“Pivot” in Indonesian means “axis.” Meanwhile, in terms of strategy, “pivot” refers to the decision to change the axis or direction of a business.
This is not uncommon for startup companies. Some companies switch technologies, change products, and swerve into other industries. Building your own startup requires a great deal of capital, time, effort, and mindset.
So, when a startup company uses a pivot strategy, there must be a strong reason behind it. To understand better, let’s get acquainted with the pivot strategy and know when startups need to use it!
Also read: 11 Factors That Cause Startup Failure
What is a Pivot Strategy?
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Every startup founder and owner must have a specific strategy to ensure that the company they founded not only grows but also survives in the industry in which it operates. However, challenges and even obstacles are always lurking.
It is not just internal factors that can cause a startup’s downfall but external factors as well. The latter is often more unpredictable, such as political instability and a pandemic like what happened in 2020.
This is where the pivot strategy is needed. Pivot is a strategy to change strategies. So, when a business is not running smoothly or bringing in the expected results, something must be changed, right?
This change is called the pivot strategy. The change does not have to be big, such as switching from an e-commerce business to an investment, but it could change the target market or product. The goal is for startups to survive and avoid bankruptcy.
Also read: The Definition of Fundraising and Strategies for Startups
When Should Companies Pivot?
Changing strategy is not easy, especially if you have designed several strategies that you hope will bring success to the startup. However, a pivot strategy is necessary when circumstances are difficult and require changes.
Then, what kind of circumstances can be a strong reason for startups to pivot? As an illustration, some conditions can be a strong motive for pivoting.
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The market never formed
At times, startups actively educate their target market in various ways, ranging from conventional and direct interactions with potential consumers to digital tools. Market education is important in forming potential consumers.
If there have been constant efforts to educate the market, even to the point of spending operational costs, but the market has not formed, something is wrong.
It is possible that the target market or intended segment does not yet need the startup and the products it makes. Then, pivoting is a choice that should be made immediately.
Also read: 8 Key Differences Between Startups and MSMEs You Need to Know
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Constantly receiving negative feedback
In doing business, there will always be negative responses or reviews received. These reviews can be used as input when the percentage is small compared to positive or overall reviews.
So, what if there are too many negative responses coming in? Well, this could be a red flag for startups.
This is because repeated negative responses indicate poor performance or unacceptable products to consumers. When it turns like this, pivoting is the best strategy to generate a positive response.
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The market segment is too broad
Not only for startups but also for all types of businesses, this is highly dangerous to do. This is because trying to reach all market segments makes startups unfocused, difficult to grow, and costly.
Imagine how many types of products must be created when startups attempt to reach all demographics. Not to mention the costs of promotion and market education.
The intention to make as much profit as possible can be disastrous and damaging for startups. If the situation is like this, startups must pivot by focusing more on certain market segments.
Also read: Lean Startup Method: Purpose, and The Basic Principles
How to Pivot in Startups
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After understanding what a pivot strategy is and the right time for startups to use it, there is still one more thing that you need to know, namely how. Changing strategy certainly requires a lot of consideration. One misstep can make a startup suffer more losses.
For that, pay attention to the following tips when pivoting.
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Identify the problem and find a solution
The first way to pivot is to identify the problem. Understand the problems startups face, whether it is market segments, raw materials, products, or something else.
After the problem is found, the next step is to find a solution that is right on target. Do not let the chosen solution worsen the problem instead.
Also read: 5 Main Role of Venture Capital on Startup Business
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Create the right market segment
This tip is suitable for startups that are stuck in terms of market segments. For example, the market segment has not been formed, is too broad, or has received too many negative responses.
A step that can be taken is to enter other market segments. This method should also be done with caution. Research is required to determine the right market segment for startups.
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Develop new product prototypes
If the problem lies in the product, you might think the cost of developing a new product is very high. The risk is the same because it is uncertain if a new product will immediately receive a warm response from the market.
Therefore, develop a product prototype first to make it more cost-effective. Test the prototype on the market and see the reaction. The prototype can be developed into a product if there are many positive responses.
Also read: 9 Type of Startups in Indonesia
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Do not deviate from the initial vision
Even though pivoting means changing direction, it does not mean changing everything. The changed strategy must align with the startup’s vision when it was first established.
So, focus on changing how to achieve that vision, not changing the objectives.
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Listen to the consumers
Lastly, listen to the consumers because they are the ones who use your company’s products. Adjust the company’s output to what they need. Do not pivot, but the product is still not in accordance with the wishes and needs of the consumers.
Also read: Iterative Process: Definition and Its Importance for Startups
So, that is an explanation of the pivot strategy, as well as the right time and how to do it. In essence, startups need the pivot strategy at a less favorable time. Some changes must be made, but they must also be adjusted to the startup’s initial vision.
