Pivot Or Die: The Founder’s Dilemma
In a startup, instead of being organized around functional roles, you have a team of technical and creative minds. Development teams and sales teams have their own iterative process; customer development and agile development respectively. Thereafter, the two teams are joined together into this experiment focused on finding the quickest path to a stable cash flow. Taking this approach allows startups to increase their odds of success by having more “pivots” before they run out of resources. It elongates the runway without raising additional cash.
Let’s take a moment to define “pivot”, because you will see this word used frequently throughout this post. A “pivot” is the release of a more focused iteration of a product before a company runs out of cash.
Now, let’s get back to the subject.
Increasing iterations is a good thing – unless you are going in a circle. The hardest part of being the head honcho is developing the intuition to know when it’s time to change direction and when it’s time to stay the course. That’s why a founder’s first priority must be learning to tell the difference between progress and wasted effort.
This is the pivot in practice.
Changing the direction of the company is a hard thing to do, and should be not be taken lightly. Some startups avoid getting customer feedback for this reason: they are afraid that if early reactions are negative, they’ll be “forced” to abandon their vision. That’s not the goal of a startup. We collect feedback for one reason only: to find out whether our vision is dream or a real opportunity. The quandary of thought and the butterflies in your stomach that follow are the natural feelings you feel right before a pivot.
This epiphany typically involves the following self-reflections before a decision is made: did we find a market for the initial product? Did the customer tell us what the product should look and “feel” like? If the answer to these questions is negative, it is now time for you to change your vision.
How do I change direction? And how do you pick a new direction? These are challenging questions, among the hardest that an early startup team will have to deal with. Moreover, startups fail because the founders can’t have this conversation – they either blow up when they try, or they fail to change because they are afraid of conflict. Both can kill a startup.
A successful pivot is caused by the direction change, but must be grounded in what you’ve learned. You have to keep one foot in the past and place one foot in a new future. Over time, this pivot will lead you far into left field, but you’ll still be able to detect common features that link each product version.
Vinylmint faced the need to pivot because, we learned that our growth would exhaust our resources. We weren’t going to be able to raise cash fast enough to fund a freemium, especially since East Coast investors are all about the business model behind the business. Furthermore, we had to re-evaluate the technical architecture of version 1 of the technology, which provided a central place for musicians to record music online (I will be the first to say, the “Lean Startup” is not a one size fits all solution). We used a bunch of “off the shelf “ technologies to launch V1, but noticed they weren’t all as scalable as we would have liked, and some pieces wouldn’t play well together over the long run. This encouraged our pivot to a contest platform and sound library for the sounds we already collected. I wish I could take the credit for these pivots, but the reality is that my divine intelligence, or that of my co-founders did not cause them. Instead, they were made possible by taking the scientific approach to risk analysis and market traction. More than anything, it made us evaluate necessity during a time of resource scarcity, the mother of innovation.
Here’s what it looked like.
Vinylmint had a roughly 3-month-long development cycle that included 4-6 sprints a month. Each sprint was punctuated by a meeting of our Board of Advisors. At this meeting, we would present our goals, all the raw results we’d managed to collect, and our conclusion about what was next. This created a forum for innovative discussions and discourse over the direction of the company. We knew must have the opportunity to think strategically at least once per sprint, so we could stay focused tactically in the meantime.
When it was time to pivot, there were usually certain signs that we’d look to. The most important one actually came from sales team research. When your fundamental product hypothesis is wrong, the sales team is going to be over selling the actual features and benefits of the product. Which could be quite frustrating when you can’t deliver on that promise. One or two sprints of that kind of frustration can stall creativity and harm the team’s chemistry. But eventually, as the company fails to find traction, you start to ask development team questions: are we really solving an important problem for customers? Are our early adopters really adopting? And does our product really solve the problem we’ve promised them?
Ironically, although it’s the sales team that is canary in the coal mine for pivots, it’s actually hard for the sales team to make the decision to pivot. That’s why it’s important to have collective problem solving. The more work you’ve sunk into a product or vision, the harder it is to let go of it. As the CEO and Product Manager, I can personally testify to this dilemma. It was difficult for me to stop development on a product that we had been pitching around the country for the past 8 months and accumulated thousands of users from. The code was working and testing was great, we had conversations with some of the largest media enterprises in the world, and, we started to build a cash flow, which was exciting, but it was not sustainable. We were solving the right problem, but not providing a solution that was both good for the user and great for continued traction (and more importantly, the bottom line). I was left to answer a few tough questions: How do you tell your users that you have to reassess the business model behind your technology (which will ultimately affect the way you use the product now)? How do you curb growth so that you do not blow your first launch? And how do you keep your current users engaged while your building version 2?
We didn’t believe the problem was that we weren’t trying hard enough, but we also didn’t want to believe that the work we’d expended so much time on was a waste. It was stressful. Very stressful, might I add.
The development and sales team tandem and the concept of the pivot provides a way out. First of all, remember that everyone does a little bit of everything in a startup. That means that the creative team was able to participate in the development team discussions. Just wearing a different hat made it easier to consider abandon previous our work (or shelve it for the moment). These discussions would have fallen on deaf ears in our execution-oriented sales-meetings. Data is fundamental in the decision making process. More importantly, having a full view of all the data helped. It allowed our Advisors to help us see patterns we had missed, and look at the direction we were heading from 10,000 feet above the forest. From that perspective, it was easier to accept that our micro problems had macro causes.
The pivot helped even more.
The hard part about abandoning work is the feeling of wasted effort. Many times thoughts like “we’d been just as well off if we had spent the past few months on vacation instead of working incredibly hard,” run through your mind. But, by pivoting, we honor all the effort by recognizing that learning would have been impossible without the work committed. And, rather than just abandoning all that work, we look for ways to take advantage of it in our new direction.
This is the pivotor’s dilemma. They do everything they can to take advantage of what they’ve built so far. A common thought is to repurpose the technology platform,. But, there are a lot of other possibilities to consider. I’d like to call out three in particular: a market pivot, a problem pivot, or a feature pivot.
In a market pivot, we take our existing product and use it to solve a similar problem for a different set of customers. In this case, the product typically stays the same, but the branding, and the priority of feature releases may change.
In a problem pivot, we try to solve a different problem for the same customer segment. This pivot is usually inspired from the feedback of customers in V1. When doing business development, the sales team can attain an intimate relationship with customers. Usually the result of this exercise end in an “ah ha” moment where we discover customer problems that our solution doesn’t address, and that problem is more promising.
In a feature pivot, we pick out a specific feature from our current product and redirect the vision of the whole company around that. In order to do this kind of pivot, you need to pay close attention to what customers are really doing, not what you think they should do. It also requires abandoning the extra features that make it hard for new customers to discover what’s really valuable about the new, simplified solution.
Eric Reiss once said in one of his blog post, “Without the tools to pivot well, startups get stuck between two extremes: the living dead, still expending energy but not really making progress, always hoping the next new feature will cause traction to magically materialize, and the compulsive jumper, never picking a single direction long enough to find out if there’s anything there.” So, in short—Pivot or Die.
