Founder Institute Image

Pivoting requires diligent planning and execution. Find out what pivoting is, when your company should pivot, and how to ensure a successful pivot.  

In business, pivoting is a term that describes the process of changing direction when the current strategy is not delivering the desired results. It involves strategically changing a company's business model, product, or target market. Pivoting is not just about switching the product but also includes revising the way a company delivers value to its customers. Although there are clear pivoting frameworks, startups should pivot only when it is necessary. 

Because of the numerous factors that must be evaluated before embarking on a pivot, we have created an extensive guide that details what is pivoting, when your company should pivot, and how to ensure a successful pivot.

Join the Founder Institute for even more expert startup advice!

What is “Pivoting”

While pivoting in the startup world means shifting to a new strategy, many entrepreneurs believe it entails drastically changing the whole company. But this is not always the case. Oftentimes, a company only has one important problem that it needs to address, and only requires a change in a single aspect of the company.

In 2016, Selcuk Atli, CEO and Co-founder of Bunch, introduced his Pivot Pyramid, which outlines five main pivoting areas. They follow a standard order: customers, problem, solution, tech, and growth.

Below are some examples of pivoting that you might not have guessed are considered a “pivot”:

  • Turning one product feature into the product itself results in a simpler, more streamlined offering.

  • The opposite of the previous point is also a pivot. One product is turned into a feature of a larger suite of features as part of another product.

  • Focusing on a different set of customers by positioning a company into a new market or vertical.Changing a platform, say, from an app to software or vice versa.

  • Changing a platform, say, from an app to software or vice versa.

  • Employing a new revenue model to increase monetization. For example, a company might find that an ad-based revenue model is more profitable than a freemium.

  • Using different technology to build a product, often to cut down on manufacturing costs or create a more reliable product.There are certainly plenty of other examples of pivoting that are not included here, but at least you now understand that pivoting encompasses numerous directions for a startup. 

There are certainly plenty of other examples of pivoting that are not included here, but at least you now understand that pivoting encompasses multiple directions for a startup.

How to Know If You Should Pivot

When to pivot depends on your startup's situation. It should not be a knee-jerk reaction but a well-thought-out decision after carefully reviewing the company's current status and prospects.

So many startups have pivoted and experienced massive success. As a result, it is easy for founders to naively conclude that pivoting is a magic pill that can cure any problem. In truth, however, pivoting should only come into play when absolutely needed and when all other options have been exhausted. To guarantee you don’t make a rash decision with your company, below are some signs to help you identify when pivoting makes the most sense:

1.  Your company is always playing catch-up

If your startup is progressing too slowly despite the amount of work you’re putting into it, you may need to change direction. The company itself may not need to pivot, but you may need to transform your business or revenue model, product, or market.

2. There’s too much competition

Your idea may seem unique and original at first. Still, there’s always the chance that a bigger company with more resources, funding, and a built-in audience, will come along and create an offering similar to yours, only better. Since you don’t have much choice in these circumstances, your startup is probably better off doing something completely different.

3. Your company has hit a plateau

If you notice slow (or no) progress in your company’s development, then it’s possible it has hit a plateau. This condition may result from boredom, an unmotivated team, or simply an inefficient strategy, but whatever the cause, it is time to reshuffle the deck. It doesn’t need to be a major pivot, but take an honest, objective look at your company and identify something to revamp.

4. One thing gets the most traction

Suppose only one aspect of your company is succeeding, and the rest are failing or moving slowly. That may mean that your company should focus on capitalizing on what’s working and change, maybe even radically ditch what isn’t working. By directing your attention to what works, depending on your strategy, your company can experience a boost in productivity, efficiency, and revenue.

5. There is a limited response from your marketplace

You can do all of the customer development and research in the world, but just because you have someone say that they would pay X amount for your offering now, it doesn’t mean they will still buy it, say, six months down the line when you have actually built and launched your product or service. A lukewarm response to the first release of an offering doesn’t usually bode well, and while it’s possible to generate buzz with marketing and PR, you can only do so much to convince the world of the value of your product.

6. Your perspective has changed

Once you have launched your company and have been running for some time, your goals, vision, and values might change. Researching a niche and experiencing it firsthand are two completely different perspectives. You may realize that there are other, more lucrative avenues for you to pursue and that your current course just isn’t for you.

''Know when it’s time to persevere and when it’s time to quit''.

Know when it’s time to persevere and when it’s time to quit. There is a difference between an obstacle and an impossibility. In other words, when things get tough, ask yourself this question: “Can this problem be solved with more research, customer development, funding, etc.?” If the answer is “no”, and you really can’t think of a solution, regardless of how improbable it may be, then you should go ahead and pivot.

Note that pivoting is not a one-time fix, and it can take time and resources to make a pivot successful. However, companies that are willing to pivot and adapt to changing market conditions are more likely to succeed in the long run.

One example of a company that successfully pivoted is PayPal. Initially, PayPal was a company that developed security software for handheld devices. However, the company soon realized its product needed to gain traction in the market. PayPal pivoted to become an online payment system, which turned out to be a highly successful move.

Another example is Twitter, which started as a platform for podcasting. It didn’t perform as its founders had expected, so they planned the most important step in Twitter’s history - a hackathon at which Jack Dorsey announced a new idea for an incredibly simple product.

It might be useful to examine even more case studies of famous startups that have recentered. You can check out this list of eight.

How to Pivot Effectively

Once you have recognized the need to pivot, it is time to structure your approach.

Here are some tips to help you reduce the risks associated with pivoting and increase your chances of a lucrative outcome:

1. Do it as soon as you can

Many companies pivot more than once, so don’t give up on the startup life if you think you may have to change course a few times to get on the right track. Nevertheless, if you are going to pivot - once, twice, or multiple times - you must do it as early as possible to avoid wasting time, effort, and money.

2. Pick new goals that align with your vision

Entrepreneurship is hard and requires you to be as brutally honest with yourself as possible, as launching and running multiple companies, or even one company, is a years-long endeavor. If the path you’re on now doesn’t feel right to you, you need to step back and evaluate your mission in life, and put in extra time to ensure that your new vision is the right one for you.

3. Don’t scrap that work you’ve already done

Identify what aspects of your company you can salvage, keep, and reuse after you settle on your new direction. You have already spent much time, energy, and money building a sustainable business. Cherish them and redirect your current resources toward your new goal.

4. Listen to your customers

The feedback you receive from customers is an excellent indicator. While occasional negative feedback is expected, if you’re constantly getting criticisms like “too expensive”, “not enough features”, “the purchasing process is too complex”, “there are other, better products out there”, or any other criticism, use it to your advantage and adjust. 

5. Make sure your pivot presents opportunities for growth

If you lead your startup in a new direction without much thought as to where you’re going next, there’s a strong possibility that you’ll hit yet another roadblock, just under different circumstances. To prevent this, ensure you research everything regarding your new path expansion. If the market is smaller, the customer base is less diverse, or has too much competition, then it’s not worth risking starting another company, so keep looking.

6. Develop a pivot plan

A pivot plan should outline the company's steps to implement the pivot. It should include timelines, resource allocation, and key performance indicators (KPIs) to measure its success.

7. Communicate the pivot

Explain the pivot to all stakeholders, including employees, customers, and investors.

8. Monitor and revise

You should monitor the pivot's progress to be able to integrate it in your company’s scaling trajectory.

Ultimately, if the transition still intimidates you, read these pivoting myths to overcome the hesitation.

Final Thoughts

In conclusion, pivoting might be necessary for businesses to remain competitive and achieve their goals. 

Launching and running a startup is filled with risks. But when it comes to planning for success, just remember: the more you prepare, the less you need to. Making decisions without thought is a recipe for disaster, so before you decide to reroute your company, take the time to get ready.

And then prepare some more.

Because you just might need it.

The Founder Institute has helped thousands of entrepreneurs around the world prepare their startups for success. Apply to a program near you today!

Related Insights

More insights
Founder Institute Image
Founder Insight

Entrepreneur Cognitive Bias: 7 Biases That Kill Startups

By Dustin Betz on Apr 09, 2024
Founder Institute Image
Founder Insight

The One Secret to a Successful Startup? Focus, Focus, Focus

By Joe Garza on Mar 28, 2024
Founder Institute Image
Founder Insight

How to Find the Customers Who Need Your Product

By Joe Garza on Mar 28, 2024

Are you ready to apply to the world's largest pre-seed accelerator?

Apply to the Program