Posted by Hindol Datta
Most of you today have heard the word “pivot”. It has become a very ubiquitous word – it pretends to be something which it is not. And entrepreneurs and VC’s have found oodles of reasons to justify that word. Some professional CXO’s throw that word around in executive meetings, board meetings, functional meetings … somehow they feel that these are one of the few words that give them gravitas. So “pivot” has become the sexy word – it portrays that the organization and the management is flexible and will iterate around its axis quickly to accommodate new needs … in fact, they would change direction altogether for the good of the company and the customers. After all, agility is everything, isn’t it? And couple that with Lean Startup – the other Valley buzz word … and you have created a very credible persona. (I will deal with the Lean Startup in a later blog and give that its due. As a matter of fact, the concept of “pivot” was introduced by Eric Ries who has also introduced the concept of Lean Startup).
Pivots happen when the company comes out with product that is not the right fit to market. They assess that customers want something different. Tweaking the product to fit the needs of the customer does not constitute a pivot. But if you change the entire product or direction of the company – that would be considered a pivot.
Attached is an interesting link that I came across —
It gives examples of eight entrepreneurs who believe that they have exercised pivot in their business model. But if you read the case studies closely, none of them did. They tweaked and tweaked and tweaked along the way. The refined their model. Scripted.com appears to be the only example that comes closest to the concept of the “pivot” as understood in the Valley.
Some of the common pivots that have been laid out by Eric Ries and Martin Zwilling are as follows 😦http://blog.startupprofessionals.com/2012/01/smart-business-knows-8-ways-to-pivot.html). I have taken the liberty of laying all of these different pivots out that is on Mr. Zwilling’s blog.
- Customer problem pivot. In this scenario, you use essentially the same product to solve a different problem for the same customer segment. Eric says that Starbucks famously did this pivot when they went from selling coffee beans and espresso makers to brewing drinks in-house.
- Market segment pivot. This means you take your existing product and use it to solve a similar problem for a different set of customers. This may be necessary when you find that consumers aren’t buying your product, but enterprises have a similar problem, with money to spend. Sometimes this is more a marketing change than a product change.
- Technology pivot. Engineers always fight to take advantage of what they have built so far. So the most obvious pivot for them is to repurpose the technology platform, to make it solve a more pressing, more marketable, or just a more solvable problem as you learn from customers.
- Product feature pivot. Here especially, you need to pay close attention to what real customers are doing, rather than your projections of what they should do. It can mean to zoom-in and remove features for focus, or zoom-out to add features for a more holistic solution.
- Revenue model pivot. One pivot is to change your focus from a premium price, customized solution, to a low price commoditized solution. Another common variation worth considering is the move from a one-time product sale to monthly subscription or license fees. Another is the famous razor versus blade strategy.
- Sales channel pivot. Startups with complex new products always seem to start with direct sales, and building their own brand. When they find how expensive and time consuming this is, they need to use what they have learned from customers to consider a distribution channel, ecommerce, white-labeling the product, and strategic partners.
- Product versus services pivot. Sometimes products are too different or too complex to be sold effectively to the customer with the problem. Now is the time for bundling support services with the product, education offerings, or simply making your offering a service that happens to deliver a product at the core.
- Major competitor pivot. What do you do when a major new player or competitor jumps into your space? You can charge ahead blindly, or focus on one of the above pivots to build your differentiation and stay alive.
Now please re-read all of the eight different types of “pivot” carefully! And reread again. What do you see? What do you find if you reflect upon these further? None of these are pivots! None! All of the eight items fit better into Porter’s Competition Framework. You are not changing direction. You are not suddenly reimagining a new dawn. You are simply tweaking as you learn more. So the question is – Is the rose by any other name still a rose? The answer is yes! Pivot means changing direction … in fact, so dramatically that the vestiges of the early business models fade away from living memory. And there have been successful pivots in recent business history. But less so … and for those who did, you will likely have not heard of them at all. They have long been discarded in the ash heap of history.
Great companies are established by leaders that have vision. The vision is the aspirational goal of the company. The vision statement reflects the goal in a short and succinct manner. Underlying the vision, they incorporate principles, values, missions, objectives … but they also introduce a corridor of uncertainty. Why? Because the future is rarely a measure or a simple extrapolation of expressed or latent needs of customers in the past. Apple, Microsoft, Oracle, Salesforce, Facebook, Google, Genentech, Virgin Group, Amazon, Southwest Airlines etc. are examples of great companies who have held true to their vision. They have not pivoted. Why? Because the leaders (for the most part- the founders) had a very clear and aspirational vision of the future! They did not subject themselves to sudden pivots driven by the “animal spirits” of the customers. They have understood that deep waters run still, despite the ripples and turbulence on the surface. They have honed and reflected upon consumer behavior and economic trends, and have given significant thought before they pulled up the anchor. They designed and reflected upon the ultimate end before they set sail. And once at sea, and despite the calm and the turbulence, they never lost sight of the aspirational possibilities of finding new lands, new territories, and new cultures. In fact, they can be compared to the great explorers or great writers – search for a theme and embark upon the journey …within and without. They are borne upon consistency of actions toward attainment and relief of their aspirations.
Now we are looking at the millennial generation. Quick turnarounds, fast cash, prepare the company for an acquisition and a sale or what is commonly called the “flip” … everything is super-fast and we are led to believe that this is greatness. Business plans are glibly revised. This hotbed of activity and the millennial agility to pivot toward short-term goal is the new normal — pivot is the concept that one has to be ready for and adopt quickly. I could not disagree more. When I hear pivots … it tells me that the founders have not deliberated upon the long-term goals well. In fact, it tells me that their goals are not aspirational for the most part. They are what we call in microeconomic theory examples of contestable agents in the market of price-takers. They rarely, very rarely create products that endure and stand the test of time!
So now let us relate this to organizations and people. People need stability. People do not seek instability – at least I can speak for a majority of the people. An aspirational vision in a company can completely destabilize a certain market and create tectonic shifts … but people gravitate around the stability of the aspirational vision and execute accordingly. Thus, it is very important for leadership to broadcast and needle this vision into the DNA of the people that are helping the organization execute. With stability ensured, what then happens are the disruptive innovations! This may sound counter-factual! Stability and disruptive innovations! How can these even exist convivially together and be spoken in the same breath! I contend that Innovation occurs when organizations allow creativity upon bedrock of discipline and non-compromising standards. A great writer builds out the theme and let the characters jump out of the pages!
When you have mediocrity in the vision, then the employees have nothing aspirational to engage to. They are pockets sometimes rowing the boat in one direction, and at other times rowing against one another or in a completely direction. Instability is injected into the organization. But they along with their leaders live behind the veil of ignorance – they drink the Red Bull and follow the Pied Piper of Hamelin. So beware of the pivot evangelists!
Tags: boundaries, choice, core, creativity, employee engagement, extrinsic motivation, intrinsic motivation, lean startup, learning organization, mass psychology, organization architecture, pivot, platform, talent management
Posted by Hindol Datta
Creativity is not innovation. Let me say that again – Creativity is not innovation!
However, creativity is an important process toward innovation. There are other components that are just as important in the process, and these may, one might argue, amputate the creative process – but these components are important in increasing orders of magnitude to fuel the innovative cycle. Some of the other key components are focus, discipline, boundaries, and relevance. I will tackle each of these in further detail.
1. Creativity: You begin with an idea. The idea could be different, it could be unique or it could be an existing shift in the way of looking at things. It is novel but perhaps may not be appropriate. It could defy the physical and temporal constraints … it may not be even appropriate for the time and purpose. It elevates a response to a condition that has actually brewed in one’s mind for some time; or a simple realization when the constellation of circumstances seem to be aligned to surface the idea. It is singularly the process of gestating and giving form to an idea and channelizing it, through some medium, for active and passive observation.
2. Focus: The idea is out there … an abstract metaphor perhaps! Or something that is concrete but it is an object that is like an amoeba. It changes, it is malleable, it is psychedelic, it is formless … and so now you have to zero in and seek the relevance. You have to eliminate the irrelevant … you have to peel the onion and get to the core of the creative component. Two people might look at the core in the same creative component and arrive at starkly different results. The core is a mesh of both – objective being and a subjective assessment of its latent value.
3. Discipline: Now that you have zeroed in on the core and you have reflected upon it long enough to allow permanence, the hard task is discipline. This is an act of pushing away all peripheral thoughts that may threaten or distract you from amplifying the core. It is here when you say more no’s to push away the meteoric shower of blinding and provoking possibilities. This is a hard milestone: this is where we now start to think that we can bite more than we can chew; we give ourselves superhuman strength; we believe that a few extras here and there will only add and certainly not take away value from the core. Alas, we would be so wrong if we start thinking that way. If we happen to introduce more variables with the penultimate thought of creating something grand, we would have create immense complexities that would suddenly make the core less relevant. So discipline is to ward off those extraneous thoughts and return with plural judgment toward a singular end.
4. Boundaries: Now you ensure that the core does not spillover beyond its reach … in other words, it does not spread itself so thin that it dilutes its purpose for existence and relevance. You establish boundaries. The scale of such boundaries that you determine are in the context of the existence of the core … ideas that are thinly separable from others but enough to maintain its own identity will have smaller and well defined boundaries versus ideas that swim in the blue ocean wherein one can envision a slightly larger scale with some porous frontiers.
5. Relevance: Once you have gone through all of the above steps, you have to seek relevance or position the core toward relevance. It is a philosophical mindset … if you get this right, the messaging of positioning and execution strategy will be a lot easier and executable.
Innovation is the production and the implementation of the ideas. But innovation must have a payback within a reasonable time frame. It may span seconds to a generation, each of which would have different levels of investment and risks attached to it. Regardless, innovation without payback is a mirage … a delusion … a word that will implode quickly with the passage of time. Creation is easy, innovation is hard! Creation can be a solo effort; innovation by and large requires more players in place, institutional or otherwise. Creation dies with you; Innovation stands the test of time. Creation is the embodiment of the thought – cogito ergo sum; Innovation is the core that lives beyond your times.
So consider the question – Do I want to simply create or do I want to innovate?
The answers may lead you to divergent paths …and, if innovation is the path you choose, get in terms with the social network – the array of people, institutions, value systems, dreams … all of which exist in some cohesive whole. Imagine that the social network is your reference library that you must depend on to forge ahead to enable meaningful and impactful innovations … since innovation cannot ever occur in a vacuum.