Alloy logo
News

May 28, 2015

Anna Ruth Williams

|

Partner

This article originally appeared in the Hypepotamus.

The word “pivot” in the tech startup community has traditionally invoked disparate, yet passionate reactions.

“Pivot believers,” as I’ve taken the liberty to classify them as, are quick to justify their point-of-view by referencing household name tech brands, like Pinterest, Groupon and PayPal, that have successfully navigated through one, two or maybe even three pivots. Often, many pivot believers have actually never been involved in a pivot themselves; rather, they simply embrace the doctrine that most companies, no matter the industry, don’t get ‘it’ right on the first try.

“Pivot deniers,” in contrast, shiver and shake at the very letters that spell the word. Their sentiment is perhaps driven by experience, but more likely it is ego, cynicism or overt frustration. Pivot deniers, by nature, don’t easily deal with change and are less likely to embody the startup pillars of flexibility and poise under pressure. As such, deniers associate a pivot with weakness, either in leadership, technology or strategy, or a combination thereof, and they are quick to reference pivots gone wrong, such as MySpace, Joost and Friendster.

The reality is that there are some truths to both pivot believers and pivot deniers opinions. Let’s face it – pivots are not ideal, but are sometimes essential to a tech startup’s survival, and are certainly not an indicator of imminent failure. In fact, a report by Startup Genome found that “startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.”

Ready, Set Pivot

So what justifies a pivot and how does an entrepreneur know just when its time to make the move? “There isn’t an algorithm or some magic formula for you to use,” entrepreneur Bernard Moon told Venturebeat in 2013. The most common pivot drivers include:

  • Market Congestion/Low Barrier to Entry – Particularly burdensome to SaaS and mobile application developers, market congestion and low barriers to entry make it exceptionally difficult to differentiate products/services, build a unique brand identity and garner loyalty.

  • Ineffective Business Model – The monetization model isn’t proving as effective as anticipated. Perhaps consumers won’t pay as much as suspected or the supply chain is too expensive to turn a positive ROI. A change needs to be made.

  • Complicated Technology – Sometimes startups spend too much time talking about their technology and too little time speaking about the value and benefits that the technology provides. This is counterintuitive to profitability and scale, so much so that it often requires a pivot to bring clarity to the market.

  • Reputational Damage – Large corporations are prepared to mitigate reputational damage, while startups are not. Depending on the severity of the incident, a pivot might be required to regain consumer trust, confidence and loyalty.

Put the Ego Aside – Pivot or Fail

What’s important, but often hard for many tech entrepreneurs to understand is that a pivot is usually not indicative of a faulty vision or a misguided mission; but rather it’s the unintended consequence of trying to change the world through a means that most people won’t easily understand. To this day, more than 8/10 startups “fail” – many simply because of leadership that is too stubborn and self-righteous to embrace a pivot.

But the sentiment of pivoting is beginning to shift in the favor of believers. As veteran entrepreneur Zach Cutler wrote in Entrepreneur, “pivoting is a great way to bring new life to the business. All businesses must evolve if they want to stay current with their audience and competitive within their industry.” Mr. Cutler is right, and the startup community is finally beginning to shed the pivot stigma that once hindered the mass-market adoption of many great innovations.

Rebranding After a Pivot

Most startups warrant a rebrand following a pivot to accompany their change in strategy. For some startups, an evolution of brand messaging will suffice, but for the majority, an entirely refreshed brand identity will facilitate the most immediate benefits. For those companies, here are 8 tips that will aid the brand’s credibility prior to, during and after the pivot. At AR|PR, we’ve helped many startups expedite a seamless reintroduction to the market and mitigate the likelihood of needing to pivot again in 6, 10 or 12 months using these tried-and-true steps.

  1. Conduct a Pre-Pivot Analysis – Start by understanding the exact drivers of the pivot. What didn’t work with the initial strategy? What did work? What are the lessons learned? Ultimately, why was the pivot necessary?

  2. Bring all Stakeholders to the Table – There is a fine line between accessibility and having too many cooks in the kitchen. Nonetheless, all stakeholders deserve to help shape the post-pivot strategy. Investors, engineers, sales and other strategic advisors and stakeholders should all be consulted on defining the new direction and how best to execute it. And don’t forget your customers – their input is perhaps most valuable as you develop your new brand.

  3. Build/Revisit the Product Roadmap – While maintaining flexibility is important, the pivot re-brand will only be successful if there is a unified understanding of where the company is, where its going, and what its going to take to get there. Clarity of the product roadmap also helps stakeholders anticipate future challenges and proactively assess unexpected opportunities.

  4. Refine/Test Messaging – Often times entrepreneurs and startup employees are too close to their product/service to message it correctly, and for multiple audiences. Engage a tech PR firm to help develop key messages and differentiation points. Then build a relationship with an analyst or an industry influencer, and test the messaging with them under NDA.

  5. Develop a Unique Brand Identity – A startup’s success is determined by how compelling its visual (e.g., logo) and verbal (e.g., web copy) identity. Knowing your target audiences, and the touch points that will resonate most with them is challenging, but an essential to creating buzz worthy imagery and copy.

  6. Develop Brand Architecture – As part of the new brand identity, consider brand architecture as a core component. By segmenting products and services underneath the main brand, startups will gain flexibility, scale more effectively and will be empowered to easily add and refine messaging to reach new audiences.

  7. Don’t Rush – Rushing through a pivot leads to mistakes and mistakes can be the driver of another pivot, or worse, failure. Take the extra time to ensure that you’re getting everything right. Spend time and resources on market research if necessary. Minimize external communications that aren’t essential. Keep the lights on, but use a dimmer until you’re ready to burst back onto the scene.

  8. Train Your Employees Intently – A startups, employees are your biggest and most essential advocates, and they need to be flawless in how they communicate the brand. Bring in a professional firm to train them on new messaging and key talking points. Make sure they know the company story and how to connect using both emotion and objectivity. Train them in crisis tactics and best practices.

Today’s technology environment suggests that your startup is likely to go through at least one pivot, or risk failing for good.  So embrace it. Become a pivot believer, if you aren’t already one. And remember, the key to a successful pivot is embracing it as a necessity and preparing for it accordingly.  If you do so, your startup might just be the next multi billion-dollar acquisition or IPO.