The Strategic Pivot: Rules for Entrepreneurs and Other Innovators

The Strategic Pivot: Rules for Entrepreneurs and Other Innovators

8:30 AM Monday February 28, 2011

by Caroline O'Connor and Perry Klebahn

Silicon Valley culture is built around great pivots — a sudden shift in strategy that turns a mediocre idea into a billion-dollar company.

Groupon began not as a local coupon business, but as a platform for collective action. Pay Pal started back in 1999 as a way to "beam" money between mobile phones, Palm Pilots, and pagers. Twitter was born from a stalled podcasting startup.

At the Stanford d.school, the ability to pivot is essential to the process we teach in our Launchpad course, an introduction to entrepreneurship in which each student launches a real company, taking it from an idea to revenue in 10 weeks. Even in that extremely short timeframe, abrupt turns are inevitable. The ground rules for fluidly shifting course — or, when needed, radically altering direction — apply equally well to start-ups outside the classroom, as well as to innovative ventures within established companies.

Here are our five rules for executing a successful pivot:

1. Have an idea compost pile.

To get to a great product or service, you need to work from great insights about your customers. If your current start-up is going down the tubes because your idea isn't resonating with customers, you don't have to throw everything away. Keep the insights about your customers that you gained along the way, angel investor Michael Dearing — who co-teaches Launchpad — tells students. Some of the best insights may come from understanding why your current idea isn't delighting them. Accepting the metaphor of composting ideas makes it easier to accept the perceived cost of failure, Dearing says.

2. Know your customers, not just their statistics.

The user-centered design process we teach at the d.school focuses on developing empathy for your customers. This is much more than just understanding statistics, data, and click-through rates. You need to know them well enough to understand what's important to them, what they care about, and how your product fits into their world. One of the teams in our class developed a product for police that makes duty gear more comfortable. Through their social networks, they found a few officers they could spend time with, getting a better understanding of their lives and jobs that went far beyond technical or ergonomic specs for a product. When you know your customers so well you can see your product through their eyes, you'll have an intuitive sense for when it's time to pivot.

3. Fail earlier, more cheaply, and more often.

Failing early and often is a Silicon Valley cliché. But the key is to fail as cheaply as possible. Perry's first company, Atlas Snowshoes, failed every weekend. He'd build prototypes for new designs out of the materials he had on hand, and then try them out on weekend adventures with friends. Broken straps and cracked frames would leave him hiking out of the woods with unhappy companions in knee-deep snow. But those early, cheap failures meant that by the time he went to manufacture his product, he knew how to keep the same thing from happening to customers.

Getting time with your customers before you go to market is cheap. Show them a prototype and find out if they'll use it. Test your product or service by making it quickly with post-its, paper or a quick technology hack before you ever write a line of code. PowerPoint can substitute for an interface; a $20 Google Adwords buy will tell you a lot about driving traffic. An early pivot is exponentially cheaper than a late one.

4. Build a customer-focused culture, not a product-focused one.

A pivot can seem obvious from the top, but to those who've been executing a product that's changing direction it can be frustrating. To execute a successful shift, you need your team on board. One way to do that is to build a culture focused on making customers happy. If your team believes that pleasing your customers — by any means and over the long term — is more important than executing your current idea, it will be easier for them to accept change.

5. Don't survive mediocrity.

WorkerExpress started out as a text message-based way for homeowners to schedule hourly construction workers. But the market founders Joe Mellin and Pablo Fuentes had hoped for just wasn't there. The company wasn't in imminent danger of failing and could have limped along, but Mellin and Fuentes made the decision to pivot. In the research they'd done for their original idea they found a new direction: they realized that large contractors who need temporary help on job sites don't have any great options. In the midst of one of the largest construction droughts in American history, they managed to build a booming web-based platform.

Lots of companies find themselves in a similar spot. The key is confronting the fact that it's time to re-evaluate. If you don't have a single die-hard fan of your product — let alone the thousands you'd need to take off — it's time to pivot into something your customers are passionate about.

Caroline O'Connor is a Fellow at Stanford University's Hasso Plattner Institute of Design (the d.school). She was formerly a journalist with the Boston Globe and the Miami Herald.

Perry Klebahn is a Consulting Associate Professor at the d.school, where he teaches Launchpad and other classes. He was formerly CEO of Timbuk2 and COO of Patagonia.