Perils of the Pivot

USS Pivot

October 30, 2016: It’s commonly expected that startups will pivot as their original concepts meet the tests of the market. Even the most carefully crafted plans may not correctly anticipate customer behavior, may overlook competitors, may run into unexpected technical obstacles, may be blindsided by external forces, and may ultimately not translate the founder’s vision into a workable business model. It’s generally better, however, to pivot than perish, and startup teams that can accept reality and adapt are the ones that are most likely to succeed again and again.

There are many complicated issues with a pivot. It’s not just a quick turn to port and running faster on a different bearing, as per the USS Pivot in the photo above. If has many effects, and the further along in the startup cycle the pivot is made, the greater are those effects. Here are some to consider:

Highest on the list are the personnel issues. If you’ve assembled a team specialized in a particular product area, market, or technology, it may no longer be a match for the tasks that carry forward the company. You’ve probably brought on board some very talented people who had the relationships and insights critical for plan A but who are completely lost in plan B. They may have worked to the best of their abilities, and you’ve grown to like having them around, but they’re starting from scratch in the new strategy. You wouldn’t hire them today. Your compensation and equity structure now look out of whack when you weigh the forward-looking roles against your original intentions. You’ve got to make some tough and unpleasant decisions. Can you repurpose someone, or should you replace? If your hire was based on customer relationships that are no longer relevant, you have to replace. If, of the other hand, you brought on board versatile technical skills that can produce one product as easily as another, then you have a keeper. It is absolutely necessary to recognize these issues and deal with them, lest you demotivate the entire team by hanging on to colleagues that are obvious deadwood in the new regime.

Your strategic partners may also need revisiting. Those MOU’s or contracts that called for certain deliverables on both sides may no longer be applicable. Whether you classify a partner as “strategic” or not, you’ve probably entered into a number of deals that you expected to support your plan and now find to be useless. Your partners may well have pivoted away from you on their own and failed to perform. They may have nothing to offer that supports your pivot. These arrangements, if not laden with minimum dollar performance terms and other entanglements, may just be allowed to wither without consequence, but you no doubt have established some personal relationships that you don’t want to end badly. One never knows what will happen next in the world of startups; yesterday’s friend who is out of today’s picture may become tomorrow’s hero.

Don’t dwell on the dead ends. It’s hard not to look back and rue the amount of development you did that is now consigned to the shelf. You may have paid significant salaries from which you will recoup nothing. You went to the wrong trade shows. You spent countless personal hours that have come to naught. It’s just like in golf; you’ve hit a shot out of bounds, now clear your mind, take your drop, and play on. There are no mulligans in startups.

Do dwell on customers. Chances are that you are staying in the same general market area, since that is what you know and what inspired your original idea. You may still be solving the same fundamental problem that afflicts the same customer category but just approaching it with an entirely different method. It’s important to take care of your early customers and not leave open the door to bad press in these days of social media where every voice is heard. You might want another shot at those customers, and you want to be welcomed by them. If you’ve already sold them something and are now retracting it, then make it right somehow. Don’t leave anyone with a bad taste. You have a personal brand to maintain, and you may be keeping vestiges of your current startup brand. Those are hard to establish and easy to diminish. Do what it takes to protect them.

What about your investors? If you have outside investors who bought into the concept of Plan A, will they support you in Plan B? Will they come back to the table with more funding to underwrite your pivot? If they invested in you personally and believe you are behaving reasonably and responsibly on their behalf, chances are they’ll stick with you. Any major pivot gives an investor a great excuse to check out and hit you with the “good money after bad” maxim. On the other hand, if you show them a convincing plan that looks better than what they originally supported, they may be willing to trust you with the resources to keep going. If you are so lucky, however, don’t count on too many trips to the well. That next pivot, if any, will likely be one pivot too many. You may then have to become an adherent to the Silicon Valley “fail fast” mindset and move on to the next gig.

It’s very personal. If you gave your all mentally, physically, and emotionally to the idea of a lifetime that just didn’t work, what is your state of mind now? Yes there may be an obvious pivot that has good odds. But, you have to endure the torture of the various considerations mentioned above in this essay. Will that lead you to something you actually want to do? If you find yourself out of your own element working strictly for a business outcome and not fulfilling a dream, it’s just not the same. That extra gear of motivation required to succeed at any startup is much easier to find when you are called to a “mission” for which you personally feel qualified and adept. Your chemistry with your founding team, and in particular those going forward with you, is critical in this respect. You can motivate each other and perhaps recapture the spirit that moved you in the first place. Entrepreneurs exist to prove they have a better idea and can make a business of it; in many cases if it’s no longer their idea, they’d be better off contributing their talents to another company until that next big inspiration comes along.

With all that to consider, will you pivot, perish, or proceed?

<The U.S. Navy minesweeper USS Pivot (MSO-463) underway, circa 1970. Public Domain image from Naval History and Heritage Command.>