When do entrepreneurs pivot and how do they do it?

In the world of startups, no entrepreneur can survive without needing to adapt. No initial business model is perfect, and as people’s needs change and technology evolves, so too must the entrepreneur’s ability to adapt, as well as pivot, as they learn more about the market that they work in. 

Yet regardless if the change is great or small, altering the direction of one’s business is by no means an easy task. It is in fact quite the opposite, and when executed poorly can be the cause of many entrepreneurs’ downfall. To ensure success, the best entrepreneurs not only know exactly when to pivot – but how. 

But when exactly is the right time to pivot, and how is this achieved? Why do companies pivot at all? And just what separates a good entrepreneur from a bad one when it comes to pivoting?

What does it mean to pivot?

At its most basic level, a pivot can be defined as a shift in the strategy of an entrepreneur’s business. This could be a move to a new product or service, although other changes such as in supply or the organisational structure itself are also not uncommon.

However, what is often debated between entrepreneurs and business academics is to what degree does a change need to occur to constitute a pivot.

For example, does a change in monetisation constitute a new pivot? It’s not uncommon for businesses to move from focusing on individual sales to a subscription model, yet there is debate as to whether this one sole change is enough to be defined as a pivot. Many academics instead see a pivot as a much grander change in a business’s goals and vision, such as a product-based business moving to an entirely service orientated one.

While the truth lies somewhere in the middle, what is clear is that the former is far more common in the business world than the latter, with startups making lots of small incremental changes over time as opposed to one large drastic change. 

When entrepreneurs do conduct drastic, large scale pivots, and do so successfully, they often become the prime examples of what constitutes a pivot. The reality, however, is that these forms of pivot are the exception to the rule – not the standard.

The myth of the entrepreneurial pivot

Perhaps one of the most well-known examples of pivoting is Twitter, which originally started out as a podcasting platform known as Odeo. Launched in July 2005, it wasn’t long before Apple announced iTunes, effectively killing off Odeo before it had even begun.

It became clear that a pivot, and a drastic one at that, was needed. After many days working on projects in small groups, entrepreneur Jack Dorsey put forward his idea to turn Odeo into a different service altogether. Fast forward to March 2006 and the Twitter we have all come to know was officially launched and would go on to become one of the biggest social media platforms today.

Twitter was able to pivot effectively due to understanding the resources they currently had and utilising them in a new way to their benefit. The ability to do so is vital for an effective entrepreneur, and we see this across other well-known businesses too.

For example, prior to being the video-sharing platform we have all come to know, Youtube initially started out as a dating website. When they realised a change was needed, they focused on their strong video sharing capabilities to pivot into the platform we have today. The ability of both companies to understand their key competencies allowed them to identify how to pivot. 

It is important to remember though that these pivoting success stories are few and far between, yet the excitement they create that extends beyond the business world and into the mainstream can be dangerous in creating a reality that is in fact very different. Entrepreneurs should begin with an understanding of this. Pivoting is more often a trend of continued incremental changes as opposed to one large one. 

Why do companies pivot?

Pivots occur out of a need to change some aspect of a business’s strategy, such as underperformance with the current business model, as well as changes in the environment. However, the reasons why these changes are needed vary drastically depend on the industry we are looking at. At the start-up stage, ventures pivot to develop an idea that works, one that will sell to customers and make profits or attract investment. 

In more developed ventures, those that have already found something that works, the most common reasons entrepreneurs pivot is the need to grow, with the solution being to launch a new product.

This is especially prominent in IT and tech-related industries, where naturally the product life cycles, and the software surrounding them, change very quickly. The need to continuously grow, keep your audience engaged, remain ahead of the competition and offer a product that offers an incentive for choosing it over another is therefore not a simple task. It relies on these businesses not only being able to pivot, but to do so quickly enough that they are ahead of the curve. 

What has become apparent more and more often in the areas of digital transformation however, is that pivoting business models are not confined to one or any one group of industries. In fact, with businesses needing to embrace and take advantage of digital more and more, we see pivoting becoming common even in industries where historically pivoting was not often seen, such as the automotive and telecoms industry.

What of industries that do not rely on digital as much? Those that don’t, such as more ‘traditional’ industries like mining, tend to pivot far less due to less of a need to move to a new product. Industries such as mining also benefit from the fact the products they offer (gold, clay and aluminium for example) are likely to always have a high demand in our economy. 

This is not to say we have not seen examples of those in the mining industry pivoting in the last few years. Some have moved away from their traditional oil and as roots and pivoted towards becoming energy companies. A Norwegian O&G company by the name of Statoil is one of the greatest examples of this, renaming itself to Equinor as part of a pivot that saw them explicitly focusing on alternative energy generation sources. 

Adapting during COVID-19

Entrepreneurs cope with uncertainty constantly. For example, releasing a new product into a market they don’t fully understand is a fact of life. Will people want it or have their preferences changed since development started? The ability of entrepreneurs to deal with such levels of uncertainty places them more favourably compared to traditional businesses. 

However, if the pandemic has taught entrepreneurs anything, it’s the sheer difficulty to problem-solve when everything is constantly changing around you. 

If traditional circumstances would demand entrepreneurs to pivot, the pandemic has moved pivoting to a new level entirely, forcing entrepreneurs to reassess all possible dimensions of the challenge. As such, COVID-19 has created an environment where only those entrepreneurs able to rapidly adapt their understanding and respond to these changing needs are able to reap the benefits.

With many establishments no longer needing to purchase products from them, breweries were one industry that found itself needing to pivot as a result of Covid. The entrepreneurs behind many of these breweries realised they could repurpose many of stock and turn it into something that was much more in demand – hand sanitiser. Brewdog, Absolut Vodka, as well as many microbreweries are all examples of successful pivots that were reliant on them being able to assess the current situation alongside their own competencies, resources and pivot quickly.

When and how do entrepreneurs pivot?

The frequency with which an entrepreneur is able to pivot therefore plays a huge role in how likely the venture will be successful. However, frequency alone, be it too often or too rarely, is not what separates a good entrepreneur from a bad one.

The best entrepreneurs know both when and how to pivot effectively. Pivoting happens quickly, but this does not mean it is a decision that should be made without great thought and a deep understanding of different scenarios. Pivoting too often means you may end up never sticking to a position long enough to test it out and apply that knowledge, while pivoting too rarely may make you run out of resources while working on something that doesn’t work.

It is an entrepreneur’s ability to, in the very early stages, synthesise all the available information into a long term vision; not just the information obtained from the last point of discussion. The best entrepreneurs will then be able to understand all aspects of the business and model different scenarios, taking into consideration all the key areas typically found within a business model. 

People like to follow simple steps to a solution, yet the world of pivoting business models is devoid of simple cookie-cutter recipes for success. Entrepreneurs understand this, which is why they are able to spot the need to pivot, layout the different scenarios available and play them out in their head. Based on what they find, even in the face of ambiguity, they are able to critically select the best way to pivot and act upon it quickly.