Architecting Pivots

by Mosbah Kahaleh

Eric Ries and Steve Blank, two of the pioneers of lean startup methodology who are trying to codify what lean startup methodology actually mean and how can future entrepreneurs benefit from such way of thinking. At the heart of lean startup methodology is the ability to ‘pivot’, which in simple terms can be defined as the act of changing the startup’s path as the founders learn by experimenting and gathering feedback. Startups pivot in an iterative process with the goal of reaching product-market fit.

Drawing on frameworks from other management theories, I hypothesize that pivots can be categorized along three dimensions that can help entrepreneurs in architecting pivots.

First, inspired by Clay Christenson’s innovation theory, I believe pivots can be classified into two categories: disruptive pivots and sustainable pivots. In disruptive pivots, the entrepreneur learns something about his/her market or consumer behavior that completely changes the entrepreneur perspective on how to create value which leads the startup to disrupt itself. In disruptive pivots, entrepreneurs may choose to completely ignore their prior work and start from scratch. On the other hand, sustainable pivots are incremental changes that enhances existing product for a better product-market fit. In architecting the pivot, that categorization will affect who will make the ultimate decision on whether to pivot or not. My hypothesis is that sustainable pivot decision can be made by VP of Product Development while Disruptive Pivot decisions should be done founders or CEOs.

Another important aspect in architecting pivots is to figure out if the entrepreneur is pivoting on the product design or on the businesses model. When designers perform A/B testing on best color on the landing page or when engineers experiment with additional product functionality, these pivots are around the product design itself. On the other hand, pivoting around the business model has to do with the way the startup creates, delivers or captures value. For example, in the case of HurryDate, an online match making service, the company had pivoted away from capturing all the value from customers who use the service to capturing value from sponsors would benefit from marketing to a captive audience.

Finally, the last aspect of architecting the pivot has to do with the direction of the pivot. In my hypothesis, pivots can be classified as horizontal vs. vertical. Pivoting vertically refers to a pivot that increases the scope of the startup value proposition (along the value chain) offered to the existing targeted customer base. For example, when Facebook decided to add ‘Classified’ feature in their website, they have added extra value to their existing customer base. Whereas, pivoting horizontally refers to pivots that broaden / limits or even change the targeted market and customer base. For example, IMVU initial targeted market was “homemakers” – middle-aged female users interested in making social connections, and IMVU team intentionally avoided teen audiences. However, after experimenting with the product and based on teen high adoption rate, IMVU team decided to switch to targeting teen users.
 

Even though these dimensions are not 100% Mutually Exclusive and Collectively Exhaustive (MECE), they provide a starting point of understanding the different dimensions and can help entrepreneurs architect new pivots to ultimately achieve product-market fit.