types of pivots, as well as various practices on creating a less wasteful business practice and management principles on helping startups succeed

The different types of startup pivots include: 

  1. Zoom-in pivot: This means you “zoom in” to focus on one particular function or offering of your product, rather than multiple things at once. 
  2. Zoom-out pivot: You guessed it — this pivot is the opposite of the one above. Are you thinking too small? Zooming out to provide a bigger picture for your product could be the key to a booming business!
  3. Customer segment pivot: Your product is attracting customers, but maybe not the customers you first intended. This pivot involves repositioning your product to meet the specific segment that’s interested in what you’re selling. 
  4. Customer need pivot: Pivoting to meet customer needs that have arisen rather than the original problem your product was intended to solve. 
  5. Platform pivot: Your product is successful, but perhaps the platform/application you’re selling it on isn’t having the effect you wanted. 
  6. Business architecture pivot: No business model is perfect or set in stone. Startups are all about learning to adapt, and this pivot allows you to do just that. 
  7. Value capture pivot: This refers to the way your startup makes money. If the product offering is strong but the revenue isn’t there, you may want to look into this particular pivot. 
  8. Engine of growth pivot: There are three main growth engines: viral, sticky, or paid growth. Try them all and see what “sticks.” 
  9. Channel pivot: This pivot is another great option for a startup whose product is there, but other aspects of the business seem to be stalling. It requires you to reevaluate the way you’re disseminating your product to your customers. 
  10. Technology pivot: This pivot is used when a startup is able to solve the same problem with their product using a different kind of technology. (And that technology usually makes the startup more competitive.) 

When Your Startup Should Pivot

The next question you need to ask yourself after you’ve familiarized yourself with the types of pivots is, “Does my startup need to pivot?” Oftentimes, this question is abundantly clear. You may have hit a dead end with your capital, or the customers may just not be responding to your product. 

Other signs that your startup should pivot include: 

  • Your startup isn’t financially sustainable 
  • The market is saturated and you’re being outperformed by competitors 
  • The market isn’t responding to your startup 
  • The market is only responding to one portion of your startup
  • Your startup’s progress has suddenly stalled/hit a wall 
  • Your perspective about your product or market has shifted
  • You want to pivot 

Ultimately, you know your business best. It’s possible that only one of these signs or reasons are applicable to your startup, or perhaps it’s a mix. Whatever the reason may be, it’s important to have a plan in place that supports your new business goals in order for your startup to be received more effectively.

What Should Your Startup Do Instead of Pivoting?

Sometimes the need to pivot may not be so obvious. If it’s not, it’s possible that your startup doesn’t need to. You may just have to take a different approach to your existing business model, target audience, or product offering. 

Maybe your product is making money, and customers seem responsive, but you’re just not hitting the numbers you’d like to see. A great place to start is going to the source for customer feedback. What do they like and dislike about your product or solution you’re offering? Can your sales team benefit from having a more streamlined pitch or more networking opportunities? 

Getting that response from internal and external teams can be critical for your business. Not only can it help you realize what holes need to be filled or problem areas that need some attention, it can also help you realize that a pivot is not necessary for your startup. (Before you make a decision about pivoting, try this step first!)

How to Pivot Effectively

You’ve officially decided that your startup does need to pivot. Now it’s time to execute it successfully. The following tips and tools will help you create a winning strategy for your startup, no matter your business needs.

Step 1: Develop a Prototype

Arguably one of the best parts about pivoting is the chance to develop something new from your existing product offerings. Because you’re already in a certain stage of your business, pivoting means you can use the foundation you’ve already built to create a new stepping stone for both you and your customers. 

Developing a prototype allows you to test the functionality of your new product or solution to see how your customers respond to it in real time.

Step 2: Reassess the Market and Strategize Accordingly

The essence of pivoting is all about reassessing and realigning, and knowing the right questions to ask is imperative when it comes to creating a new strategy for your startup. (If you’ve already inquired about what your startup could be doing better from your customers or sales teams, this feedback can be extremely helpful here!)

Some other great questions to ask when reassessing the market include: 

  • How well does our product fit into the current market? Do we need to enter our product into a new market? 
  • What is the potential size of the market? Do we anticipate it growing? Shrinking? 
  • Where have we been successful in the current market? Unsuccessful? 
  • What are the purchasing habits of the market? 

Step 3: Research New Resources

After you’ve conducted your market research, it’s time to find new resources for your startup — and this doesn’t just mean physical resources like equipment or office space; you may need to research new financial resources for capital, new employees to execute your startup pivot, educational materials from your local small business association, and more. 

Your market research will shed light on the kinds of resources you’re in need of. Having a strong support system in place for your startup will not only make this process easier but will provide you with a great jumping-off point for finding those resources.

Step 4: Track Potential Growth

This will help your startup see what’s working in real time. The factors you’ll want to keep a close eye on are revenue burn rate, customer churn rate, operation efficiency, average rate per customer, and revenue run rate. 

While revenue is the easiest metric of success for your startup, it never hurts to do another round of feedback from your customers, sales team, and even upper management to gauge if you’re on the right track. 

Step 5: Research Competitors

Now that you’ve been in business for a bit, you know who your competitors are and what allows their business solutions to flourish. It may seem counterintuitive, but researching competitors, as well as their successes and shortcomings, can help you better understand how to pivot your startup. 

This may require you to go beyond your typical Google search. Check industry reports, attend a conference, and watch who they’re hiring to get a better sense of what they bring to the market.

Step 6: Communicate With Investors

Transparency with investors is key in executing your startup pivot successfully. Before it’s time to strategize on your new prototype, communicate your intentions to your investors. Not only is it important to communicate why but being able to back up your reasoning for pivoting with research will show your investors that you’ve done your homework and are ready to hit the ground running.

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