Did you know that Youtube was originally a dating site? And they are not unique in that, many large companies were initially radically different from how we know them today. There is even a term for this kind of sharp shift: a pivot. Just about every start-up goes through a pivot at some point. In this blog we go back to the origins of the term, introduce you to the champions of pivots and tell you where the platform Slack comes from.
The origin of the term pivot
The word pivot comes from Eric Ries. Ries is an ex-startup entrepreneur best known for his book The Lean Startup, in which he lays out an iterative model of growth typical of startups. Despite the book’s great popularity, he called the pivot his most long-standing contribution to startup language.
The word pivot first appeared on his blog in 2009. There he describes a pivot not simply as a shift in your idea, but as a shift where you stay grounded in parts of your original vision while adjusting aspects that don’t work.
For example, he describes a pivot as:
“The idea that successful startups change directions but stay grounded in what they’ve learned. They keep one foot in the past and place one foot in a new possible future. Over time, this pivoting may lead them far afield from their original vision, but if you look carefully, you’ll be able to detect common threads that link each iteration.“
He later incorporated that into the following very pithy definition.
“Pivot = a change in strategy without a change in vision.”
Pivot has since become a synonym for any type of product or business model change in young companies. Nevertheless, it is interesting to keep Ries’ original definition because it emphasizes what remains the same: your vision and certain parts of your direction. A good pivot is therefore not only based on change, but also on continuity.
So did a lot of successful start-ups! Below we give you the four most iconic ones.
Stewart Butterfield is the most successful pivoter in the world. The Canadian entrepreneur is the founder of Flickr and Slack, both the result of radical pivots.
Flickr started out as Neverending, an online video game. That game didn’t last and eventually they had to stop development. Nevertheless, Butterfield turned the company around and turned the game into a site where you could exchange photos. They gained traction with this very quickly and eventually Butterfield sold Flickr to Yahoo in 2005 for an estimated amount of around $25 million.
After Butterfield left Yahoo, he continued to toy with the idea of a video game. His second effort was game Glitch and he raised $17 million in capital for it. Despite initial capital, this game was not a success and the founders took it offline in 2012.
Meanwhile, the company behind Glitch had built an internal communication system that showed promise. So after shutting down the game, Butterfield decided to focus on that system. And so Slack was born, a chat system for businesses that quickly proved extremely popular. Today, Slack already raised over $1 billion in capital and has over 8 million daily users.
A second notable pivoter is Twitter. The microblogging service was thus not always the source of news that it is today. Twitter began in the early 2000s as a platform for podcasts.
Although podcasts are a popular medium today, they were not at all in 2005. The market was too small and iTunes’ dominance too strong. They decided to pivot to microblogging. With that formula, they brought in billions of dedicated users.
Perhaps the funniest classic example of a pivot is YouTube. This was originally not the video platform we know today at all, but a dating site. For example, YouTube allowed singles to introduce themselves in video form to attract other singles.
That idea turned out to be unsuccessful. So the founders decided to shift the underlying technology and make it a pure video platform. Their dating site grew to the giant it is today.
How do you do a pivot?
A pivot is not unique among young companies and start-ups. If you look at the classic examples, such a transition seems relatively easy. But appearances are deceiving. For example, a wrong pivot can drive your company into the ground and repeated pivots are often a hallmark of a failing company.
Pivots are difficult. That’s why it’s important to think it through carefully and start from a strong base. According to Eric Ries, there are three ways to approach a pivot:
- a segment pivot: here you tap into a new target group with your existing product. For example, when it turns out that your solution works better in B2B than in B2C. So your product remains the same, but your marketing, sales and development usually change drastically.
- A customer problem pivot: here your target group remains the same, but you use the knowledge you already have about them to sell them a new product. So your product changes, but your target audience remains the same.
- A feature pivot: this is where you take one part of your product and orient the entire company to that feature. This is often a difficult pivot because you have to know very well what your clients want and you have to write off a whole lot of your work. If you’re successful, you’ll come away with a much sharper product that will hopefully gain traction.
When is it best to pivot?
Timing, of course, is another important aspect of a pivot. When is the best time to radically turn your business around? That will always be a gut feeling decision, usually the need for a shift will be obvious. For example, when you keep missing goals and can’t get traction. Metrics and customer contact are critical. If you see that you are systematically getting into trouble there, it may well be time for a transition.
Another time may be when you do grow, unfortunately not fast enough. On the face of it there is little wrong, but that false sense of security can hide structural problems. Solomon Hykes, founder of Docker, compared it to cooking a frog.
“There was no dramatic, horrible situation. It was more like a slow-boiling frog situation, where you’re making progress every month, but you can’t help but think, could it be better? But you don’t really have a reference point, so you keep going. Because what are you going to do? You’re not going to give up. And so that’s where that seed was planted that it would eventually lead to the pivot, to Docker.“
Finally, with a pivot there is the risk of failure. What if one, or multiple pivots fail and your business doesn’t make sense? Then you may be faced with the choice of perhaps doing another pivot, or pulling the plug after all. Again, that’s not an easy decision, this blog from Y Combinator shows you four considerations you need to make.
- Do you have any ideas left to grow your startup?
- Can you drive that growth profitably?
- Do you want to work on the startup that results from that growth?
- Do you want to work with your co-founders on the startup that results from that growth?
If you decide not to re-pivot it may be the right choice. This decision is of course difficult, but it also has advantages. That way you don’t burn out and can put your energy into something new.
Want to know more about pivots? Here are some reading tips: