Groupon,
the most popular deals site, was launched in November 2008. Starting
with a $1 million seed funding, it quickly reached a billion dollar
valuation. But, the company did not start as we see it today. It started
as a campaign website called “The Point” (http://www.thepoint.com/).
The Point lets one start a campaign asking people to give money or do
something together, but only once a “tipping point” is achieved. Soon,
the founders realized that they were not going anywhere with this
venture. The idea itself was very vague and did not have a specific
market segment or set of customers in mind. But, the founder- Andrew
Mason realized, that one of the features of The Point was that it gave
‘bargaining power’ to the group of people. This clicked the idea for his
next venture- The Groupon. The site started by providing coupons for
deals on different products and services. To get the vendors agree to
the discounts, the Mason team used the ‘tipping point’ feature of The
Point. The founders slowed down on The Point and launched Groupon- and
in the process scripting the billion dollar success story.
This
is not a one off instance where the original idea did not work as it
was expected to. While launching a venture, majority of the times the
things do not go as expected. Even if the entrepreneur has a detailed
business plan, there are still many factors that he would have missed.
There are chances that by the time the venture is launched, the economic
conditions change, there are better and cheaper technologies in the
market place or the customer demands have changed drastically. With all
these factors working against it, the going might get tough for the
venture. When the going gets tough, work on course correction or what is
called “Pivoting” in the world of start-ups.
Course
correction or pivoting is very important not only for the success of
the venture but in many cases for the survival as well. Pivoting might
in the form of a small change in the price of the product to a change in
the features of the product or even to the extent of change the product
altogether. In the extreme case, the founders might want to cut the
losses, shut shop and go back to the drawing board again and redraw the
plans.
If
the venture is not working as you expected it to, you might want to
pause and have a re-look. Most start-ups have limited amount of money
for operations. There are four major ways in which one can try to pivot
the startup.
Zoom-In Pivot
Many
a times what was earlier considered a single feature of the product can
actually become a whole new product in itself. Thus, what was actually a
small part of the whole offering takes the center stage and changes the
whole dynamics around the offering. This was the case with Flickr. The
photo sharing application was a small feature of the massive multi
player online game, Game Neverending, which the team was developing. The
photo sharing feature appealed so much that it was developed into a
whole new offering- Flickr. The online game was dropped mid way.
Zoom-Out Pivot
Sometimes
the product does not sell because there are no supporting services or
products around the offering. This situation calls for zooming out and
providing the whole package with some other products or services
complementing the original offering. Thus what was originally the whole
product might become a small part of the bigger offering.
Customer Focus Pivot
The
product offered by the venture might be attracting customers but the
customer segment might be different from the original vision of the
venture. This means, the offering is solving a real problem but the
customer segment is different. Thus the offering has to be tweaked/
optimized for the new segment to shift the focus to the new customer
segment.
At
other times, the customer segment might remain the same, but the needs
of the customers change. The product then needs to be changed according
to the changed needs of the customers.
Technology Driven Pivot
Sometimes
the startup discovers a new way to achieve the same solution by using a
completely different technology. This type of pivot is of advantage
when the new technology can provide price and/or performance advantage
over the existing process.
It
is not mandatory for a startup to pivot to become successful. But, if
one is facing challenges in the venture, he might think of stopping,
pivoting and starting again. Pivoting should not be mistaken for failure
of the startup, its reinventing the venture by part or all over again.
Even the startups that do not need to pivot must always keep
scrutinizing their operations to check what is working and what is not
and why something is working while the other is not. Pivoting works best
when done in the early stages of the startup and done fast. The older
the business gets the harder and costlier it is to pivot. The whole idea
is to enhance the effects of what is working and minimize the effects
of what is not.
