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Amazon began as an online bookstore. Blockbuster had an opportunity to purchase Netflix for $50 million and passed. And now Netflix is valued in the tens of billions. Two companies. One shifted its focus and became the internet’s largest company in the world. The latter is non-existent.
Businesses survive by adapting to conditions in the market. Entrepreneurs and business leaders know it as a pivot. As easy as it is to look back on Amazon’s decision to sell more than books, pivoting in real-time is a valuable skill. When outside forces negatively impact your business and threaten its existence, knowing when to pivot (and when not to) could determine your future.
How To Look At A Pivot
There are various ways a company can pivot. One such example is when a business shifts focus on a new set of customers. They may even market their product differently.
Look at Play-Doh, the clay that children play with. It was invented in the 1950s to remove soot and ash from homes burning coal for heat. But gas overtook coal, rendering Play-Doh obsolete. Instead of selling it as a method of cleaning, it morphed into a child’s toy.
Play-Doh is an example of why a business should shift its focus. In this scenario, it was due to the market—or the lack of one. Gas eliminated the need for the product.
Another reason a business should pivot is if it stopped growing, stopped increasing revenue, or the response to the company’s product is too small. Starbucks is an example of this. Initially, they sold espresso makers and coffee beans. The potential for selling these products was minuscule when compared to becoming what they are now.
Pivots Could Be A Failure
Look back at the previously mentioned business examples. Neither Starbucks nor Play-Doh started over. Their goals shifted using the base they’d developed.
Your business exists to be someone’s “why.” There are several reasons why people buy things: to feel safe, to be liked, to have fun, to be happy. Though your business may be successful at doing this for someone, it could change quickly. Coal gets replaced by gas. A pandemic occurs and shuts businesses down.
When your customers no longer need or want what your company provides, how can you use your existing resources to solve a different problem? You are not altering your business, but you are changing directions in the pursuit of growth.
Drucker & Mattia, PLLC
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