Do Pivots Matter? Yes, in NEARLY EVERY Case.

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In late 2013, Cowboy Ventures did an analysis of U.S.-based tech companies were only available in the last a decade that are actually valued at $1 billion. They found 39 of the companies, that they called the "Unicorn Club."

This article summarized 10 key lessons from the Unicorn Club. Surprisingly, among the "learnings" said that, "…the ‘big pivot’ after you start with a different initial product can be an outlier. Nearly 90 percent of companies will work on the original product vision. The four ‘pivots’ after a different initial product were all in consumer companies (Groupon, Instagram, Pinterest and Fab)."

Among my students sent me this article and asked, "What does this mean?" Good question.

Because the pivot is among the core concepts of the Lean Startup, I was puzzled. MAY I be wrong? Is it feasible pivots really do not matter if you would like to become a Unicorn?

Related: YOU SHOULDN’T BE a ‘Pividiot.’ Follow THESE POINTERS.

Short answer — virtually all the Unicorns pivoted. The authors of this article didn’t know very well what a pivot was.

A pivot is a simple insight of the Lean Startup. It says on day one, all you need in your brand-new venture is some untested hypothesis. Therefore you will need to get beyond your building and rapidly test all of your assumptions. The chances are that a number of of your hypotheses will be wrong. When you find your error, instead of firing executives and/or creating an emergency, you just change the hypotheses.

That which was lacking in this article was a clear definition of a pivot. A pivot isn’t just changing the merchandise. A pivot can transform any of nine various things in your business design. A pivot may mean you changed your customer segment, your channel, revenue model/pricing, resources, activities, costs, partners, customer acquisition — plenty of other things than simply the merchandise.

A pivot is a substantive change to 1 or even more of the 9 business design canvas components.

OK, but exactly what is a business design?

Think about a business design as a drawing that presents all the flows between your various areas of your company’s strategy. Unlike a business chart, that is a diagram of how job positions and functions of a company are related, a business design diagrams what sort of company makes money — and never have to go in to the complex information on all its strategy, processes, units, rules, hierarchies, workflows and systems.

Related: The Art of the Pivot

Alexander Osterwalder’s business design canvas puts all of the complicated strategies of your business in a single simple diagram. Each one of the nine boxes in the canvas specifies information on your company’s strategy. (The business enterprise model canvas is probably the three the different parts of the Lean Startup. Start to see the HBR article here.)

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So to answer my student’s question, I remarked that the author of this article had too narrow a definition of just what a pivot meant. In the event that you returned and analyzed just how many Unicorns pivoted on the nine business design components, you’d likely find that almost all did so.

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Have a look at the Unicorn Club and take into account the changes in customer segments, revenue, pricing and channels those companies have made given that they began: Facebook, LinkedIn — new customer segments; Meraki — new revenue models and customer segments; Yelp — product pivot. Now you realize the energy of the pivot.

Lessons Learned:

  • A pivot isn’t just when you change the merchandise

  • A pivot is a substantive change to 1 or even more of the nine business design canvas components

  • Virtually all startups pivot on some part of their business design after founding

  • Startups centered on just product pivots will limited their strategic choices — it’s like bringing a knife to a gunfight

Related: Steve Blank on Building Great Founding Teams

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