START-UP 101: PIVOT and CONSOLIDATION

In an entrepreneurial venture, one often comes across the term “Pivot” . According to the Merriam-Webster Dictionary, the meaning of pivot is an action to turn something around its central point. One might wonder-> What is the significance of pivot in startups ?
Well, this article will explain you the significance of “pivot” in startups  and how it affects them.

What is ” PIVOT” ?

Pivot or Pivoting is a strategy for iteratively  searching for a repeatable and scalable business model. To speak in general terms, pivot describes the tortured path that most start-ups go through to find the right customer, value proposition, and positioning. When the  first business model isn’t working (and this happens more often than not), the CEO and team pivot to plan B.  These are deep breath moments!

Creating a successful company is essentially a search for the repeatable and scalable business model. To succeed in this search, startups should frequently make and test predictions about what will work in their business models. If an element works, then future iterations should retain that practice, but if it does not work, the startup should “pivot” by changing one or more elements.Pivots imply keeping one foot firmly in place as you shift the other in a new direction. In this way, new ventures process what they have already learned from past success and failure and apply these insights in new areas.This “pivoting” practice contradicts the traditional model of creating – and sticking to – a conventional multi-year business plan.

But does pivoting means desperation?


No, not necessarily. It can be a tool to discover additional growth–growth one might otherwise have overlooked. Here comes the consolidation part.Businesses can grow beyond their initial dreams by re-imagining their assets and talents, thinking more broadly about the customer problems they solve, and accessing growth capital to seize the new high ground. Most of the start-ups consolidation moves in recent years have involved pivots.Pivoting has been implemented to great success – at companies like Intuit, DropBox, Wealthfront, Votizen, Aardvark, and Grockit – within the startup community, and these principles have also gained a foothold in elite business education at institutions like Harvard .Groupon famously pivoted from their original aim to organise social advocacy campaigns and turned into a billion dollar daily deal site

Recently, TinyOwl, the troubled Mumbai-based food-ordering service that tried to pivot to a home-chef aggregation model in a bid to raise more capital, is in the process of being merged with Roadrunnr, a hyperlocal delivery service based in Bengaluru. Sequoia and Nexus Venture Partners, common investors in both TinyOwl and Roadrunnr, played an active role in pushing through the deal.

Pitfall !!!!

While you might want to pivot, you don’t want to jump. Pivoting differs from jumping in that a pivoting company will keep its core insight but use it in a different way. A jumping company changes everything entirely and loses the important lessons it learned from its partial failures.  When a company pivots, you might move from one implementation to another, from one customer segment to another.The pivot is often driven by specific customer feedback.You might decide that only one part of your insight is valuable and separately market that one part. Jumping is when you don’t have anything to stick to.

The important lessons one might or should learn from pivots is to let go and move fast to outpace the competition.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s