What does it mean to pivot a startup and how to achieve it step by step

There are several reasons why a high-growth company fails to succeed. Being outperformed by the competition, not meeting a market need or the inability to raise capital are some of the main reasons why startups fail, according to CBInsights. However, before things get to that stage, startups have an opportunity to ensure their continuity: they can reinvent themselves and define a new business plan or model. In short, pivot their startup.

Over the years, many companies have decided to rethink their business idea in order to grow and succeed. Sometimes, it is not necessary to be at a critical point: it can be enough to integrate mechanics such as those established by the lean startup method, which allows the product or service pilot to be updated to meet the needs of users, to ensure the company’s development.

Ways to pivot a startup

There are different aspects of a business proposal that can be varied to change the course of a startup. Depending on what we want to change, we can talk about:

• Pivoting the product. This is the most conservative approach. The company chooses not to expand into other markets and it is its solution that it transforms, in the same environment in which it was already operating.
• Pivoting the market. In this case, companies keep the features (or part of them) of their solution, but move it to another market niche. It permits companies to reuse the effort invested in the development of the product, although focused on new customers.
• Pivoting the business model. In this case, both the product and the market niche are maintained, and greater profitability and growth are sought by changing the marketing strategy (from freemium services to a subscription model, for example).
• Pivoting ambitiously. This is the most extreme way. In these cases, companies put aside the initial idea of their project to start a new one with a significantly different approach.

Considerations before pivoting

Among the goals that should be set before the prospect of pivoting a startup, the following are particularly relevant:

• Aspire to grow. Startups must select their target market based on the real growth possibilities it offers and design a solution that provides a differential value, based on an in-depth study of the potential audience, competitors and the strengths and weaknesses of the sector.
• Re-evaluate objectives. With a new solution, a new business vision and different business goals may also be necessary. It is important to redefine the project’s mission and values and adapt the pivot strategy to the new milestones.
• Explore the potential of technology. New technologies are in the DNA of startups. Mapping the most promising technology trends, such as those selected by BBVA Spark for 2023, and incorporating the most promising innovations into the new product will contribute to the success of the pivot.
• Test the product. Developing an MVP (minimum viable product) of the product or service, a prototype with the minimum functions necessary to present it to potential customers, allows it to be tested in a controlled environment before launching it to the market. In this way, it will be possible to test consumer acceptance and incorporate their feedback into the design of the solution.
• Secure the investment. It is essential that entrepreneurs who plan to pivot their startup inform shareholders and partners of their intention to change the value proposition, justifying the feasibility of the project through previous research and product testing.

Netflix, Slack, YouTube… Stories of companies that pivoted to fame

Reformulating their strategy when their initial product failed to fit the market has been key to the success of many startups. Some of the fastest growing technology companies in recent years are the result of a timely reinvention:

• Slack. The video game startup Tiny Speck, founded in 2009, initially developed an online multiplayer game called Glitch. But the commercial potential of its internal messaging tool, dubbed Slack, soon became apparent. Launched in 2013, the company achieved the status of a unicorn in less than two years and was acquired in 2020 by Salesforce for $27 billion.
• Netflix. The streaming giant was born as a postal-order DVD rental website in 1997, and first introduced video-on-demand services a decade later. The company ended up focusing its business entirely on the audiovisual catalogue of its website and, after international expansion and the creation of its own content, boasted 231 million users in 2022.
• YouTube. The social network was first conceived as an online dating site to which users could upload videos of themselves. When the idea did not take off, its founders expanded the type of content accepted by the platform and found the key to success. Google bought the company in 2006 for $16.5 billion and today it has become the second most visited website in the world.
• Groupon. The Point website, launched in 2007, mobilised users around common causes. The great success of an initiative that brought consumers together to qualify for discounts led its founders to decide to pivot the company in 2008 towards the daily deals service. In just over a year, the company expanded to 45 countries and reached a valuation in excess of $1 billion. However, Groupon, whose solution has become less popular in recent years, is also an example of how pivoting once may not be enough in the long run.
• Twitter. The idea for the microblogging platform’s creation came from Odeo, a company founded in 2005, which focused on podcasts. One of its employees, Jack Dorsey, had the idea of pivoting the company towards a solution that would allow users to share their “status” (emotions, thoughts, activities, etc.), giving rise to one of the founding companies of the very concept of social networks.

We could mention many more paradigmatic examples, such as Instagram, which simplified its original solution (based on geolocation, in the style of Foursquare) to focus only on photographs; or Flickr, which emerged from what was a feature in an online role-playing game that never took off.

As these success stories from some of today’s best-known companies demonstrate, timely reinvention can be the key to growth. With clear objectives and good planning, pivoting a startup is within the reach of any entrepreneur to wipe the slate clean and start again.