Time for change? A great pivot strategy can revitalize business
April 27, 2022
These days, we all associate Netflix with binge-worthy TV shows and on-demand movies. But it wasn’t always this way. The company took a big risk and implemented a highly successful pivot strategy by disrupting the home entertainment industry.
Before streaming became a home staple, Netflix began life as a DVD rental service. You’d pay a monthly fee, and Netflix would mail DVDs to your home, so you could watch them at your leisure.
But company executives knew DVD sales and rentals were nearing the end of their popularity, and growth potential was extremely limited. Netflix faced a decision: stay the course with DVD rentals and compete with the likes of Blockbuster…or pivot to something new.
At the time, watching TV shows or movies online involved waiting for lengthy downloads and dealing with frequent lag from slow internet speeds. No other company was even willing to invest in the technology to support widespread instant streaming of licensed content.
Netflix had the chance to create an entirely new market with no competition. After seeing the popularity of sites like YouTube, they chose to go all in on streaming. And we all know how that story ended.
Pivoting sounds scary. It feels like you’re giving up on your original vision and leaping into the great unknown. But if done correctly, pivoting can be the key to taking your business to new, lucrative heights. Here’s everything you need to know about pivoting, when to do it, and how to make sure it’s successful. Let’s go!
What is a pivot strategy?
A pivot is a strategy to change the direction of your business. It’s a way to radically shift your business model while still using the resources and knowledge you’ve already accumulated.
For example, Facebook was originally only available to Harvard students. But after realizing that there was a demand for the platform elsewhere, the company pivoted and made it available to other colleges and, eventually, to the general public.
Types of pivot strategies
There are three main types of pivot strategy:
- Product pivot: this involves changing the product or service your business offers. If your company makes cakes, and you decide to start selling sandwiches as well as or instead of cakes, that would be a product pivot.
- Platform pivot: this is when you change the method of delivering a product or service. Let’s say your company sells physical books. If you decide to start selling e-books instead, that would be a platform pivot in action!
- Business model pivot: this involves a major change in how your business makes money. When an online company decides to switch to selling products at brick-and-mortar stores, that’s a business model pivot.
Three real-world examples of businesses pivots
A well-thought-out pivot strategy can transform a business and lead to invaluable opportunities. Here are three such examples.
Play-Doh is a classic example of a company that pivoted successfully. It all started when Kutol, a soap company, produced a non-toxic, non-staining clay-like substance for cleaning wallpaper. But after realizing that there was more demand for the product as a toy than a cleaning tool, they pivoted and began marketing it as such.
Nokia is another example of a company that had to pivot when the market changed. Initially, the company focused on selling paper and rubber products. After recognizing that the demand for mobile phones was growing, they quickly shifted gears and began manufacturing them instead.
3. Instagram and Snapchat
More recently, we’ve seen companies like Instagram and Snapchat make similar moves. Both started as photo-sharing platforms. Once they realized people use these platforms to communicate and advertise, they added features like messaging, filters, and stories to cater to this new demand.
A pivot doesn’t mean you need to completely revamp; it could just mean adding new features, rebranding, or attracting a new type of customer.
Reasons to implement a pivot strategy
Here are some reasons your business might need to pivot:
- You’re not reaching your target market. If you’re not attracting the customers you want, it might be time to rethink your strategy. You may have confusing brand messaging or products that don’t serve target customers well enough to stand out from the competition.
- You’re not making enough money. For an unprofitable company, a pivot can be a way to cut your losses and focus on a more lucrative avenue.
- The market is changing. Sometimes, the market changes, and you need to adapt to stay relevant.
- The company isn’t growing. A pivot strategy can help a stagnant business become more innovative or diversify to beef up revenue. Again, consider the case of Netflix. The streaming giant attracted new subscribers by launching Netflix Originals — some of the most-watched and talked-about movies and shows worldwide. They’ve even won Oscars…
- Customers are unhappy. Routinely getting negative feedback is a sign that you don’t understand customer needs.
- Competition is growing aggressively. If you’re dealing with an influx of new competitors or existing ones are growing rapidly, your business might need significant improvements to stay viable.
- Competitors are undercutting your prices. Instead of competing with low-cost competitors, it may be time to target higher-end markets.
- Employee morale is consistently bad. When employees are unhappy, it can have a negative impact on the business. You’ll likely need to make company-wide changes to improve morale and productivity and create better products.
- You focus too much on one product line. If you over-allocate time, staff, and resources to one product line, you may ignore other valuable sources of revenue. Taking a step back to reassess can help you determine if you’re neglecting important business areas.
A pivot strategy checklist for business owners and managers
When making a pivot, it’s essential to have a clear goal in mind. What do you hope to achieve? Is it more customers, more sales, or something else entirely? You’ll also need to do research to figure out who your target customers are and what they want.
Here are steps you should take for a successful pivot strategy.
- Research your target market: who are your customers, and what do they want? If you aren’t reaching your target market, you can either focus on a different customer base or research new marketing channels. To do this effectively, you’ll need to dig into the data through website analytics, social media insights, and customer surveys. Investing in PPC ads, a bigger online presence, or a beautifully designed website could also lead to better results.
- Define your goals: what do you hope to achieve with your pivot? Will it align with your current business goals, or will you create new ones?
- Test your idea: try out your new business model on a small scale before making any big changes. A minimum viable product (MVP) might come in handy.
- Focus on features first: do you really need a complete revamp? Sometimes, it’s better to start small and see how it goes.
- Re-evaluate your pricing: does your pricing accurately reflect the value you bring to customers? Review your costs, and make sure you’re charging enough to cover them.
- Consider your brand: if your current brand isn’t working, a fresh name, identity, or website might help you flourish.
- Analyze the competition: what are your competitors doing that you’re not? If they’re succeeding where you’re failing, it might be time to take a page out of their book.
- Preserve processes that still work: you don’t have to start from scratch just because you’re going in a new direction. If parts of your current business model work well, don’t discount their usefulness.
Strategize before you make the leap
A pivot often involves far-reaching changes, so you need to be sure you’re doing it for the right reasons. Develop a plan that everyone on your team is on board with before making drastic moves. Here’s how to make an implementation plan.
How to sell a pivot strategy
To successfully implement a pivot strategy, you’ll need the support of your team, leaders, and stakeholders. If you aren’t clear on the reasons for the change, it’ll be tough selling it to others. Here are a few tips:
1. Brush up on organizational communication skills
If you’re going to convince others of your pivot, you need to communicate effectively. This means being clear, concise, and persuasive. Also, try to anticipate the perspectives of key stakeholders, so you can be prepared to address their questions thoughtfully.
2. Make a case for the pivot
Opinions and enthusiasm probably won’t be enough to win over the skeptics. You need compelling data to back up your decision. Whether it’s website analytics, customer surveys, or market research, make sure you have the numbers to support your case.
3. Sell the story
A great way to get buy-in for a pivot is to sell the story. In other words, articulate the vision for a new direction by painting a picture of what success looks like. Data visualizations can be a great way to do this.
4. Get buy-in from your team
It’s important to get everyone on board with the pivot before making drastic changes. This means having open and honest conversations about the why, what, and how of the pivot. Not everyone will be thrilled about the idea of change, so be empathetic, and have a plan for how you’re going to address it. A solid change management process can help with this transition.
5. Show continuity
Don’t try to change everything all at once, especially if some aspects of the business are still working. Forcing unnecessary change could lead to problems internally, and you’ll have a harder time figuring out how to move forward. Instead, communicate with internal teams to analyze the business and drive improvement in ways that are advantageous to your employees and customers.
6. Communicate, communicate, communicate
Change can be scary, so it’s important to over-communicate during a pivot. Make sure your team is aware of any changes and prepared to execute the new plan. And be flexible and open to feedback, as you may need to make adjustments along the way. If you have a remote or hybrid team, ensure you have tools to support good communication. Chat apps, video platforms, project management tools, and online whiteboards are all great options.
Pivoting can be a great way to shake things up and breathe new life into your business. But it’s not always easy, and a lot can go wrong.
If you’re thinking of pivoting, one of the most important things you can do is have a clear plan and communicate it with your team. This can be difficult if you’re working remotely, but there are a number of collaboration tools that can help.
Once you’ve got a clear goal, the tools to help you thrive, and a supportive team behind you, the sky’s the limit. Just ask Netflix, who not only crushed their competition but completely transformed the entertainment landscape.