Business Insight

PIVOTING – When is the right time? (Case study – Paypal)

The most successful businesses are often those that have found a way to truly meet the needs of their customers. Such businesses had achieved a Product–Market Fit.

If their initial idea doesn’t work as planned, entrepreneurs are expected to be ready to pursue a Plan B. But what does it actually mean to pivot – and are entrepreneurs really as open to doing it as they say they are?

There is more to pivoting than most aspiring entrepreneurs know, but it is widely agreed upon that startups should pivot only when it’s necessary, and that it must be done with considerable planning and thoughtful execution.

What is Pivoting?
A pivot is essentially a shift in business strategy to test a new approach regarding a startup’s business model or product after receiving feedback. It is a fundamental concept of Lean Startup approach.

With pivoting, you’re questioning what the actual needs of the customers are and the ways in which you think you should be serving customers, so that you can best meet their needs.

While pivoting for Startups means to shift to a new strategy, it is often believed to entail drastically changing the whole company. But this is not always the case. Most times, a company only has one problem that needs to be addressed, and only requires one aspect of the company to changed.

Examples of Startup Pivot

1. Turning one feature of a product into the product itself
2. Focusing on a different set of customers by positioning a company into a new market or vertical.
3. Changing a platform, for example, from an app to software
4. Employing a new revenue model to increase monetization.
5. Using different technology to build a product, often to cut down on manufacturing costs or create a more reliable product

Let’s take a look at Paypal, a company that took a customer-focused approach to pivoting and to growth. Paypal today is a platform that makes it easy for people to securely send others money using only their email address. It also allows for businesses to easily conduct online transactions, say, for their e-commerce store.
But PayPal didn’t start out that way.

It was called Confinity and was designed to provide encryption on mobile devices. After realizing that it depended on others companies to build application it decided to change course. It then turned its focus to email-only payments where they concentrated on buyers and sellers on the ebay platform.

When do you Pivot?

1. There’s Too Much Competition – The startup realm is a dog eat dog world. Your industry might be crowded. There could be too many companies in it to claim a significant enough portion of the market. Pivoting to challenge your competition is a matter of becoming different — different from your competitors and different from your business as you know it.
2. One Thing Gets the Most Traction – If you can identify a single feature of your product or service that your customers enjoy or leverage more than others, consider pivoting and building around it.
3. There’s Limited Response from Your Marketplace – where your product or service doesn’t resonate with consumers like you thought it would is cause for a pivot. One way or another, you have to change your business model to convey better value to your target audience.
4. Your Perspective Has Changed – this particular reason for pivoting is the trickiest to navigate. If your business is doing well, it could be risky to make a radical shift. Still, as a business owner, it’s up to you to decide how your company operates
5. The business isn’t financially viable – a business can only go so far as its capital lets it. If your company is running out of money, you’ll need to jump ship from the idea or processes behind it and pivot to something more financially viable.

Pivoting your startup isn’t a decision to take lightly. No matter what you choose to do, it’s going to take considerable effort on your end. It’s a tough call to make. It means being honest with yourself and any employees you might have about how you do business.

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