Pivoting

Type of record:
  • strategy method
Handout PDF-Export Add experience
Ideal innovation phases for this method:
  1. Innovation Phase
  2. 1
  3. 2
  4. 3
  5. 4
  6. 5
  7. 6
  8. 7
  9. 8
  10. 9
  11. 10

Description

The term Pivot comes from the English and comes from the Lean Startup model of Eric Ries. A pivot refers to the necessary adjustment of the strategic orientation of a start-up, whereby the corporate vision is not called into question.

Pivoting refers to the significant strategic change of course of a young company to make it more successful. But even long-established companies can use these pivots to generate innovations. A pivot can be triggered by customer feedback, tests, competitive situations or generally new market conditions.

There are different types of pivots.

- zoom-in pivot
In this case, what was previously regarded as a single characteristic for a product becomes the total product.

- zoom out pivot
In the opposite situation, sometimes a single feature is not sufficient to support an entire product. With this type of pivot, what was considered a total product becomes a single feature of a larger product.

- customer segment pivot
In this pivot, the company realizes that the product it manufactures solves a real problem for real customers, but that they are not the kind of customers it was originally intended for. In other words, the product hypothesis is only partially confirmed, the right problem is solved, but for different customers than originally expected.

- Customer demand pivot
After getting to know your customers extremely well, it sometimes becomes clear that the problem we're trying to solve doesn't really matter to them. However, due to this familiarity with the client, we often discover other, related problems that are important and can be solved by our team. In many cases, these related problems only require a small price correction on the existing product. In other cases, a completely new product is required. This is again a case where the product hypothesis is only partially confirmed; the target customer has a problem that needs to be solved, but not what was originally expected.

A famous example is the chain Potbelly Sandwich Shop, which today has over 200 shops. It all started with an antique shop in 1977; the owners began to sell sandwiches to support the customer frequency in their shops. Soon they had taken the pivot to a completely different line of business.

- platform pivot
A platform pivot refers to a change from an application to a platform or vice versa. Normally, start-up companies that want to create a new platform start by selling individual applications for their platform, the so-called killer app. Only later does the platform help third parties to break through as a way to create their own related products. However, this order is not always carved in stone and some companies have to perform these pivots several times.

- business model pivot
This pivot uses a concept by Geoffrey Moore, who observed that companies generally follow one of two main business models: high margins, low volume (complex systems model) or low margins, high volume (throughput volume model). The former is often associated with business-to-business (B2B) or corporate sales cycles and the latter with consumer goods (there are notable exceptions). In a business model pivot, a start-up changes the model. Some companies are shifting from high margin, low volume to mass market (for example Google's search application); others, originally designed for the mass market, have proven to require long and costly sales cycles.

- value-added pivot
There are many ways to realize the value a company creates. These methods are often called monetisation or yield models. These terms are far too restrictive. The idea of monetization is based on the fact that it is a separate feature of a product that can be added or removed at will. In fact, value creation is an essential part of the product hypothesis. Changes in the way a company creates value can often have far-reaching consequences for business, product and marketing strategies.

- Growth apparatus pivot
In this type of pivot, a company changes its growth strategy to seek faster or more profitable growth. In general, but not always, the growth apparatus requires a change in the way value is created.

- channel pivot
In traditional sales terminology, the mechanism by which a company brings its product closer to its customers is called a sales channel. For example, packaged consumer goods are sold in grocery stores, cars at dealerships and company software (with far-reaching adaptations) by consulting and specialised service companies. The specifications of the channel often determine the price, characteristics and competitive landscape of a product. A channel pivot is the realization that one and the same basic solution could be distributed over another channel with greater effectiveness.

Whenever a company bans a previous complex distribution model and sells it directly to its end customers, a channel pivot is underway.

Precisely because of its destructive effect on distribution channels, the Internet has had such a damaging impact on industries that previously required complex distribution channels, such as newspapers, magazines and books.

- technology pivot
Sometimes a company discovers a way to achieve the same solution through a completely different technology. Technology pivots are much more common among established companies. In other words, they support innovation, achieve growth-enhancing improvement and maintain their existing customer base. Established companies prefer this type of pivot because not much changes. The customer segment remains the same, the customer problems are the same, the value creation model is identical and the distribution partners are the same. The only question is whether the new technology leads to a higher price and/or higher performance compared to the existing technology.
  • Effective for disruptive innovations
  • Effective for product innovations
  • Effective for radical innovations
  • Effective for service innovations
  • Effective for technology innovations
  • Effective for highly complex challenges
  • Effective for medium complexity challenges
  • P1 Understanding (identifying innovation search fields - problem solving)
  • P2 Analysis (of problems - the environment - people - products)
  • P3 Observing (of people - the environment - the product use)
  • P4 Synthesize (create leading questions - derive position)
  • P5 Idea Finding (Idea Generation - Creative Phase - Incubation)
  • P6 Idea enrichment (idea combination - idea integration)
  • P7 Idea selection (idea evaluation - filtering - deciding)
  • P8 Early Prototyping (testing directly on the user)
  • P9 Fighting for ideas (Building Commitments - Generate Fundings)
  • P10 Implement (Implementation - execution of ideas)
Log in for free