What is a Pivot?
A pivot is:
a structured course correction designed to test a new hypothesis about the product and business model
When we begin a new product or service, we make an assumption (or make a hypothesis) that this product and business model is something that customers will be delighted by and that the business can reach its objectives by building this product. But that isn't always the case.
We may run several experiments and never get results that back up this hypothesis. For example, imagine we try to acquire traffic profitably through Facebook, Twitter, Google Ads, blogging, direct sales, events etc. but we still cannot achieve the desired results. We have two choices: pivot or persevere.
The Pivot is where we change our old hypothesis to create a new one. We find a new Minimum Viable Product and try to prove that this new hypothesis is true.
The Persevere approach is where we keep trying to prove our old (existing) hypothesis. We design new experiments or improve old experiments and see if those work.
Deciding whether to pivot or persevere is a judgement call. Just be aware that sometimes if your data shows that the business model isn’t successful, it is time to redesign some elements, change the business model, and start again.
The Early Pivot of Twitter
Twitter actually had a different company name to begin with: "Odeo". In 2005, their product was a podcast service. Users could create podcasts but also find and subscribe to them.
However, the same year, Apple announced that iTunes would include a podcasting platform in all iPods. Odeo was never going to successfully compete with Apple so its 14 employees started to brainstorm ideas and look for new directions.
One employee, Jack Dorsey, came up with an idea to build a product for group SMSs (texts). Customers could update their statuses to a group of friends via SMS (text) and see a timeline of their statuses. To see how far the idea has evolved, you can see a version of Twitter's first home page here.
Types of Pivot
Eric Ries, author of Lean Startup, suggests that there are ten types of pivots:
Zoom-in pivot. This pivot can be useful when you see that one feature in your product gets far more traction and interest than the other features in your product. You can then "pivot" by offering a new product that offers only that one feature. Obviously, by doing so you can dedicate more resources to perfecting this one feature (and really making sure the customer's job-to-be-done is well-catered to). You can also get to market more quickly and build an MVP more efficiently. For example, imagine you have a project management tool that offers a group chat functionality, bug tracking, agile board management, and time management. Pivoting your product to only offer the specialized time management solution could be more successful.
Zoom-out pivot. This is the above pivot in reverse. You broaden your product to include more features. Now what was considered the whole product becomes one (or several) features of a larger product.
Customer segment pivot. Your product may prove popular but not with the user segment that you had initially targeted. Therefore your product positioning may need to change and the value proposition, pricing, and channels would all need to be reviewed.
Customer need pivot. Life is too short to build products that nobody wants. Imagine you use the Lean Startup framework to identify early on that the problem you are trying to solve with your product is not very important to customers. Then you must understand more deeply the job that they are trying to do and find a problem they are willing to pay you to solve. You may need to point your existing product at a different customer "job" or you may need a completely new product.
Platform pivot. This talks about a change from an application to a platform or vice versa. Examples of platforms are eBay, AirBnb, Uber, Android store etc.
Business architecture pivot. Geoffrey Moore, author of Crossing the Chasm, tells us there are two types of business: high-margin, low-volume businesses and low-margin, high-volume businesses. You cannot be both but sometimes you can pivot from one to the other.
Value capture pivot. This pivot refers to changes to how you monetize or earn revenue. This is how the business captures value, typically by charging customers money. When you change how you make money, this impacts the product, business, sales, marketing and operational sides of the business model.
Engine of growth pivot. Most startups these days use one of three primary growth engines: the viral, sticky, and paid growth models. Viral growth is when current users recommend other users. Paid growth is when you spend marketing money on acquiring new customers. Sticky growth is when you manage to retain most of your users and churn rate is low. You can pivot from one of these growth engines to another.
Note: The churn rate of a product or service the percentage of subscribers that stop subscribing in a given period.
Channel pivot. Here you change how and where you sell your products and services (in stores, online, through partners, in-app). Channel pivots therefore often require adjustments to many elements of the business model.
Technology pivot. This pivot is when a new technology can be used to achieve the same outcome. This can be beneficial if the new solution has lower cost and/or better performance.
A nice slideshare by Ange Chang of some famous companies that have pivoted successfully.