The term “pivot” is bandied about in the business world a lot these days.
It started in the tech startup world, where idea after idea poured into the marketplace, and tech companies had to stay in the mindset of being willing to shift their entire product while retaining their core technology.
The most oft-used example of this is Instagram, now one of the most popular social media networks. They wanted initially to be a check-in app for people to tell others what locations they had been in, but when that didn’t pan out they utilized the core technology to be a photo sharing app instead.
It has been such a successful business model and ideology that, according to Startup Genome Compass of San Francisco, which tracks more than 13,000 Internet startups, “founders who change products and markets between one and three times raise more money than those who don’t.” When you have the Wall Street Journal and Forbes writing about the benefits of pivoting and companies who made it successfully because they pivoted with their business model, it’s not hard to see why this has leeched into the mindset of entrepreneurs everywhere, not just in the tech startup sector. More and more new business are being encouraged with the “lean startup” method, and being able to pivot their business model. This can be problematic for a business whose fundamental worth is not a technology that can adapted, but rather a business that relies on inventory or manpower. To talk about this further, let’s discuss the difference between “new” and “different”. A different business model is an adaptation of the former business model to better suit the needs of the customer base. An example of this is a dive bar in ritzy neighborhood having difficulty staying afloat and revamping its business model to better appeal to the local clientele. A new business model is that same bar deciding that the neighborhood is really lacking a barbershop and completely overhauling the building. Both of these are expensive for the dive bar to accomplish, but with the different business model you can keep the same equipment, most of your basics in your stock can stay the same, and you can use the same staff with a little more training. With the pivot to a new business model, you don’t just need to remodel the storefront, you also need new staff, new equipment, new computer systems, new bookkeeping methods, et cetera. It is always important to be aware of the demands of your customer base and when you are not fulfilling their needs to your best potential. It is important to be adaptable and to keep with the times. It is not important that all new businesses be able to “pivot”. The lines between tech startup and new business are getting blurrier every day, but it is important to keep in mind where your assets lie and when it is beneficial to act like a tech company and when it is beneficial to your business to act like a business.