Key Points

• Pivoting is crucial when your startup faces stagnation, lacks product-market fit, or experiences declining customer engagement, signaling the need to realign your business model or target market.
• Use customer feedback, performance metrics, and market analysis to identify key areas for improvement and base your pivot on validated learning, ensuring that changes are backed by solid evidence.
• Common pivot types include adjusting the product focus (zoom-in/zoom-out), shifting target customer segments, or changing the revenue model to address market needs and improve business sustainability.

In the fast-paced world of startups, flexibility is crucial. Entrepreneurs often enter the market with bold ideas, but reality has a way of testing those ambitions. As conditions change, so must the strategies. This adaptability is known as a pivot—a fundamental shift in a startup’s business model, product offering, or market approach. Pivoting is not a sign of failure; it’s a recognition that evolution is necessary to succeed.

The concept of pivoting comes largely from Eric Ries’ Lean Startup methodology. Lean Startup and Lean principles emphasize iterative processes, constant learning, and efficient use of resources. Pivoting is a key element of this approach, allowing businesses to adjust direction when their initial assumptions don’t align with market realities. In this article, we’ll explore when and how to pivot a startup strategy using the Lean framework.

What is a Pivot?

It’s more than just a tweak or adjustment; it’s a deliberate change that redefines the startup’s core direction. Pivoting could involve shifting the target customer base, changing the value proposition, or introducing a different monetization model. In the book The Lean Startup, author Eric Ries describes a pivot as “a structured course correction designed to test a new fundamental hypothesis about the product, strategy and engine of growth.” The website iSixSigma.com published an explanatory article on the concept of Lean Startup shortly after Ries published his book. The idea of a pivot is to preserve the learning and validation a startup has already achieved but use it to pursue a different path.

When to Pivot

Determining when to pivot is critical. Entrepreneurs must avoid the temptation to pivot too early, without giving their original idea sufficient time to gain traction. Conversely, sticking to a failing strategy for too long can result in wasted time, energy, and capital. The right time to pivot often becomes clear through a combination of qualitative and quantitative signals.

Here are some indicators that it might be time to pivot:

1. Lack of Product-Market Fit

The most common reason startups pivot is the absence of product-market fit. Product-market fit occurs when a product satisfies a strong market demand. If users are not engaging with your product, dropping off quickly after sign-up, or if sales cycles are excessively long, it could be a sign that your product isn’t meeting the market’s needs.

2. Stagnating or Declining Growth

If your startup experiences an extended period of stagnation—whether in user acquisition, revenue, or engagement—it may be time to consider a pivot. Growth stagnation often occurs when the initial enthusiasm for a product fades, and new users aren’t coming in at a sustainable rate.

3. Unprofitable Unit Economics

Sometimes a startup may gain traction but still struggle with profitability. If the cost of acquiring customers or delivering the product is higher than the revenue generated from those customers, this is a sign that your business model needs adjustment.

4. Customer Feedback Misalignment

The Lean methodology encourages startups to seek continuous feedback from customers. If that feedback consistently suggests a different solution or problem than the one your product addresses, you might need to pivot.

5. Competitive Pressures

An unexpected shift in the competitive landscape can make a pivot necessary. If new entrants or larger competitors are capturing your market share or offering superior solutions, it might be time to consider differentiating yourself through a pivot.

Types of Pivots

There are several different types of pivots that a startup can consider. The right choice depends on the unique challenges and opportunities a business faces.

1. Zoom-In Pivot

A zoom-in pivot involves narrowing the focus of the product to a single feature or function that has demonstrated value. This happens when a specific aspect of the product gets more traction than the broader offering. 

2. Zoom-Out Pivot

Conversely, a zoom-out pivot occurs when the initial product is too narrow in scope to achieve product-market fit. In this case, a startup expands its product by adding features or a broader offering that better addresses the needs of the target market.

3. Customer Segment Pivot

This pivot involves shifting focus from one customer segment to another. For example, a startup that initially targets small businesses might find that enterprise customers are more interested in the product and pivot to serve that larger market. 

4. Customer Need Pivot

Sometimes, a startup realizes that while its target customer segment is correct, the specific problem it’s solving is not. 

5. Platform Pivot

A platform pivot occurs when a company shifts from offering a single product to offering a platform that supports multiple products.

6. Revenue Model Pivot

If a startup’s revenue model proves unsustainable, it may pivot to a new one. For instance, a company that initially relies on advertising might pivot to a subscription model if that model proves more effective for long-term growth.

7. Technology Pivot

A technology pivot occurs when a company discovers a new, more effective technology that can achieve the same end goal as the original product but in a better, faster, or cheaper way.

How to Pivot Successfully

Once the decision to pivot is made, the next step is to execute it successfully. Pivoting is a strategic process that requires careful planning and execution. Here’s a step-by-step guide on how to pivot using Lean principles:

1. Reevaluate Your Assumptions

Before pivoting, revisit the core assumptions that informed your original business strategy. These could include assumptions about the target market, product features, and revenue models. Use the insights gained from user feedback, metrics, and market conditions to test new hypotheses.

2. Create a Hypothesis for the Pivot

Just like in the initial product development stage, a pivot should begin with a clear hypothesis. Define what change you are making, why you believe it will work, and how you will measure success.

3. Build an MVP

Using the Lean Startup method, develop a minimum viable product (MVP) for the pivot. Focus on the core features that align with the new strategy and put it in front of users as soon as possible.

4. Test and Measure

Once the MVP is launched, it’s essential to track performance closely. Use metrics and feedback to determine whether the pivot is working. Key performance indicators (KPIs) might include user engagement, customer acquisition cost, conversion rates, or profitability.

5. Iterate

If the pivot proves successful, start iterating to refine the product and scale the business. If the pivot doesn’t deliver the desired results, continue testing different hypotheses until you find a strategy that works.

Pivots You Weren’t Aware of

Here are some well-known examples of when a company successfully pivoted.

Starbucks

When Starbucks started out in the 1970s, it sold espresso machines and coffee beans, but it later pivoted to selling coffee and the rest is history.

Twitter

Twitter started out as a Web site called Odeo. The original intention was that it could be a place where people could download podcasts from all over the world. After experiencing business problems, the founders of Odeo came up with a rough idea of an individual using an SMS service to communicate with a small group thus creating one of the best tech pivots in history.

Instagram

The app’s origin was an HTML5 app called Burbn that included a mix of check-in and gaming features.To separate themselves from Foursquare, another popular location-based app at the time, the founders pivoted and narrowed down their features to just becoming a place to post, like, and comment on photos.

PayPal

In 1998, Confinity was created as a software development company that would focus on building security for handheld devices. Over the course of the next couple of years, Elon Musk took an interest in the money transfer part of the business Confinity was developing. At the time Musk was CEO of an internet banking company called X.com, which merged with Confinity in 2000. X.com decided to abandon everything else and focus only on the Confinity operations. X.com/Confinity was renamed PayPal in 2001. Now you may also understand how Twitter became X.

YouTube

Today it’s the most popular video sharing platform. But in its inception, the founders set up YouTube to be an online video dating site, but it didn’t generate wide appeal. The YouTube team noticed that people were beginning to upload videos other than dating profiles. Jawed Karim, a co-founder posted some funny videos on the site, showing that people uploading videos of themselves online could be profitable.

Similar Concepts

If pivoting and the idea of a startup strategy interest you, here are a few other concepts that you might find informative:

• Using the feedback from your initial Minimum Viable Product (MVP) is what may lead you to the conclusion that you need to pivot from your initial design.
• There are other techniques that center around iterative and incremental change. Check this additional article if you have interest in this.

Final Thoughts

Pivoting is not an admission of failure but a recognition that startups operate in an unpredictable environment. The Lean principles of continuous learning, experimentation, and adaptation allow startups to navigate challenges and pivot when necessary. By paying attention to market signals, testing hypotheses, and maintaining a focus on delivering value to customers, a pivot can transform a struggling startup into a thriving business.