Stefan Roock

All About Agile and Lean

August 19, 2012

Pivots in grown companies

Thesis: Pivots in grown companies are challenging

When you pivot in a real startup the situation is quite simple. The product team recognizes the need to pivot and then does the pivot.

In a discussion with Markus Andrezak I realized that the situation is quite different when you want to pivot in a grown company. Then the pivot often affects not only the product team but completely different departments. And therefore you may need to get the commitment of the CEO to pivot. In a larger company this may increase the time you need for the pivot to weeks or months.

An Example

Let’s look at an example of a marketplace platform with a transaction oriented pricing model like eBay or Amazon: The company earns money everytime a transaction is completed. According to this model the KPIs of the marketing department are based on transactions. The KPIs of the sales force may be based on new registered sellers.

Now let’s assume that in our imaginary example company revenues have stopped to grow. After some investigation the product team thinks it should pivot the transaction based model and just connect buyer and seller. While the product may need only minor modifications it changes nearly everything for marketing and sales. The marketing KPIs based on transactions become senseless and need to be replaced. For the sales force the change may be even more dramatic. Perhaps registered sellers are not that important any more. Perhaps there is even no need for a sales force any more?

The product team would not be able to make these changes happen within the company on its own. The changes would need the intervention of the CEO.

Rationale

The situation described in the example is not a special exception. It is the result of the nature of a pivot. A pivot is not just a modification to a product feature. Pivots address the product strategy – revenue streams, cost structure, key partners, target group, customer needs as well as key features.

The most aspects of the product strategy are built into a grown company. The revenue streams and key partners affect sales. Target group and customer needs affect marketing. The cost structure affects operations. And so on.

Therefore: In a grown company a pivot is a major change to the whole company.

The consequences are:

You need to analyze what parts of the company may be affected by the pivot.
You often need commitment or at least explicit support for the specific pivot by the CEO.
You may have to market your pivot to the whole company.
The pivot may take weeks or months.

Published by

stefanroock

4 Antworten zu „Pivots in grown companies”.

Bernd Schiffer (@berndschiffer)

August 20, 2012 at 5:21 am

Thanks for sharing your thoughts on this. For me it’s another reason not to have departments in the first place, but instead organize work in a network of crossfunctional teams.
mgaertne

August 20, 2012 at 7:00 pm

Thinking over your point, a pivot is intended to change the business model of a startup company. In a company where a lot of structure is also built around that business model, it appears logical to me that it will cause a major change in the whole company. But my explanation might just follow as hindsight from reading your blog entry. Thanks for sharing that.
Markus Andrezak

August 21, 2012 at 7:09 am

@Markus: I think Stefan is just trying to make the point very explicit that you see as given. Simply because, while our conversation it was getting very apparent how much a simple ‚product‘ change might affect all kinds of people in the company who could not even in the most silo less world (@Bernd, I guess your reflex against silos is too simple, see below) be involved in the simple product change.

When a product change is indeed e.g. like in the eBay example leaving the transaction model just a little bit core metrics of the business model, the platform will change and have a deep influence over the people doing the work – outside of any product influencing team. Changing the view on what they have been doing for years – it sound strange, but you can not stress that point enough considering the people living in a system.

@Bernd I do not see where silos get into the picture. All I see in Stefan’s post are specializations, e.g. Marketing. I do hope they exist fro healthy enterprises. Regardless of the org structure, silos or not. I hope Marketing has KPIs or objectives and a purpose. they will change with a business model change, again regardless of the org structure. That has to be considered. Regardless of the org structure, different specializations bring different eduction, bring other cultures. In RL that happens. These ’silos‘ are much more persistent than ‚functional‘ or ‚org‘ related ones. But … they have to be respected and only sloooowly changed. But first of all, where do you silos described in Stefan’s post? Isn’t that really a ’silos are bad‘ reflex?
Leseliste zu Lean Startup « Stefan Roock

November 7, 2012 at 9:15 am

[…] Roock: “Pivots in grown companies“, Blogpost, […]