Business model presentation
A little pivot here. A little pivot there. There’s no better way to successfully navigate today’s changing marketplace. Yet, all that pivoting could lead you down some disastrous paths if you’re not careful. It’s fine to be creative, but you don’t want to make big moves without conducting due diligence.
The problem, of course, is that it can be hard to resist making major pivots. When your industry gets shaken up by a competitor, you may be tempted to follow suit. Or you may be worried that you’ll miss out on an opportunity if you don’t embrace the latest trend. While both cases might be true, they aren’t always. Sometimes taking time to consider your options makes the most sense. You don’t want to pivot too rashly, quickly, or dramatically.
This doesn’t mean you should rest on your laurels and let the world rush by. Obviously, pivoting can be a good decision. YouTube was originally a dating site, after all. Without a pivot, you might be swiping left on videos rather than binge-watching TED Talks. The point is that you need to pivot, but you need to do it in a way that protects your company rather than exposes it.
To determine whether you should pivot, ask yourself the following three questions. They’re designed to help you evaluate the situation and refocus on your core business.
1. Is it worth productizing your service?
Many pivots involve businesses productizing their services. For example, let’s say you have a service that you want to scale. Your first instinct? Turn it into a product. That way, you can sell the product en masse, especially if you can set up subscriptions or another recurring income stream. There’s little doubt that productizing can be your ticket to more money. However, you don’t always have to productize, as noted by Greg Alexander.
As the founder of the mastermind networking group Collective 54, Alexander works with many other founders. He admits that one thing they often say is that they want to be software companies. Why? “Some founders believe that service firms are more work-intensive and that somehow building a SaaS company means a better work-life balance,” he explains. But according to research, the five-year survival rate of professional service firms is 47.6%. In contrast, the five-year survival rate of product companies is 23.%. “It is wiser to play the odds and start a service firm instead of a product company,” Alexander says.
This doesn’t mean you can’t productize. Just be certain that you’ve exhausted all service opportunities in your business niche. You may have overlooked some possibilities by assuming that productization was the only way to achieve your goals. If you’re still set on productizing, then thoroughly test your product on a small audience before scaling.
2. Can your intended market absorb another player?
You’re seeing your competitors engage in similar pivots that involve a market you’ve never tried. Is it your turn at bat? Maybe, or maybe not.
Did your parents ever ask, “If everyone were jumping off a bridge, would you jump off it, too?” They were worried about you giving in to peer pressure. When your peers seem to be appealing to a specific target market, you will notice it. What you might not think about, however, is the fact that the market may be a mirage. As noted by CB Insights research, one of the major reasons that 35% of startups go under is a poor market fit.
The way to avoid this is to be certain that you (1) identify a real market with a real need and (2) the identified market can support you and all your competitors. This is where you must get your hands dirty and do some serious focus group and market research. Your job is to figure out the total addressable market because you can’t use it to sustain your organization if it’s too small. Joseph DeWoody, CEO and cofounder of Valor, says, “This knowledge helps you craft a unique value proposition, develop a clear business strategy, and identify potential challenges and opportunities.”
Once you’ve completed a comprehensive assessment, you’ll know whether you should plan to enter a new market. If you’re still not convinced, you can always make a minimally viable product and test the waters.
3. Should you add or take away something?
Companies often get rid of major services or products as a pivoting move. BuzzFeed is a great example—and a cautionary tale. It officially shuttered its news division in 2023. The problem wasn’t the journalism. Rather, the division was no longer sustainable. Many wonder if the company waited too long.
Whether you’re thinking of closing a department or offering or adding a new one to your lineup, you have to be strategic. It’s not enough to just be comfortable with your choice. One wrong move could affect your profits, reputation, etc.
Even if you think removing or adding something is obvious, guess again. In 2022, franchisor McDonald’s and its American franchisees couldn’t see eye to eye on whether to keep or ditch $1 drinks. The conundrum was that the ramifications went beyond economics. Was it more profitable on paper to get rid of the menu option? Yes. Did it make sense from a marketing standpoint? Not always.
Data can help you make decisions, but you need to look beyond your profit margins. Jettisoning a beloved product or service—even if you’re replacing it with something you think is better—can be a liability.
Pivoting isn’t for the faint of heart. It’s not something to necessarily avoid, either. Just be sure to always look before you leap.
