Make Investors Sit Up and Notice #12 – The 6 Point Pivot Plan Strategy
Well, we’ve covered a lot of ground on pivots in a short time. In this post I’m going to share some tips for creating a pivot plan that you can roll out when it’s called for — and that you can show to investors in advance to build trust. Remember that it all comes down to developing and growing investor trust. In the past few posts, I’ve given you a primer on the pivot so that you can be prepared in advance to make a pivot (I assure you that you will need to pivot at some point) and to communicate that preparation to investors to build trust. We’ve explored what a pivot is (and isn’t) and when to make a pivot (and when not to pivot) and we’ve looked at 10 classic pivot plays that you can study. Today, I’ll conclude this discussion on pivots by giving you the elements of a good pivot plan.
Let’s begin with an empowering context about pivoting. First, a pivot is not a failure, it is a strategic move to capitalize on new opportunities and adjust your business plan to new conditions and circumstances. Second, a pivot should be data and information-based, rather than an emotional decision. Third, a pivot is aimed at long-term success, even if it involves short-term pain — it’s ok to take a step backward in order to leap two steps ahead.
Now here is the key thing I want you to really get about a successful pivot:
Prepare for a pivot before you need to execute it.
Remember being a kid and having to practice fire drills in school? There was no fire, but the whole school practiced what to do in advance so that if a fire ever took place everyone would know what to do and where to go. There could be an organized response to a stressful event because everyone practiced beforehand. That’s how I want you to think about the almost-inevitable pivots in your business future.
The following material is synthesized from the many sources I’ve cited earlier in this series and from my own experience as both entrepreneur and investor. In a forum such as this I can only give you a general overview of how to plan for a pivot. The goal here is to guide you towards creating your own structure for pivot planning and being able to communicate that you’ve done so in order to build investor trust.
Pivot Plan Strategy #1: Collect Data Constantly
Everyone collects sales data so that won’t set you apart from the crowd. The key data to collect is based on determining your Key Performance Indicators (KPI’s). To know what these are you need to know what it is you are trying to accomplish — increasing traction in a market, generating revenues, testing a new product, etc. etc. So, the trick is to know where you’re intending to go, what you’re intending to accomplish BEFORE you need to pivot. That way, your pivot planning can be focused around what it is you intended to accomplish and are not accomplishing. When you formulate new hypotheses you’ll then assess the old data and determine what new data to track based on your best new hypothesis for generating value.
Pivot Plan Strategy #2: Know your Customer Deeply
It’s important to know who is buying your product, why they are buying it (or aren’t), how they are using it and what they wish it could do that it doesn’t. Even though there are all kinds of ways to get and stay connected with customers through technology, sometimes the old fashioned way works best. That means actually TALKING to customers to learn what they love and don’t love about your product; how they’re using it (especially if that’s different than you thought); and last but definitely not least, if you can talk to people that did not buy your product and find out why that will help you immensely in working out a pivot.
Pivot Plan Strategy #3: Know the Trends in your Industry
Disruptions are commonplace in most industries. Consumer behavior changes. New approaches to solving problems appear. New ways to complete tasks are developed. New ways to access information, treat illnesses, travel, learn, meet people, build wealth and all kinds of other things are always being developed. You need to stay “in the know” about what is happening out there in your industry. Better yet, you want your team to itself be on the cutting edge in its thinking and to practice constant innovation.
Pivot Plan Strategy #4: Be Agnostic about your Product
There is an old adage in commercial real estate that advises “never fall in love with a site.” The idea is that you want to stay open to other sites that could be ever better than the one you’re currently looking at. Be the same about your product. What’s most important about your product is what customers think of it, not what you think of it. If it’s not selling well or not being used by people as you’d thought it would be, then you need to be flexible enough to make changes, even enter whole new markets with a new product or one aspect of your existing product.
With those strategies and practices in constant motion you’ll have the systems in place to empower you and your team to make a pivot when it is called for — and you’ll be able to see the signs that a pivot may be approaching in advance. From that strong base you’ll then need a pivot process. Here are my suggestions for creating that process:
Pivot Plan Implementation #1: Assess exactly what’s not working
That means establishing KPI’s (Key Performance Indicators) at the outset of your market launch and then tracking data related to them. Where are things not measuring up? Without real information based on the original KPI’s that you generated from your original hypothesis, you’ll simply be guessing about what pivot to make — or whether to pivot at all.
Pivot Plan Implementation #2: Review your data
If you’ve been collecting data related to your KPI’s then assess where the data is showing that you are not measuring up. Remember, the key point is what were you setting out to do? Some companies aren’t profitable for years, but patiently work to create a large user base before monetizing their offer. Other companies spend millions on R&D without selling anything for a long time, then enter the market in a big way. Others want to go to market ASAP with a minimum viable product (MVP) and test market acceptance. That’s why the data will only be useful if you are clear about what it is you are trying to accomplish.
Pivot Plan Implementation #3: Brainstorm
This is where you get your entire team involved. You’re clear about what you set out to do. The KPI’s are not measuring up to your hopes in one or more areas. Now is the time to dive deeply into what is actually happening in the marketplace. Your sales and marketing team can provide insight about what customers are saying or whether messaging and branding are communicating. Your R&D team can provide insight on how a product could be changed to meet customer desires. Your execution master can provide feedback about how the overall efficiency, spirit and capability of your team rates. At this point you are looking to answer the question “why” as it relates to the KPI that is not living up to expectations.
Pivot Plan Implementation #4: Create a new hypothesis that is measurable
After assessing data and brainstorming you should have some clear ideas of what’s not working and why. This should be especially apparent as it relates to your customers (if you’ve already launched into the market) and/or your KPI’s that are not being fulfilled. Based on that knowledge and the input of your team, including advisors, mentors, investors, customers and other stakeholders, your job is to formulate a new hypothesis. Generally, that new hypothesis will be focused on what you can do that will satisfy a customer need that you missed the first time into the market.
Pivot Plan Implementation #5: Test your new hypothesis
Once you have formulated a new hypothesis, test it with customers. You might conduct focus group research. You might create user groups comprised of early adopters and others composed of later adopters. You might test the popularity of your product in specific new niches. Or, if the data and your brainstorming favors an entirely new product, then you may first need to develop an MVP and then test it with potential or actual customers. As you test, collect data that should guide you as to whether your new hypothesis is on point.
Pivot Plan Implementation #6: Go all in if the data supports it
If the data suggests your new hypothesis is on point then go for it! But continue to collect data, test the data against your KPI’s under the new hypothesis, continue to get customer feedback and always practice continuous innovation.
Key Takeaways: The art of a successful pivot is part art and part science. I urge you to review each of the posts in this ongoing discussion we’ve provided about pivoting, click on the links provided and read the in-depth materials that experts in this field have provided. Remember, our context is primarily how to gain investor trust. So the point of this post and the others in this series is to get you to a place of general competency about pivots so that you can communicate to investors your awareness and understanding of the likelihood of a pivot in your business future and that you and your team are prepared to navigate a pivot when the time comes.