It is extremely rare for a company to begin with a business plan that remains consistent throughout the development of the company, all the way to exit. Most often, companies must make at least one strategic pivot, and many require multiple pivots before the true vision for the company can be realized through a successful exit.
It is at the point at which a pivot is necessary when companies can stumble, and sometimes fail.
So, what is a pivot anyway?
A pivot is simply a significant change in corporate strategy that can involve a change in product offering, customer focus, geographic focus, pricing model, etc. It is a major change in corporate direction that is usually necessary due to the failure of the current corporate strategy.
Startups begin life with a specific purpose in mind — selling a particular product or service to a particular target customer group, in a specific target market. Often, over some period of time, the founders discover that this strategy is not working. Those who are unable to find a path forward through a effective pivot usually fail, and the company dies.
Here are a few examples of large, successful companies that underwent successful pivots:
Wrigley
When William Wrigley Jr. started out in business in the 1890s, he was a traveling salesman selling soap and baking powder. With each sale, he offered free chewing gum. When the gum became more popular with his customers than the products he was selling, he reoriented Wrigley’s to sell gum and went on to give the world Juicy Fruit, Spearmint and Doublemint gum, along with Life Savers and many other products. The company currently sells its products in more than 180 countries and districts, maintains operations in more than 50 countries, and has 21 production facilities in 14 countries.
Twitter was originally called Odeo, a podcast subscription network. When iTunes made Odeo obsolete, the company solicited suggestions from its employees for two weeks. Jack Dorsey and Biz Stone came up with the idea of a micro-blogging, status-updating platform that we now know as Twitter. Today, Twitter has more than 300 million users and is worth in excess of $24 billion.
Starbucks
In 1971, Starbucks, which had been just a single-location neighborhood coffee shop, began selling coffee beans and espresso makers. The current CEO and president, Howard Schultz, loved the coffee, and he transformed the company so everyone could easily taste European-style coffee. If Starbucks had never pivoted and begun selling coffee beans, there would be no Starbucks on virtually every corner as we see today. Starbucks is work almost $80 billion today and has more than 28,000 locations.
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Those are just three of thousands of examples of early stage businesses that would never have become household names if they had not pivoted, and then executed their new corporate strategies effectively.
The takeaway is that entrepreneurs not only need to be mindful that at least one pivot may be necessary to drive the success of their businesses, but pivots are a natural and common feature of most successful business, so they should be embraced.
In my personal experience, it is extremely rare for any business to start with a corporate strategy that does not eventually require at least one pivot before the business reaches the scaling phase.
What makes the key difference in whether most businesses survive and eventually succeed is how quickly the entrepreneur identifies the need for a pivot, and then takes appropriate steps to facilitate that pivot effectively. Founders can be extremely vested in their original vision for their business, which can make it very difficult to pivot, causing them to delay making the decision to pivot, or worse, not pivoting at all.
Most entrepreneurs view the need for a pivot as a failure of the original strategy. While it can seem like an exercise in narrative framing rather than a concrete method for advancing the company, embracing a pivot really comes down to understanding and accepting that change is a natural and necessary part of the development of any business.
A good way to address the possible resistance of the executive management team is to understand that a pivot will likely be necessary from the inception of the business. One way to implement this is to include the possibility of a pivot, and some possible scenario analysis with various impacts of one or more pivots, into the strategy planning process.
Ongoing updating of the strategic plan, including the possibility of a pivot, will ensure that the team remains focused on the possible need for a pivot, and what needs to happen in the event that a pivot, in fact, becomes necessary.
If the team anticipates and expects to pivot from Day One, and prepares for that likelihood, the team will be far less resistant to making the pivot when needed, and far less resistant to making the pivot decision and necessary alterations to the strategic plan quickly and efficiently.
The result will be that the business has the best possible opportunity to make a successful pivot and move forward in a new and more promising direction, with a corporate strategy that provides the best chance for success.
— Craig Allen, CFA, CFP, CIMA, is president of Allen Wealth Management, and has been managing assets for foundations, corporations and high-net worth individuals for more than 25 years. He can be contacted at craig@craigdallen.com or 805.898.1400. Click here to read previous columns or follow him on Twitter: @MPAMCraig. The opinions expressed are his own.
