CEO Today Magazine April 2020 Edition

16 Almost all start-ups pivot at some point in their evolution, but only a few are successful. A common myth in the industry is that altering the product or its positioning will make the business pivot; just focusing on the product will limit the degrees of freedom and constrain execution. DecidingWhen to Pivot Although this is part art and part science, there are some key questions to be considered to inform this critical decision. The first criteria to assess is the traction i.e., the target market, the response to the product in that market, the ability to reach that market and at a velocity that is optimised for capital and resources. If the answers to more than two appear to be sub-optimal, chances are that the company needs to consider a pivot. In simple words, it means that your product might not be solving the right problems, not reaching the right people facing the intended problems or that the route to reach those specific people is not correctly configured. Hitting stagnation, playing catch up or losing market share are consequences of a business posture right for a business pivot. There are a few additional indicators to analyze before a company embarks on a pivot. Market Crowding The original product idea might have made sense at a certain given point in time but is quickly replicated by others. Larger companies could throw more capital, resources and execution capacity at the same idea, while many different start-ups come in and reach the same target market with very similar messaging. This situation will lead to rethinking how you could beat the competition by doing something different. Asset Performance Another sign is that if some of your organisational assets perform a lot better than other parts of the business (e.g., a few products or features of a product gather momentum in specific markets and customers), it may be time to focus on accelerating momentum through a heightened focus on those aspects. At times, a single feature can become the entire product focus and at other times, the initially conceived product could be positioned as a premium feature as the product extends to solve broader problems. Customer Responses In my experience, customers tend to respond well to beta testing, product demos and even freemium models creating misleading momentum. They even say that they are keen on the product and would be willing to pay for it. But when it comes to committing funds for the product, they stall the decision or even back out. This is the time to introspect and evaluate the situation; either the product is not exciting enough in real life or the product positioning is flawed. The company might also realise that the product test was partly confirmed and solve the right problem but for a different economic buyer than originally anticipated. If you don’t want to burn capital or human resources, a pivot is the right answer here. New Insights Pivots are not necessarily driven by products, markets, channels and brand alone. At times, CEOs learn new perspectives, insights and foresights by speaking with experts, customers and other entrepreneurs. This also informs new wisdom on the way scale and opportunities are evaluated. A pivot might be rooted in the new understanding and focused on unlocking opportunities that were previously not visible. Economic Logic Companies realise a different or easier way to monetise their product by altering the underlying economic logic of their business models. Some examples are moving from low volume/high margin to low margin/high volume or shifting focus from a product to a platform or the other way around. This sort of a pivot can also be undertaken to optimise for valuation rather than for cash flow e.g., pivoting from licensing software to subscription-based SaaS. A Framework for Executing Pivots Brand, Target Markets, Route to Market (Channel) and Product are the four primary anchor points to design a good pivot. At any given point, all these levers must stay aligned. For example, if a company picked the product as the pivot point then brand, target markets and channel strategy and FRONT COVER FEATURE “In Silicon Valley speak, a “pivot” is commonplace and refers to a change in business trajectory.” “Good pivots typically have four anchors, one of which is chosen as the primary lever with the other three aligning very quickly behind it. Capitalisation and Talent are critical levers to execute a successful business pivot.”

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