Hard Decisions About Pivoting Your Company: Signals To Look For

Surviving in a consistently evolving commercial sphere is challenging, and pivoting your company can be a powerful strategy. Redefining the company’s core structure is a more practical approach than closing down the business. It’s how you’ll remain relevant and continue delivering value to customers.

Pivoting also indicates agility and adaptability, factors that investors and customers appreciate. At the same time, making drastic changes within the company can involve significant risk-taking and costs. Before making the final decision, you’ll explore the signals indicating the right time to act.

You’ll determine the next strategies to adopt and the direction in which to take the company. To make that happen, you’ll need to do extensive research to understand the expected changes in the market. Next, you’ll align the company’s business model, products, or target audience against expectations.

Eventually, you’ll develop the necessary frameworks for pivoting your company strategically to ensure long-term success and scalability. Do keep in mind that pivoting should be a data-driven decision that you’ll make after weighing different aspects.

Once you have finalized what needs to be done, act quickly and decisively. Hesitating could mean that you lose out to the competition and miss out on a crucial head start. When you research, you’ll learn about several top companies that have successfully redefined their operations. Here’s a quick dive.

Understanding What Pivoting Your Company Means

Pivoting a company in the startup ecosystem involves adopting a revised strategy to adapt to shifting market conditions. These conditions may center on evolving customer preferences, technological advancements, and new products and features breaking into the market.

However, pivoting does not necessarily mean drastically altering the entire company. It can also mean changing one aspect that is likely to become redundant in the near future. Companies operating within any industry typically keep a close eye on emerging trends. Here are the possible changes they adopt:

• Change the product portfolio entirely or focus on a specific product feature to create a new line around it.
• Combining a product into a component or feature of another product.
• Target an entirely different customer demographic, more likely to receive the products well.
• Target a new geographical location with products better suited to that area.
• Source inventory from sustainable sources to comply with green rules and regulations.
• Adopt new operating methods to reduce emissions, which can be crucial to staying afloat.
• Change the revenue model from, for example, freemium to subscription-based to enhance monetization.
• Upgrade the manufacturing facility with innovative technology that can improve product quality while cutting back on expenses. You can relay the cost savings to customers by offering lower prices. At the same time, you’ll balance this with a higher bottom line for the company, thereby securing its competitive branding. Everyone wins.

Case Studies of Successful Pivots

If you’re unsure whether pivoting your company is the right move, check out these successful cases:

• Instagram: This platform was initially a location-based check-in app called Burbn. Ultimately, it pivoted to a photo-sharing app. The founders realized that users were using the app mainly for sharing images, and that’s where they decided to focus.
• PayPal: PayPal was initially designed for handheld devices, such as Palm Pilots, intended for use as a digital wallet and peer-to-peer payment system. Today, it is a digital payment platform that enables customers and businesses to transfer funds quickly and efficiently worldwide.
• Twitter (X): Twitter was initially Odeo, a podcasting platform, but faced tough competition from Apple when it launched iTunes Podcasts. Odeo’s founders reinvented it as Twttr and eventually, to Twitter, the microblogging service.
• Pinterest: Pinterest was initially Tote, a social shopping app. However, its founders realized that users were using the platform to organize and share images. They did a strategic pivot and transformed it into a visual discovery platform.

Yet another interesting pivoting story surrounds PaySimple and its founder, Eric Remer, who recently appeared on the Dealmakers Podcast. PaySimple was originally Apartment Moves, which distributed moving guides to a nationwide English and Spanish-speaking customer demographic.

Its objective was to provide advertisers with access to the transient marketplace, which included 15,000 properties. However, Eric quickly realized that the audience spend was too low, which meant that marketers were unable to get advertisers.

Eric’s solution was to explore the key challenges users faced by conducting interviews and extensive research. He found that users needed streamlined solutions for collecting rent on a monthly or annual basis. Thus, he transitioned into PaySimple, a platform to help service-based businesses.

Using this platform, they could streamline payment collection and customer management. Eventually, it reached over $60M in revenues.

Signals that Indicate It’s Time to Pivot Your Company

Pivoting your company needs to be a strategic and carefully planned move. Before taking action, review not only market conditions but also your company’s current performance and future potential. When you make the decision to restructure, it should be informed by research and feedback.

You’ll connect with customers to understand their needs while aligning them with the company’s agility and ability to adapt. Aside from market research, you’ll conduct a thorough internal analysis to ensure growth and success, but only through stability. Also, organize the necessary funding.

Understand that companies undergo pivots at various stages of their growth. For instance, you might rethink your product ideas at the inception stage. Or, you may choose a different direction after the initial release. Some companies adapt years later as buying trends change.

Competition is Too Tough

Many startups emerge with disruptive ideas that are poised to transform the market entirely. While their ideas are excellent, they also need to scale rapidly to maintain that edge. It’s not unusual for bigger companies and established brands with larger resources to outdo them.

You might notice that another company with more funding and a dedicated customer base has developed a similar product. But with somewhat better features and lower pricing. The competitor may leverage advanced technology and resources to create better products within the same niche.

In this situation, it’s advisable to execute a strategic pivot. You’ll want to redirect the available funds and resources toward a different direction and more viable products.

Slow Response to the MVP

Every savvy entrepreneur should test the market with a minimum viable product (MVP) before diving into full-scale production. Your MVP is a basic version of the product with the rudimentary features, but it is fully functional. Users can deploy it to understand its usability and effectiveness.

If the response is good, you can move forward with investing in a manufacturing facility, equipment, and a team. However, if the response is anything less than that, abandoning the project is advisable. Yes, you can use aggressive PR and marketing to create a buzz for the product.

However, if customers don’t see it as driving adequate value, they are unlikely to place orders when the product is launched. Even if you receive initial orders, they may be a result of introductory offers and discounted pricing strategies. Getting repeat orders could pose a challenge.

Stagnant Company Growth

Take a good, hard look at your company’s performance and growth chart. Do you see a hockey stick line? That means it has traction, sales, revenues, and profits are accelerating well. But, if the graph line is more or less linear, you’ll consider pivoting the company.

Several reasons could contribute to sluggish growth. For instance, saturation of similar products in the market, an unmotivated team, or ineffective marketing. If the numbers are no longer exciting, it’s time to do something different. Revamp your strategies, product design, or bring in fresh talent.

Falling behind the competition consistently is another good reason to explore other options. You may find that the company is struggling to keep up with innovations and evolving product features being released in the market. At this time, you’ll need a drastic change in strategy to secure your leading position.

Rethinking the Problem and Mission Statement

Entrepreneurs start with an exciting concept, a mission they want to accomplish, and a vision. But that vision may not materialize as they imagined. You realize that the problem you identified does not really make sense to build a company around.

Alternatively, there are other lucrative niches that are likely to yield more returns. Pivoting your approach to pursue these channels makes sense before investing resources in a losing proposition. Or, even approaching investors for capital to further develop the concept.

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Lop-sided Traction

Companies typically have a multi-dimensional success strategy with a selection of products in their portfolio. Or, implementing different payment structures to cater to customer needs. That’s how they monetize their operations–by offering customized solutions to keep customers coming back.

However, when a specific aspect is gaining more traction, you’ll consider pivoting the company and focusing on developing it further. For instance, if a specific product is capturing audience interest and generating more orders, you’ll redirect resources accordingly.

You’ll work on enhancing this product with more advanced features, eventually, stopping production of others that aren’t working well. Liquidating the intellectual property (IP) behind other products is another strategic move that involves divesting non-performing assets.

Difficulty in Attracting and Retaining Customers

Customer retention, customer acquisition, and churn rates are among the most reliable indicators of performance. As long as sales are consistently growing and you have repeat orders, the company is progressing well. Further, churn rates should be low, and acquiring new customers should cost less.

However, if your advertising and marketing costs are steadily rising without a complementary increase in sales and revenues, you’ve got a problem. If customers are switching to other brands, that’s a signal that your products no longer deliver value. This is the right time to pivot and regain market leadership.

Negative Feedback from Customers and Employees

What do customers say about your products? What are their experiences with using its features? Keeping a close watch on reviews, social media posts, and interactions is crucial. Dissatisfied customers often trigger a domino effect through negative word-of-mouth exposure.

Don’t overlook the fact that buyers scout around reviews before finalizing their purchases. On your part, you can use the insights to identify the areas where the products fall short. Whether it’s product features, competitive pricing, after-sales service, or any other concern, you’ll take steps to rectify the issues.

Maintain a company culture that encourages employees to offer suggestions and provide feedback freely. Accept their views on how to improve products or lower operations costs, even if it involves a pivot.

Sluggish Cash Flows

Are you struggling to maintain an optimal cash flow? If the incoming cash flow is erratic or slowing down, that’s a signal for pivoting your company. The figures indicate that the business model is no longer effective and the product-market fit is failing.

It’s time to take drastic decisions to reinstate healthy cash flows for the company’s stability. Before you do that, research the market to identify data that suggests an industry-wide downturn or issues specific to your brand.

Significant Market Shifts Resulting from Technological Advancements

Technological innovations can drastically alter how an industry operates, making some products redundant. A good example is the iPhone touchscreen, which quickly overtook BlackBerry’s keypad. The only way to stay relevant is to adopt the innovations and reinvent your company quickly.

Pivoting the company will involve hiring fresh talent that can transform your products to continue serving customers. Be prepared to upgrade your manufacturing capabilities and integrate the tech in the company. Remember that innovations can also focus on operations and increased efficiency.

Any advancements that enhance the customer experience, drive more value, and make products more affordable and better are worth exploring. Also, remain aware of changing trends, such as a growing preference for products made with sustainable materials that have a lower environmental impact.

Or, customer support for companies that operate in accordance with environmental, social, and governance (ESG) regulations.

The Takeaway!

Adapting to changing market conditions and customer buying preferences is crucial for survival in an intensely competitive business space. Recognize the importance of adapting, and the first step in the right direction is conducting research–external and internal.

Understand where the market is headed and what customers are expecting to see. You’ll allocate resources to ensure your company perseveres through market shifts and comes out the winner. That’s how you can ensure long-term success and stability.

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