Picture this: You’re at the crossroads of your business. You could either keep doing what you’ve been doing, or you could adjust your approach and possibly recognize new potential. What do you do?

In these cases, many businesses choose to pivot. A pivot is a shift in business strategy to start a new business model or launch a new product due to internal and/or external factors. Very few successful businesses are still doing what their founders originally envisioned. Sometimes a pivot comes from the market, the competition or customer demand. Other times, pivots happen when all the signs point to something greater in the future. Some of the most successful businesses even pivoted in the beginning, including Slack, Yelp and Netflix.

I’ve experienced a pivot firsthand. When we first started our business, we envisioned a marketplace for customers to buy, sell and swap their preowned luxury clothes. But as we continued to grow, we quickly learned from our customers that the best experience would actually be through shopping our consignment boutique partners, not individuals. So, we pivoted to become an e-commerce platform for vetted luxury resale boutiques to go online. And after a couple of years, we pivoted again after working closely with our resale boutique partners and observing high demand for these boutiques to replenish their supplies.

Pivoting is a word commonly heard in the startup world, yet very few are successful at doing it. What separates the successful pivots from the failures? What does it take to pivot? How do you know when to pivot?

Here are a few things to keep in mind:

1. Follow the data.

Before you make a decision, make sure the data you have is ready for analysis. This includes any data you have from both internal and external channels. Review internal data from running your business, and pull together external data from the market and competition. Internal data should include the usual key performance indicators (e.g., sales, profit margins, traffic, etc.), as well as customer surveys. External data should include competitor analysis and market trends.

Before we pivoted our business twice, we took a deep dive into the data. We also ran customer surveys and called our customers to interview them. We then used that data to build out projections. We used historical data, customer input and future projections to make the best decision.

When Yelp was first started, it was initially a system to ask friends for direct recommendations. But the founders looked at the data and realized that users were writing reviews for businesses for fun instead. And as of June, the company reported that users had left more than 100 million reviews on its site.

2. Follow the money.

If you’re considering taking a new direction, you must also ask yourself:

• What is generating the most revenue?

• Which path will be the most profitable?

If pivoting your business would bring significant financial improvement, consider cutting your losses (even if that means abandoning your original idea). At the end of the day, the most successful businesses are the ones that are profitable and generate revenue. Put your ego aside, and show me the money. Just keep in mind that there could be costs of pivoting, such as shifting resources or branding, but these costs should be heavily outweighed by revenue generated if you’re pivoting in the right direction.

Stewart Butterfield, founder of Slack, envisioned a gaming platform that, while successful, was not profitable. What was working for this company, however, was a chat app for communication among his team. Slack is now worth billions.

3. Follow the easiest path.

Which path has the least amount of heavy lifting with a greater payback? Some areas to consider are customer experience, team resources and current processes. For example, if the customer experience will greatly improve with little change to your team resources, that path may be the right one.

Or, perhaps both paths you’re considering are generating revenue, but one is much more costly because the competition is outspending you on ads. Alternatively, maybe one path requires more resources. Focus on what is working in your company and what you can do to grow that.

Netflix originally started as a rent-a-DVD mail-order business. As customer demand for digital content grew, Netflix began to publish its own programming. Netflix now joins the ranks of HBO and Disney, vying for Emmy wins.

The moral of the story is: Don’t be afraid to pivot. Be open to opportunities and ideas that might be very different than your original vision. The most successful entrepreneurs are the ones who are flexible and can see beyond right now.

Original source:https://www.forbes.com/sites/forbesbusinesscouncil/2019/11/06/why-pivoting-your-business-might-be-the-answer/#185dae402df9

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