The Anatomy of a Pivot
Imagine this scenario—you identified a problem 99 percent of your friends agree is a massive problem. You came up with an idea for a product to serve as solution. You challenged yourself to create a coherent investor deck. You then hustled at numerous investor events, pitching your idea passionately to multiple investors. Every time you had stars in your eyes, and showed them that if they’d only believe in you, you would leave a mark on the global start up scene. But then one “no” turned into few, you realized you lacked resource, you got tired and lost momentum, then the few “no's" turned into more “no's." This is was Adrian, the founder of Fuse, one of the start ups at 8 Devonshire Square, in London.
I have been a part of the startup eco-system for years now, and I find many startups will find themselves into exactly this situation. Founders find themselves at a dead end, and realize they need to make changes. These changes, some call, the “pivot.” This word gets tossed around a lot, so let me define it:
A pivot is a fundamental change in strategy. It is not a change in tactics. We’re changing what we’re selling and/or to whom we’re selling it and/or how we are selling it.
There are three key elements we can change to achieve a pivot:
We can change our TARGET. I joined Uber at a time when it looked pretty much what it is today: the mostly-Prius-operated car service, available at a tap of a button. But it didn’t use to be this way. In its first iteration UberCab was a premium service, operating larger and more luxurious vehicles. Uber realized to achieve mass adoption, they needed to think with a different target in mind, one that is more.. mass. Moving to UberX (and the Prius-type of vehicles!) was a deliberate pivot, ensuring a level of utilization, which could be achieved on a global scale. This pivot set the pace for a global expansion with domination in mind.
Second, we can change our PRODUCT. Yelp started as an automated system for direct recommendations from your friends about places they’ve been to. As this variation of the product wasn’t picking up, the founders noticed that people had an intrinsic value to write comments and reviews of local business. The automated system didn’t matter; the fact that it was local did. Yelp changed its product fundamentally, to become the crowd-sourced 3rd party review site of local restaurants we know it to be today.
And last, we can change our BUSINESS MODEL. Netflix is a great example of a business model pivot, changing from a mail delivery DVD service (already innovative for its time) to a SaaS model. In this proactive pivot—Netflix was already a leader in its market—Netflix decided to experiment with live streaming. Before the world was fully ready (broadband wasn’t up to speed, licenses for top shows were not signed), Netflix had rolled out a product to test out the creation of a whole new category. Today they motivate binge watching and numerous pop-culture memes about “Netflix and Chill.”
Whether the pivot comes at the pre-launch stage, or comes once a company has gained initial traction, it follows a similar structure, and ends up changing one or more elements of a company.
Recently, we gathered at our Labs location at 8 Devonshire Square to help Adrian plan his pivot of Fuse. Starting a pivot, it won’t be always obvious which of the three key elements (Target, Product, Business Model) need to change. So we dug into it.
To figure this out we took the following steps to help Fuse:
1) Audit of the original proposition—what is the current state?
2) Define the issue—what is not working?
3) Solution—what is the one thing we need to solve? And what is the concept?
4) MVP—what are we going to test?
Here’s how we went through the steps:
1) Audit of the original proposition—the original idea of Fuse was to tackle the problem that organizing group activities is very cumbersome. It takes time, effort, and up to nine apps to handle the full planning, consensus, booking, and payments of the user journey. The solution in its current state is a marketplace, operated by two apps (a B2C and B2B one), allowing consumers to browse restaurants, theatres, activities, vacation spots etc, inquire about availability of and secure consensus in the group, book the activity, and handle the payment. Suppliers (restaurants, etc) would be listed on the platform, and the company would make money off the transactions and the listings of restaurants etc.
2) Define the issue—the main points of contention from investors and to-be users are that it is a complex idea with lots of moving parts; it is a competitive market; and the lack of resource (technical talent) has pushed an MVP stage further in time leaving with no insight on what works. While a company can play in a wider ecosystem, a competitive set with such varied functionality and user targets (from Whatsapp, to Facebook, to TikTok, to Doodle, to Splitwise) demonstrates a lack of focus. A good way to gain clarity is define the target and a killer use case. To cut through the clutter, we asked ourselves two key questions: who is the target? And what is the one killer user case Fuse will have that will make them drop Facebook, Whatsapp or Doodle, and go directly to Fuse and use its product?
3) Solution—simplify, simplify, simplify! We wanted a simple and easy to use solution. In the user journey of finding, agreeing, booking and paying for a group activity, we hypothesised the agreement and booking stage are the crux of the experience, and are yet not nailed by any other service in our market (there are plenty of solutions for finding experiences or group payments). An early millennial / gen Z audience who want to agree and book on the fly, would find a chatbot experience intuitive and easy to use (we had numbers for this trend). It also nailed down an idea that a key benefit of this new product would be the semi-automated experience. You’d have to confirm, what the product already knew to be a viable option. In effect, we were looking to combine a type of a “Automatic Doodle + OpenTable” in one solution.
4) The MVP—emerging from a passionate discussion, we now want to test the hypothesis that reaching group consensus will be easy once it is semi-automated. Enter the personal concierge chat bot.
The MVP would look something like this:
Chatbot, that integrates with one app (Whatsapp/FB messenger etc), with the following capabilities:
Interrogate people’s calendars
Find out when people are free
Allow them to vote on a restaurant
Book the restaurant
Measuring the conversion of users through these steps would be the key KPIs to find out if this is working.
Looking at the outcome of this, we narrowed down all of the three elements – the target became much clearer, with one key use case in mind; the product was cut in “functionality” leaving only a few key capabilities and one interface; and the business model became focused on a listing fee only. We estimated we could get to an MVP in about a month.
On November 18th, Adrian pitched this new concept at HSBC, in front of leading entrepreneurs who are all ex military, and some of whom had been in the SAS for 19 years. Four start ups pitched to a wide audience, for a total of 30 minutes of presentation, Q&A and feedback. After a smooth presentation, Adrian’s new pivoted concept came out unscathed, with a lot of enthusiasm and newly fuelled optimism. Time will tell, but we are feeling good about this one.
I want to offer one last observation: a pivot requires utmost discipline. Changing a business requires changing a mindset. Typically changing a mindset takes a long time, but in a start up, we don’t have time or resource to move slowly. We need to cut our losses, focus on what we have and are good at, and be very disciplined with the way forward. This means clarity about where we want to go, how we want to get there, and how do we measure the distance we’ve gone. Lack of discipline can kill a pivot. Distraction tries to sneak in, manifested as adding too much to the product, or serving too many types of people, or in too many use cases. Don’t let it spoil the pivot.