Discuss: Do we actually know what a pivot means?

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In late 2013, Cowboy Ventures did an analysis of US-based tech companies that started in the last 10 years and were valued at US$1 billion. They found 39 companies and called them the Unicorn Club.

The article summarized 10 key lessons from the Club. Surprisingly, one of them was this:

“The ‘big pivot’ after starting with a different initial product is an outlier. […] Nearly 90 percent of companies are working on their original product vision. Four ‘pivots’ after a different initial product were all in consumer companies (Groupon, Instagram, Pinterest, and Fab).”

One of my students sent me the article and asked, “What does this mean?”

Good question.

Since the pivot is one of the core concepts of the Lean Startup, I was puzzled. Could I be wrong? Is it possible pivots really don’t matter?

Short answer: Almost all the unicorns pivoted. The authors of the article didn’t understand what a pivot was.

What is a pivot?

A pivot is a fundamental insight of the Lean Startup. It says on day one, all you have in your new venture is a series of untested hypotheses. Therefore, you need to get outside of your building and rapidly test all your assumptions. The odds are that one or more of your hypotheses will be wrong. When you discover your error, rather than firing executives and/or creating a crisis, you simply change the hypotheses.

What was lacking in the article was a clear definition of a pivot. A pivot is not just changing the product. A pivot is a substantive change to one or more of the nine business model canvas components.

But what is a business model?

Think of a business model as a drawing that shows all the flows between the different parts of your company’s strategy. Unlike an organization chart, which is a diagram of how job positions and functions of a company are related, a business model diagrams how a company makes money  without having to go into the complex details of all its strategy, processes, units, rules, hierarchies, workflows, and systems.

Do all startups pivot?

Lessons learned

Let’s discuss