Pivot a Startup: How to Transform Your Business Model

Key takeaways

• • The pivot meaning in business is a strategic decision to change the direction or focus of a company. It usually happens in response to market conditions, customer feedback, or other external factors.
  • Successful pivot requires careful planning, clear communication with stakeholders, quick tests of new ideas, and some flexibility.
  • Startup pivot also comes with risks, such as the potential loss of existing customers and increased costs.
  • Many successful companies, including Starbucks, PayPal, and Groupon, have pivoted their business models and become successful in the startup world.

What does pivot mean in business

Firstly, let’s define the meaning of pivot in business and startups.

Pivot, in the context of digital products, refers to the strategic decision to change the direction or focus of a company. This usually happens in response to market conditions, customer feedback, or other external factors.

Pivoting happens in many aspects of a business. Sometimes, this change can impact the whole company or only a part of it, such as:

• • business model
  • products
  • target audience
  • marketing strategy
  • other aspects.

For example, a startup discovers that its initial target audience isn’t responding to a product as expected. To stay afloat, they have to pivot: either find a new market segment or adjust the product.

Another example is when a startup realizes that the technology they’re relying on is quickly becoming outdated, and innovations appear as they’re developing a product. To avoid being left behind, they choose to adopt the latest tech.

How do you know when it is time to pivot a startup

A startup pivot does not just happen out of the blue. Here are 5 common signs that you need to change the course of action to stay in the game.

1. Lack of demand

If your product doesn’t receive any traction from users, it can mean many things: maybe your target market is too narrow, or the app is just not convenient and intuitive to use. But there is one solution: analyze the market size and pivot before your startup becomes completely irrelevant to the audience.

2. Sudden market changes

Imagine, a major competitor entering your target market with a similar offering but much lower prices. If you cannot match that offer, you will have to adapt and find new ways to attract customers. For example, you can: implement new key features, review the business model, consider customer segment pivot, or find better distribution channels to make your services and products more accessible.

3. Update of industry regulations

Some industries are more regulated than others. For example, in healthcare, fintech, or data analytics, there are many laws that dictate how your product should operate and handle sensitive and protected information. Any change in those regulations can potentially impact your product, from minor tweaks to major updates and full startup pivots.

We once developed an online marketing psychotherapy service for users in the UK in compliance with GDPR, HIPAA, the Data Protection Act, and other healthcare standards. If any of those were to change, the business pivot would be inevitable.

4. New promising market opportunities

Market opportunities are macro-level trends that open up in your niche and can lead to an increase in a new product or feature. Think of a social media startup as an example. As new platforms like BeReal or TikTok emerge, businesses have to implement updated key features and APIs to keep up with the changes.

5. Lack of funding

Another scenario for a business pivot is a lack of capital to operate. If a startup runs out of money and needs a new approach to attract investors, it might be time to be honest with yourself. Do you truly know your users, their needs, and their pain points? Would investors believe in your end product?

4 tips on how to pivot successfully

A successful pivot is a change that can bring positive results for the product. To be able to stay on course during the process and measure the impact, we recommend the 4 following strategies.

Develop a strategy: from small to big

Identify the areas that need to be changed first and make a step-by-step plan. But don’t go all in yet — if you just replace one version of an app that’s not working with another that still has some issues, you’re at risk of losing loyalty, users, and finances. Start with small steps that fix pressing problems and move on to big changes later.

Maintain clear communication with stakeholders

This includes your team members, investors, and customers. Give them a heads-up about the changes that are coming and stay transparent — explain why you are shifting things around and what benefits it will bring for them.

Test your new direction quickly and don’t waste money

The more you test before implementing changes, the safer you are from disappointing results. There are many ways to test out the updates: MVP and project discovery are the 2 most popular ones.

The project discovery phase is a comprehensive analysis of the market and users before the launch of a product. The main focus is to research and collect information about the market, user needs, and industry standards.

Monitor the results and stay flexible

Make sure to set key performance indicators (KPIs) and keep an eye on results. Be prepared to integrate if the pivot doesn’t go the way you wanted it to.

5 risks associated with pivoting

Business pivot comes with certain risks. We have identified 5 potential pitfalls you should keep in mind, making that sharp turn.

1. Loss of existing customers and market share

When you pivot, you are essentially changing your product or service offering. What about your loyal customers who liked how things were before? Some might not be too thrilled about the new direction and leave. It’s like telling your regulars at a pizza joint that you’re now switching to selling sushi — some might stick around, but others will definitely head towards a competitor.

2. Team resistance and loss of key employees

​​Some employees might not be on board with the new vision and even leave the company because of it. Their confusion and worries can be understood: imagine you came to work for a social media platform, and suddenly they are pivoting to become a blockchain company. That’s why transparent communication and strategic thinking are important to explain the change and offer opportunities to acquire new skills for those who need them.

3. Increased costs and resource drain

Pivoting always comes at a cost: implementing new technologies, hiring new experts, or completely rewriting a marketing strategy. Be prepared for some serious resource allocation and potential budget overruns.

4. Damage to brand reputation and credibility

When you pivot, you risk confusing or alienating your audience. One day, they just get back to a product they are used to, and everything is different. They might stay afterward, but the trust will not be there. To prevent this reaction, plan pre-release communication and crisis management strategies if not everyone likes your new direction.

5. Uncertainty and potential failure in the new direction

No one guarantees that pivoting will be successful. It depends on too many factors: timing, market conditions, audience flexibility, and planning. Stay flexible and aware of a potential failure — it’s always great to have plans B and C.

What is the pivot process like for startups

Business pivot can take anywhere from a few days to several months, depending on what kind of changes you are implementing. Here’s what steps the process typically includes:

1. Identify the need to pivot

First, you need to recognize when it’s time to change course. Maybe your product isn’t gaining traction, market conditions have rapidly shifted, or it turned out your initial assumptions about your target audience were way off. Whatever the reason is, acknowledging the need to pivot is the first step.

2. Analyze market data and customer feedback

Next, look into market data, customer feedback, and industry trends — key performance indicators of your business. Does the number of active users go up or down? Is there a feature customers are constantly requesting? This information will be a roadmap for the pivot.

Two common types of market research for a startup are:

• • Primary research — when you collect information directly from your audience
  • Secondary research — when you analyze already available data provided in reports or public databases.

3. Brainstorm new directions and strategies

Get together with a team and generate a bunch of ideas for a pivot. A good tip is to welcome all ideas and not to give any comments or evaluations during the brainstorming, at this stage — the more ideas, the better. Then, take a look at the suggestions and select ones that fit your pivoting goals and require realistic resources.

4. Develop a new business model

If your pivot strategy includes a new business model, review your value proposition, target market, and revenue streams. Will you need to change your pricing strategy? Do you need to target a different customer segment? These are the questions you’ll need to consider and answer.

5. Test the new concept with an MVP

An MVP, or minimum viable product, is a basic version of your new product or service. You can get it in front of potential users and test the waters before implementing the change. Then, based on the feedback, you can refine the concept or release an MVP as is.

6. Implement the pivot and scale the new direction

If your MVP is successful, you can implement the pivot and commit to a new vision. For example, redefine a marketing strategy for the product or even rebrand the company. As you implement these changes, keep a close eye on user response and be prepared to make quick adjustments.

3 famous examples of successful pivots

Many startups pivoted not once, not twice, but multiple times before finding their niche and becoming successful. Here are 3 well-known examples.

Starbucks

Starbucks started as an equipment retailer, selling coffee machines, espresso beans, tea, and even some spices. It wasn’t until the CEO, Howard Schultz, took a trip to Italy and visited a coffee shop for the first time.

He was inspired by the idea to bring Italian coffee culture to the US and switch their business model from a simple retailer to a café. That’s how the company started the product we know them for — signature drinks like lattes, frappuccinos, and americanos.

PayPal

PayPal pivoted at least 5 times in the first 15 months of its existence before finding the innovative business model that led to its success. The company started as an encryption provider for phones, then switched to cash operations over the phones. The final pivot is to focus on email and web-based payments. Ultimately, PayPal broke through the startup world and became a pioneer among peer-to-peer payment platforms.

Groupon

Groupon was originally called “The Point,” a social media platform designed to get groups of people together to help each other with problems. It wasn’t really successful, but the community aspect is what inspired the founders to create Groupon, a website and mobile app that offers coupons, cashback, and group deals for offline and online shopping.

Wrapping up

Many startups come to a point where pivoting is the only way to move forward. Whether it happens due to new industry regulations, increased competition, or lack of traction from users — pivoting needs to be well-planned and thoughtfully executed. The problem is recognizing it in time and having a plan.

If you want to decrease your chances of pivoting a released app and changing everything, consider continuous product discovery services. The strategy is based on customer feedback: regular interviews with the users, surveys, and data analysis are needed to conduct interactive research and come up with improvements during the development and after the launch.

About us

Purrweb is a full-cycle development company with 10+ years of experience spanning healthcare, fintech, logistics, real estate, social media, and many other niches. We build user-friendly, intuitive, and reliable digital products, from project discovery and planning to market launch and post-release maintenance. You can look through 50+ examples of them in our portfolio. 

If you’re looking for a partner to help you with a product release or pivot, we’ll be glad to help. Fill in the form and we’ll get back to you within 48 hours.

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