When, Why, and How to Pivot a Startup

Running a startup or business is somewhat like sailing a ship. Sometimes you have to readjust the sails to keep the boat moving forward. If you're just at the start of your journey, the need to modify the initial route, at least to some extent, is almost inevitable. Or, just as it happens with the shifts in weather that you have to monitor to stay safe, when the market conditions change, you might have no choice but to steer together with them in the same direction.

These are tough calls for those at the helm. But, at times, a strategy pivot can be the tailwind moving your company toward success or even the only way to survive in the harsh environment of the high seas of business.

On this page, we've taken a close-up view of startup pivots. We give a definition of the pivot meaning in startup lingo, answer common questions, and describe what a company can pivot on. Next, we'll go over the ways to determine that it's time to pivot, how to do it, and explain which risks are on the line.

What Does Pivot Mean in Business? 

Let's begin by defining this startup term and specifying the pivot meaning in business. It implies making significant changes to the company's strategy in view of a shift in market conditions, new opportunities, or other circumstances. Such a change in direction can concern the product, target market, business strategy or model, or result in a total transformation of business focus.

‍Why do businesses or startups decide to pivot? In general, this happens because founders or decision-makers see that something isn't working as expected.

• It may be integral if the young company is still undergoing the process of target market identification and is just shaping the business model.
• For startups, it can be a crucial step that’s necessary for growth or startup scaling. 
• Companies that are more established and have developed products may opt for pivots to keep up with the competition.

At the end of the day, it's all about adapting to the often altering market conditions, strengthening your position on the market, and doing something to boost the business' chances to thrive. To achieve this, you need to test your hypotheses by investing in change, which is among the main lean startup framework fundamentals.

What Can a Startup Pivot?

What are the different types of startup pivots? As a matter of fact, multiple factors can be pivoted when it comes to business. Let's go over the main types of pivots for a startup or an established company.

Product or Service Pivot

This type involves changing the offered product or service. For instance, you can modify its purpose or the ways to utilize it, add new features or remove old ones, change the MVP design or that of the existing large product. Alternatively, you may build a completely new one, invest in modernizing the used technology, or change the format, say, build a native app in place of a web application.

Addressable Market Pivot

Such a pivoting meaning places focus on changing the market a business is aiming at after launching a startup or product. For example, narrowing or expanding it or trying to enter a totally different market, including geographically.

Customer Segment Pivot

This kind of a pivoting business attempts to target a different audience or client type. For example, it focuses on another gender, age group, or consumer industry. If this is the case, you'll need to completely modify sales, say, if you decide to target the B2B segment instead of B2C, your SaaS sales strategy will need a drastic shift.

Business Model Pivot

This pivot business strategy may entail changing the way the company gets revenue. As such, modifying the pricing strategy, or switching to freemiums or subscription-based pricing, switching to freemiums or subscription-based pricing. Other options include trying other channels of distribution, reworking the company’s mission and core values, among other things.

Can businesses go for multiple pivot strategies at the same time? In essence, a startup or a mature business can simultaneously alter multiple things when pivoting. The combination of factors to pivot on will differ each time and depend on the individual business specifics. As such, a tech company offering a multi-functional marketing product can invest in a spin-off feature to cater to the needs of a smaller target audience. They can even modify their SaaS business plan to turn the feature into a separate SaaS product with a standalone mission and offer it on a freemium basis.

What Are the Associated Pivoting Risks?

Pivoting in business is a big step in any event. It's sort of like a gamble or bet that may either alleviate you or leave you with nothing. Let's find out the risks of taking this leap or deciding to do nothing.

What If You Do NOT Pivot?

Of course, at times, business owners or startup founders decide not to do anything because they have no clue how to pivot startup operations, leaving things as they are. Such a call can have its consequences, especially if things are already getting shaky and there are vivid signs of an upcoming "storm". Here are the most notable potential risks.

1. You May Lag Behind

A company that hesitates to change in due time can end up falling behind and becoming outdated. If you choose not to adapt to the quickly changing market, be ready for some other new players who aren't afraid of change to beat you to the finish line.

2. You Might Disappoint Your Customers

If you decide not to make a strategic pivot, this may lead to not living up to customer expectations and needs. Not being able to keep your client satisfaction levels high typically results in a drop in sales, product abandonment, and overall client loss.

3. You Can Lose Your Market Share

Your current approach that stopped working can make your customers leave you for another solution that's better. As a result, you'll lose the market share you've worked so hard to acquire, meaning all your previous effort can be irreversibly put to waste.

4. Your Resources Can Be Wasted for Nothing

Importantly, you may drain your resources. Since a business or startup budget isn't endless, it is crucial to know when and how to redistribute resources instead of continuing to pour in money, effort, and time into something that doesn't work. It may be wiser to reinvest in at least a part into testing out a change or running an experiment.

5. You Might Hit a Wall

Your company can face stagnation, meaning you'll be deprived of growth opportunities. The thing is that even if you're at the top, you may lose your positions at any time. Plus, potential for expansion is among the main points investors are interested in.

What Are the Business Pivot Risks?

Sure, pivoting can be a way for a business to adjust to the new conditions, many companies that pivoted successfully prove this point. However, deciding to pivot also has its own risk set. What if this decision sweeps you out even deeper into the raging "sea"? Certainly, there are things you have to carefully weigh before navigating in another direction. Below we list a few of the possible associated risks of making fundamental changes.

1. You May Lose Your Customers

Yes, there's a flipside to pivoting, as there is always a chance that some of your customers won't support the changes. For some, your new trajectory might mean that your product or service is no longer relevant, so existing clients might flee if they don't find the offering useful anymore.

2. You Might Cause Confusion

People tend to get used to the way things work. This regards your clients, employees, and even stakeholders. If your pivot changes the messaging too much or makes habitual things too different, you may create confusion. This can influence startup branding, usability, and other areas. For a part of your target audience, this could mean abandoning your product, while for others, it might signal the need for additional explanations.

3. You May Destabilize Your Credibility

If changes in direction happen too often, people might begin questioning your credibility. Can they trust someone who gets sea-tossed and keeps skipping from side to side? Hence, your pivot decisions have to be backed up by a solid strategy that can remove doubts.

4. You Might Go After the Wrong Market

Strategic changes regard the product or market and are never without a consequence. Companies that have pivoted without planning things out too well, without managing to calculate the market size correctly, or pivoting on impulse, generally waste time and resources on chasing the wrong customers. 

5. You May Waste Investment

Of course, there is a risk of lost investment if the pivot doesn't go well. The process is usually resource-intensive and requires lots of effort, but, in a sense, you never know, yet always hope for the best as this is the only path toward startup growth.

How Do You Know When It’s Time to Pivot Startup Decisions or the Product?

One of the most common scenarios of when a company decides that it's time to make a pivot is realizing that the approach they're using now doesn't work. In this case, making a strategic change is seen as an opportunity to respond to the current market conditions to stay afloat and reach success in the long run.

Sometimes the need for a pivot in business is sudden, while in other cases, it's gradual. Either way, you have to be alert if you don't want to miss your chance and shouldn't procrastinate with decision-making before it's too late to change anything.

But when does pivoting start, and how can you tell that now is the right time? Determining the appropriate time is challenging, but there are some signals and warning signs that can hint at such a necessity for change.

1. There's No Traction

Lacking traction can be one of the signs that the time is right for a business or startup pivot. This is the case when there's no demand or market interest in your tech business idea or in what you're offering.

Or if you're struggling to reach your customers (say, your offering doesn't resonate with prospects to the anticipated extent), this may be an indication that you have to try something different and change your approach. Perhaps, you should review your pricing strategy, messaging, usability, or anything else.

2. Red Flags in Analytics

Certainly, various data, statistics, and indicators can be a flag that you need a business pivot. By carefully monitoring the market trends, looking into the customers' needs, and exploring the possible growth opportunities, you'll be better armed when making up your mind on what to do after MVP or product release.

To achieve this, you have to continuously track and study the metrics and KPIs that show how your business is performing and which strategies and hypotheses are living up to the billing. By being proactive in this respect, you can make conclusions about what to invest in and which initiatives to drop.

3. Market Changes

If the market evolves or customer preferences shift, making your original service product less relevant than initially, this might signify that a pivot is required. You'll have to revise your product development roadmap and other core decisions your business is based on to stand a chance.

4. Tough Competition

If competitors are close on your heels or you're already out of breath from the multiple attempts to combat big and established players on the market, things can get tough (or even impossible) if you stick to a standard approach. This may put pressure on you; however, pivoting a business can give you the opportunity to gain a competitive advantage and stand out. If you are no different from the rest of the competition, you won't acquire the market share. Nevertheless, moving to further startup stages in this case might imply a big makeover.

5. Running Out of Money

If your budget is close to an end or you're struggling to secure funding, this can be a sign that you need to iterate your plan. No matter how attached you are to an idea (especially if we're talking about a startup at the beginning of its journey), taking another route instead of being stubborn could make all the difference. In such instances, seeking alternative funding sources might provide the necessary capital to pivot or advance your business plan.

One of the reasons for that is that you may have to break a sweat to get more money. However, if you won't have an actionable business plan and don't manage to create a pitch deck that's convincing and fact-backed, your chances of raising funds won't be high. A pivot, in this case, can be your way to show potential investors how you're reacting to the changes and are planning to accommodate them.

6. One Aspect Outperforms Everything Else

On a more positive note, though, if a specific feature or part of your offering visibly surpasses the others, this could be your cue to go for a pivot and put in all of your resources there. Yes, it might imply the need to trim your product or business model, unburdening it from things that took lots of effort to create. Nonetheless, doubling down can lead to more efficiency and a more significant return on investment if customers become more satisfied with the value you deliver.

7. Customer Feedback

Considering what your customers have to say is one of the proven ways to create a product or service that'll basically sell itself. This is why if you receive lots of negative reviews, complaints, concerns, or feature requests from your clients, you should take action and plan the changes. This is relevant both when you're testing an MVP or already have a full-fledged product.

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What Are the Business or Startup Pivot Strategy Alternatives?

If you aren't ready to commit to a full pivot, the good news is that a business or startup can sometimes make smaller course corrections and adjustments. Let's review several examples of the alternatives to a radical pivot strategy.

• Expanding the market geographically — if your product or service isn't too popular in the current location span, you can always try to test it out in another region without making many changes to the offering itself.
  ‍
• Trying different demographics — similarly, you can attempt targeting a different industry or demographic, perhaps your offering will correlate more with some other target market.
  ‍
• Making minor tweaks — instead of shifting to a totally different business course, review your marketing and sales strategy or make small changes to the product to address specific problems, ensuring the offering better aligns with the customer needs, then observe the results and note whether there are any positive changes.
  ‍
• Product expansion — if you don't want to work on creating a completely different product or massive redesign, you may expand your offering with extra services or add-ons that would complement it and bring additional value.
  ‍
• Consider partnerships or even mergers — this is the biggest alternative path, however, sometimes partnering up with another company or uniting forces can be the right way to acceleration and advancement.
  

What's the Pivot Process Like for Startups?

Let's begin by noting that the business pivot process can be different for startups and established companies.

• For startups pivoting is more about being agile and open to fast changes and iterations in order to achieve a more sustainable vision and business model. Typically, this is based on startup analytics and the feedback given by early adopters and first customers. Since their resources are limited, pivoting may be an urgent necessity, determining the project's survival chances, especially if there's a need to pivot software startup decisions.

• More established businesses, however, usually have larger customer bases and resources, which allows them to shape their business model more gradually. As a rule, mature companies are less flexible about trying completely new routes, as keeping their loyal customers and growing the revenue are their areas of focus.

Nonetheless, being open to change is a vital aspect when making pivots regardless of the company's size. Here are the essential steps in the pivoting process and how it usually works.

Step 1: Problem Discovery

It all begins with noticing and distinguishing an issue that's backpedaling the product from performing as expected or moving forward. You need to find out what's causing the problem, which mistakes you could have made, and why you may be failing.

This involves investigating the existing processes, how things operate, and reviewing the generated hypotheses on which the business model is based. You'll need to:

• examine feedback;
• conduct market research;
• review the used tech, including the programming languages;
• look into the analytics and the sets of OKRs and KPIs.

Step 2: Outlining Possible Solutions

Brainstorming how to improve the current situation and noting the possible workarounds goes next. It's similar to going through discovery when you make predictions based on user, competitor, and market research and plan your further moves.

I.e., what if a different pricing model can be the way out? Or what if a new product feature or a change in marketing can solve the problem? You have to study the market and competitors and dig deep to determine your target audience and their true needs.

Step 3: Preparing for the Changes

Once you have finalized which direction you'll attempt to move in, you have to start bringing the ideas to life and test them before making a drastic large-scale change. Depending on the scale of changes ahead, you might start with making a prototype or building an MVP fitted just with a minimal set of features. Or you can begin reworking your messaging, pricing model, or whichever things you'd like to amend.

Step 4: Putting Hypotheses to the Test

Of course, making incremental changes to the business model can be intimidating, but you'll never be positive unless you give the theory a try. After you've rolled out the changes (e.g., launched the MVP and showed it to the world), you have to evaluate whether your predictions are correct and whether the move was viable.

You can conduct split A/B or multivariate tests to observe how the audience is reacting to the changes. Or you can utilize other MVP testing methods to analyze data and feedback to make conclusions.

Step 5: Deciding to Pivot or Not

Based on your observations, you can then decide if you'll take the risk and pivot or stick with your initial plan. If you've made up your mind to go in a different direction, you have to turn the obtained knowledge and feedback into a consistent plan.

Your business might be making a U-turn, so you have to revise the mission statement, objectives, financials, and timelines. The team might need to shortlist the optimal stack and technological approach, think about feature prioritization, and the rest of the pillars. They can then begin working on implementing the changes and embrace them when everything is ready.

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How to Pivot a Startup: Strategies and Tips

The procedure described above is not an easy undertaking. After all, not being able to pivot or pivoting unsuccessfully is among the core reasons influencing the startup failure rate. So, if you're not sure how to pivot your business, we've gathered some recommendations for smoother sailing.

Go From Big to Small

If you're at a crossroads and feel completely lost, don't panic, as shaky times don't necessarily mean it's time to give up. There are many fantastic company and MVP examples of how the decisions to pivot products led small businesses to become globally renowned ones.

For instance, did you know that the creators of Slack initially built a game and then pinched off their built-in chat feature into a separate product? Of course, it took lots of work to mold it into the messaging and communication tool thousands of people use today, but the point is that you can pivot by narrowing things down.

So, don't underestimate the potential of a minor yet unique selling point. If you have a standout feature or a top-performing service, it can evolve into something big. If you have a feature that can be repurposed, why not take a shot at "recycling" it and give it a second life?

Both of these growth hacking methods can become the core of your pivot strategy. And at the same time, they don't force you to drop your legacy product if you don't want to. For example, you can keep some things constant and build a side product if you have the resources to keep the original idea running alongside the new one.

Procrastination Can Be Harmful

Not taking action is also a choice that will have certain implications. Yet rushing into things and making impulsive changes can be risky too. Therefore, making weighed decisions and taking timely measures during the product development life cycle can determine whether your startup or business initiative will survive the storm or sink. Hence, don't delay your pivot work and don't rush, as it's better to base your decisions on analysis and facts.

Silent Changes Won't Do You Good

Transparent communication during the pivot process is key. Secrecy might not be the best option here, so being open with the team and stakeholders about the current state and pivoting plans is a best practice. With more minds on board, your efforts can be more fruitful. Not to mention that you can be telling your customers about it and building in public, warming them up on social media and other channels about the upcoming changes.

Fill Knowledge Gaps

If your team lacks some required skills, it may be a good idea to find the missing talent. As such, if you need advice from a domain expert, you can contact someone outside your company to get a professional opinion on how to proceed with the project. Or, if your team capacity doesn't allow for a drastic shift, you can opt for IT staff augmentation services to aid you in quickly building an MVP so you can quickly test your pivot hypotheses.

Final Note on a Pivot in Business

Daring to make a business or startup pivot can be a hard decision to make. In some scenarios, such a strategic experiment might be a stressful time which almost means that you're back at square one. The required effort is immense, but sometimes, it's your only chance to avoid failure or reach a scaleup. Bottom line, the pivoting approach is an integral part of business and product life and can bring many benefits.

As an established product studio with over a decade on the market, Upsilon has helped multiple startups build MVPs and take their products to the next level. So, if you're in search of a trustworthy tech partner, feel free to reach out to us to discuss your business needs!

FAQ

1. What does it mean to pivot in business?

The pivoting meaning in business refers to strategically altering a company's direction to better align with market needs or resolve challenges. This often involves reevaluating products, services, or target audiences to ensure long-term growth and success.

2. When should a startup consider pivoting?

A startup might think about changing direction when its approach isn't achieving the desired results or connecting with the target audience. This could happen if customers show little interest, feedback highlights major issues, or growth stalls despite efforts. Adjusting the focus can open new opportunities for success.

3. How do I know if my startup needs to pivot?

It might be time for a pivot if your startup struggles to attract customers, achieve sustainable growth, or address market needs effectively. Common signs include consistent negative feedback, lack of engagement, or a misfit between your product and the market.

4. Where do you start if you don't know how to pivot your startup?

If you're unsure how to pivot your startup, begin by revisiting your core mission and identifying what's holding you back – this could be a product-market mismatch or unclear customer needs. Talk to your users, analyze competitors, and brainstorm new ways to solve the same problem or tackle adjacent markets. Consider testing small changes, like tweaking features or targeting a new audience, before committing to a larger shift.

5. Can a startup pivot more than once?

A startup can pivot multiple times, particularly in the early stages, as it gains deeper insights into the market and customer needs. Each pivot allows the business to refine its product, audience, or strategy, increasing the chances of finding the right fit. Multiple pivots can be a sign of flexibility and adaptability, which are crucial for long-term success.

6. What are some examples of successful startup pivots?

Some well-known examples of successful startup pivots include Instagram, which originally started as a check-in app called Burbn before shifting to photo-sharing, and Pinterest, which began as a project called Tote, focused on online shopping, but pivoted to a visual bookmarking platform.