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.
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.
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.