When COVID burst upon the scene in early 2020, startup ventures faced dramatic shifts in markets and the importance of agility became axiomatic: If you wanted your venture to survive, let alone thrive, pundits (including ourselves) almost universally advocated deep internal cuts accompanied by pivots to new markets and business models. Many business owners, however, view a strategic pivot as a last resort. After all, if your business is on a positive trajectory already, why consider moving in a different direction?
But pivoting isn’t just for startups on the brink of exhausting their markets. Particularly in the modern business environment (which is increasingly shaped by rapid technological advancement and constantly changing consumer behavior), the ability to change direction quickly and deliberately is key to staying ahead of the competition.
A pivot doesn’t have to be a 180-degree turn or a complete transformation of your business model. It could mean changing your marketing strategy or focusing your product development efforts on a feature that has generated the most traction with customers. Of course, even a relatively small change in business strategy can be tough to pull off, especially if it runs counter to the existing expectations of investors and other members of your team. However, all of your employees, customers and investors will be more receptive to a proposed pivot if your new direction remains in line with the overall mission and vision you’ve established for your company. As long as your purpose is clear, you’ll find it much easier to explain adjustments to your approach. So here are some thoughts to consider:
Immediately slow down. Ask yourself is it time to make a change. Entrepreneurs tend to run at breakneck speed. However, when their markets started to melt down due to COVID, rather than slamming on the brakes, they downshifted in order to listen to customers, track the market, conserve resources, and enhance their ability to change direction if needed. You should keep your team’s eyes sharply focused on the business long-term vision and avoid making rash decisions that might compromise that vision (see my past posts on inflection point testing).
Take time to reaffirm your vision. Slowing down also allows business owners to make double sure that their view of their future marketplace was still valid. The decision to pivot shouldn’t be taken lightly and should always be preceded by careful thought and discussion with your team. If you do ultimately decide on a new course of action, don’t hesitate to pursue it. Instead, embrace the opportunities ahead and fully commit to seizing them. Your new trajectory could involve any number of initiatives.
Watch new data like a hawk. Evaluate marketing return on investment. Not all of your marketing initiatives are going to succeed immediately, and effective marketing is often a process of experimentation. Business owners must continually evaluate their marketing tactics to ensure the best use of their limited resources. Measuring digital ad spend is constantly evolving along with the marketing and technology landscape. Just because an investment in paid search wouldn’t have generated as much ROI in 2020 doesn’t mean it won’t in 2022. By measuring the ROI of each tactic in your marketing mix, you can see what is and isn’t working for you and make necessary changes to your campaigns to bring in more revenue.
In general, many different industry businesses aim for a 5-1 ratio when it comes to ROI on marketing spend. And if revenue is anything less than twice your current spend on marketing, then you’ll be hard-pressed to turn a profit, as the underlying costs of product development and distribution will likely lead to a negative return on your balance sheets. On the other hand, if your revenue-to-marketing spend ratio is around 10-1 or better, you likely don’t need a pivot because your marketing is clearly working as is.
Test for weaknesses. If your existing product has failed to achieve the traction you’d hoped for, all is not lost. First, try to pinpoint the major barriers to adoption. Start by obtaining feedback from current and prospective customers to gain a better understanding of their needs. You can do this through focus groups, usability testing, customer surveys, or one-on-one interviews conducted in person or over the phone. With customer input, you might find that a slight modification to your offering—the addition or removal of a particular feature, for instance—is all that’s needed to achieve product-market fit.
Feedback from customers might also reveal a significant need in the market that’s not currently being met. You could redirect your resources toward developing a new product or service that fills that gap or look for partnerships with other companies that could help you capture this underserved market. You might also find that customers are in fact already satisfied with your product, and that your lack of traction is simply due to a lack of awareness. In that case, it might be time to modify your marketing approach.
Businesses should apply increased scrutiny not only to the marketplace, but also to their own internal points of failure. You can stay the course only if you stay ahead of the organizational disruption that external shocks can cause. A pivot could entail making changes to internal business processes to make them more efficient and effective. Any time you can remove manual work related to accounting, payroll management, or other administrative functions, you give employees more time to focus on work that can more directly impact the business’s bottom line. Similarly, you could invest in marketing automation tools (see my past posts on CRM tools) to expand your reach and allow your marketing team to focus more on strategies for growing your business.
Today, there are more technologies than ever that are available to business owners seeking to do more with less. However, don’t invest in software that you don’t need. Talk to your employees to identify the tasks that are taking up most of their time and decide whether it could be better spent elsewhere. If so, evaluate the tools available to determine which ones are best suited to fit into existing processes and workflows.
Non-pivoting is a choice.
Methodically not-pivoting can pay off…that is in the right situation. Staying the course, with minor adjustments, has proved to be a winning strategy for a lot of businesses. The lesson here is that when a crisis hits, it pays to resist knee-jerk reactions on how to handle external shocks and ask what is going to work best for your company, based on the particular realities of its business. Ignoring the playbook of rapid cuts plus strategic pivoting can be the smart move.
For more thoughts on pivoting, check out What Is A Pivot.
Copyright ©John Trenary 2021