The first time I heard the word “pivot” in the context of business strategy was about nine months ago. As a student of language, my ears perked up when I heard it. I remember thinking, “pivot … interesting, haven’t heard that one before, … strong buzzword potential, … nice metaphor, with one foot stationary and the other moving.”
Silicon Valley being Silicon Valley, with more fashion around language than clothing, today you hear it all the time. Some sample usage:
- “Yeah, dude, we had to pivot after our A-round, but after that we really got traction.”
- “Look at Groupon. They started out as some political chat forum, pivoted, and now they’re worth freaking $5B.”
- “I think you know like, we’re running on our 401k round, just trying to figure out the core product, then we’ll expose it to the market, through a pre-alpha and pivot from there.”
- “Like, you know, every startup needs to pivot like two or three times before locking-in on its final strategy. That’s the nature of innovation.”
Extending the metaphor, one wonders in the last example if your board can call the CEO for strategic traveling.
Despite my general buzzword aversion, I like the pivot metaphor precisely because one foot is stationary. A complete strategy change is therefore not a pivot but a traveling violation because you entirely abandon the old strategy as opposed to changing direction in a way that leaves one foot in the old strategy and one foot in the new.
I also like the pivot metaphor because I agree with the idea that from inception to $100M that a company will need to pivot and probably a few times. (Think pivoting multiple times in a game, but not on one ball.) That truly is the nature of innovation and Silicon Valley companies do it all the time.
The two interesting questions then become:
- How do you know if you’re traveling vs. pivoting?
- How you know if the pivot worked?
I answer the first question by evaluating the degree of continuity between the old and the new strategy. I’d evaluate the second question by the revenue and margin contribution of the old strategy vs. the new one. If the old strategy is driving all the revenue, then you may have pivoted, but it’s not working. If the new strategy is driving the lion’s share of revenue and margin, then — and only then — have you done a successful pivot.