Last week we featured a serial case study into the history of a business pivot that occurred in a company within the Alacrity organization. In a unique way, the story was told in steps from both the entrepreneur and investor perspectives.
Here are 5 takeaways from each perspective on how to plan and execute a pivot successfully.
Don’t “build it and they will come”
Before you build a product, ensure that customers have a need and use for it. Find your ideal customer and get feedback from them about the product concept and features. Centre your development around the target customer, instead of spending time and resources developing a product that doesn’t have the required market demand.
Don’t be afraid to reevaluate and change direction
If you see that something is not working, or discover that the monetization is more difficult to tap into, or the results are just not there, take the time to step back and properly reevaluate. Think about the customer, and adjust accordingly. Do not stay the course on a leaking ship in the hope you might be able to plug the holes: change course, and fix the leaks!
Do your homework (research and plan out the change)
If you do decide that changing direction is the best solution, take the time to plan the next (critical) steps properly. Set a timeline and stick to it. Do the research required to make an informed decision, and test options. While you can not take forever, you must not rush to a conclusion either.
Stay honest, transparent, and accountable
All the stakeholders of the company or product need to be informed to the best of your ability. Be careful not to jump the gun before you know for certain what is changing, but once ready, ensure you do not leave people in the dark either. To pivot successfully, you are going to need a team that is fully on board, an investor that supports you, and the customers that need the change. Stay honest and accountable.
Trust your knowledge
You and your team know the company and your product best. Together you have direct knowledge of the market you are in and you know what your customers are looking for. Seek advice and different points of view, but trust yourself as well. Ultimately, you will be making tough decisions for the future of your business.
Invest in the People, not the Product
Make investments in a team, and foster a culture conducive to open, honest communication. Investing in a team that has the right set of values will significantly impact the outcome by providing a critical foundation for a long-term relationship to flourish. Ideas may change, products may fail, but a good team that is dependable is much more difficult to come across.
Provide guidance and support to the entrepreneur. The entrepreneur likely knows the correct decision, but needs your feedback and support. Your experience will be greater than the entrepreneur’s, and you should be able to see patterns and parallels similar to prior experiences. Sharing your experience and knowledge is a valuable asset to a young company, but remain mindful that these experiences are not always directly applicable and should not dominate the conversation either.
Trust the Entrepreneur’s Knowledge
If you have invested in the people, you will have built a relationship based on trust and honesty. The entrepreneur will have insight into the product, the customer-base, or the market that you sometimes do not immediately see. Trust their domain knowledge, even if their general level of experience may not be as extensive as yours. You will both be able to pinpoint issues and items that are critical to making the correct decisions.
Take a measured approach
Pivots are stressful for everyone involved. They are much less stressful if the question of money is not as significant. Money spent is already invested and out the door. Money to be spent should be the focus. A measured approach ensures that pivots is all about improving what comes next, and should not be as upsetting as they are viewed. A measured approach, and open mind helps you provide longer-term support to a solid investment.
Do Not Panic
There is no guaranteed formula for success, otherwise every initiative would succeed. This means that the companies you have invested in might not get it right immediately. Reacting poorly to the potential for change will cause entrepreneurs to panic. Worse, they may begin to doubt your perspective as an investor. There absolutely is a time to walk away and cut your losses, but even unicorns pivot as they develop.
There is a reason unicorns are rare, but be persistent because you may have the opportunity to catch one, pivots and all!