Pivoting Successfully: When to Change Business Model and How?

What Is a Pivot in Business?

A business pivot is a strategic change made to the direction of a business, aimed at testing a new approach or model after assessing feedback and performance. This could involve modifying product offerings, altering target markets, or even changing the entire business structure.

Several well-known companies have successfully pivoted, demonstrating the power of strategic reorientation. For instance, Netflix began as a DVD rental service in the late 1990s and pivoted to a streaming platform in 2007, ultimately transforming the entertainment industry.

Similarly, Slack started as an internal communication tool for a gaming company but pivoted to become a product used by millions of businesses for team collaboration and messaging. You’d be surprised to know that even YouTube started as a video dating platform and transformed into an open-source video-sharing platform.

This article will explore the factors that indicate when a business should consider pivoting and the various strategies for implementing a successful change. We will look at the signs suggesting the need for a pivot, the steps to take when executing one, and how to evaluate the outcomes of such strategic decisions.

Why Is Pivoting Necessary?

A well-timed pivot can save a business from stagnation or decline, enabling it to seize emerging opportunities. As markets evolve and consumer preferences shift, organizations that are flexible and open to change can thrive while others may falter.

BlackBerry, for example, was an industry leader in smartphones but failed to pivot with the emergence of touchscreen devices and app-based ecosystems. The company continued to focus on its physical keyboard models and security features, lagging behind competitors like Apple and Android, which led to its market share plummeting and a shift away from consumer phones.

Pivoting fosters innovation, allowing companies to experiment with different strategies and learn from failures to ultimately find a successful path forward.

Right Time to Pivot: When to Change Business Models?

Knowing when to pivot your business model is critical for survival and growth in a rapidly changing market landscape. Here are key indicators that suggest it may be time to make significant adjustments:

1. Declining Sales or Market Share

If your sales are consistently declining or your market share is shrinking, it signals that your current business model may no longer be effective. This drop could be due to changing consumer preferences, increased competition, or new technologies that have altered the landscape.

For example, IBM shifted from hardware sales to a services-based model in the 1990s as the market moved away from mainframe computers. This pivot allowed IBM to regain relevance and continue growing despite declining hardware sales.

2. Customer Feedback Indicates Dissatisfaction

Regularly gathering customer feedback is vital. If you notice recurring themes in customer complaints or insights that highlight dissatisfaction with your products or services, it may be time to pivot your offerings, targeting these pain points to better meet customer needs.

Check out our step-by-step guide to conducting market research for a clearer understanding of how to get the customer insights you need to make key decisions.

For instance, Starbucks faced backlash when customers began to express dissatisfaction about the speed of service. In response, they pivoted to focus on enhancing mobile ordering and pay systems, increasing customer satisfaction and loyalty.

3. Emerging Market Trends

Keeping an eye on market trends can reveal opportunities for innovation. If you identify trends that align with your company’s strengths but are outside your existing model, this could be a cue to pivot. For example, growing interest in sustainability may encourage traditional businesses to adopt more eco-friendly practices.

4. Technological Disruption

Rapid advancements in technology can render existing business models obsolete. If you observe competitors or new entrants leveraging technology to gain an advantage, it could be a strong indicator that your business needs to adapt.

For instance, many industries are experiencing digital transformations, making it essential to reconsider how you deliver products and services.

When Kodak failed to adapt to digital photography, it declared bankruptcy in 2012. However, a successful pivot is illustrated by Adobe, which shifted from selling perpetual software licenses to a subscription model with Adobe Creative Cloud, capitalizing on the rise of cloud software and ensuring steady revenue growth.

5. Strained Resources

If your company is facing resource constraints, it may be necessary to pivot. Hootsuite originally focused solely on social media management but expanded its platform to offer broader digital marketing tools when it realized the need for more comprehensive services among its customer base.

This pivot allowed them to utilize existing resources more efficiently and tap into a larger market.

Recognizing the right time to pivot requires careful observation, analysis, and a willingness to adapt. Having strong intuition, data-supported facts, and solid business acumen are essential.

For instance, GrowthAssistants successfully pivoted from general services to offering highly specialized virtual assistant solutions for entrepreneurs and startups, resulting in them generating $13M in annual revenue.

Join Ownerpreneur today for free access to in-depth case studies on successful pivots and learn how to navigate change in your own business.

Executing the Pivot: How Do You Change a Business Model?

Changing your business model is a significant decision that can drive growth and adaptability in a changing market environment. Here are steps to effectively navigate this transformation:

1. Conduct a Thorough Assessment & Learn from Past Mistakes

Analyze current performance: Evaluate your existing business model’s strengths and weaknesses through performance metrics, customer feedback, and market analysis.
Identify trends and opportunities: Research industry trends, competitor practices, and emerging technologies to identify potential opportunities for change.

2. Engage Stakeholders

Involve key personnel: Gather insights from employees, management, and stakeholders who understand the nuances of the current model.
Collect customer feedback: Reach out to customers to understand their needs and preferences, which can guide your pivot. You can conduct surveys, study reviews, or get in touch with them directly.
Inform your team: Ensure that all employees understand the reasons for the change and how it will affect their roles.
Engage customers: Communicate with your customers about the upcoming changes and how they will benefit them, ensuring a smooth transition.

3. Define Your New Business Model

Establish clear objectives: Outline the specific goals you want to achieve with the new model, such as increasing profitability or enhancing customer experience.
Choose a suitable framework: Select the business model that aligns with your goals, whether it’s subscription-based, freemium, e-commerce, direct sales, or a different structure.

4. Develop a Strategy for Implementation

Create an action plan: Outline steps, timelines, and responsibilities for the transition. Include staff training who will be impacted by the changes.
Allocate resources: Identify the financial, human, and technological resources needed to execute the new model successfully.

5. Test the New Model(s)

Implement a pilot program: If possible, start with a pilot test of the new business model in a controlled environment to monitor performance and gather user feedback.
Iterate based on feedback: Use insights from the pilot to make necessary adjustments before a full-scale rollout.
Launch multiple MVPs: Consider developing multiple Minimum Viable Products (MVPs) simultaneously to test different aspects of the new business model. By creating simplified versions of your offering, you can gather varied feedback on what resonates best with the target market.

This approach encourages innovation and allows for experimentation with different features, pricing strategies, or customer segments. Testing multiple MVPs can help identify the most promising direction before committing fully to one model.

6. Monitor Results and Adapt

Track key metrics: Continuously assess the performance of the new business model using defined KPIs to determine its effectiveness.
Remain flexible: Be prepared to make ongoing adjustments based on performance data and market feedback to optimize the new model for success.

7. Gather Insights for Future Adjustments

Conduct post-implementation reviews: Evaluate the overall impact of the new model to understand what worked and what didn’t.
Cultivate a culture of adaptability: Encourage ongoing innovation and flexibility within your organization to remain responsive to future changes.

Conclusion

Business operations are inherently unpredictable, making adaptability vital for success. We explored critical indicators signaling the need for a pivot and provided actionable steps for executing a successful change.

We also discussed conducting a thorough assessment of the current business model, engaging key stakeholders, defining a new strategy, testing new models through pilot programs, monitoring results, and gathering insights for future adjustments.

Following these steps, organizations can remain agile and responsive in a continually evolving marketplace, ensuring long-term sustainability and growth.

For example, F uture.co successfully pivoted by combining fitness coaching with cutting-edge technology, adapting to changing consumer demands, and thriving in the digital fitness space.

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