Pivoting: How to Shift Directions and Overcome Failure

17th Jul 2012
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View from the sidelines by Venkatesh Krishnamoorthy on Failure – 2. Read the first article on failure here

Inadequate initial capital or irregular cash flow are detrimental to success, as we saw in the last column. Businesses usually start with a business plan. Most people who startup are not familiar with the business plan. It’s simply identifying target customers for your service or product and devising a strategy to make your offering appealing to them. Sometimes, if you are raising money, business plans involve projecting the growth of your business in five years on an annual basis. Put simply, a business plan gives you direction to run your business. And it simply tells you what you are going to sell and who will buy it. Most of you will agree that the five-year projections are something written like mission to the moon. If you are overly lucky, those projections might come true. Most of the times, they don’t.


direction

The problem sometimes with a business plan is it doesn’t tell you how much money you will make. You may offer a service or a product and many customers may use it or buy it. They may not pay. As you offer it free, they are fine with it. Once you say you will want them to pay, they turn back on you. Making money is vital to running a business. The revenue model is sometimes different from your business model. The business model is built around your passion, idea, product and the target market. The revenue model is developed around how much money you will make from your offerings. Sometimes, your primary offering may not fetch you a major revenue whereas a small offering to niche customers might get you more money.

Business plan, Business model, Revenue model, Let’s first put them in perspective. Business plan lets you project how your business will grow, what you will offer and who will buy it. The business model tells you how you will operate. What will be your primary business? The revenue model will suggest where your money is going to come from.

When you make a business plan, the first one, you are enthusiastic and within three months you will realize you have met none of your projections. You haven’t found a paying customer yet and many haven’t liked your idea. What do you do? This is where pivot comes in. At any stage, everything doesn’t go according to a plan. In that case, we would be more dependent upon soothsayers, astrology and foretellers. We rely on scientists and business gurus to observe and inform us the trends.

Pivot is changing the direction of your business to achieve your objective. The primary objective is to stay in business and the most important is making money. When your plans don’t seem to work, you need to rework them. Steve Jobs made an art of pivoting. When he was fired from Apple, he formed NeXT, which was a failure in terms of many strategies he devised. He didn’t give up. He forayed into animation and made success with Pixar. Supposing Steve Jobs would have stayed true to his own sworn belief of making a dent in the universe through computers, he wouldn’t have changed directions. It’s important to embrace the new plan as soon as you find that your old plan hasn’t worked.

There are several examples of successful pivots. SanjeevBikchandani didn’t start with job offerings as a business. He did a few more and found that jobs are the most sought after. So he closed down the other businesses to focus on naukri.com. MurugavelJanakiraman of BharatMatrimony.com zeroed in on matrimony online as a business after he found takers to his listing of matrimony ads on his website. He was offering data on important events and functions to the Tamil population in the United States to start with.

We are instinctively made to succeed. We know what works and what doesn’t. Eric Ries in Lean Startups coined the term pivot and says the decisions to change directions should be based on data. Gut feeling is not all that great when it comes to strategic decisions. Getting to Plan B by John Mullins and Randy Komisar is about the art of pivoting and succeeding.

Ask yourself, what is important. Success by pivoting or adamantly sticking on to your original beliefs and failing?

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