Jeff Immelt Just Nailed Why Too Many Startups Pivot Their Business Too Late
The recent ex-CEO highlights what trips up many entrepreneurs from discovering that a pivot in their business model is a must.
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Twitter started as Odeo, a Grand Central Station for podcasts before Apple iTunes scared the founders straight into the social updating behemoth it is today.
Yelp started as a system to enable you to email your friends for restaurant recommendations. But the side feature of posting unsolicited reviews is what took off, and is what the company pivoted to.
PayPal services were originally limited to only work on the Palm Pilot, but the founder soon saw that as a pigeonhole.
The more common stories, however, are businesses that didn't pivot and didn't persist as a result (too many to begin to list here).
So how can an entrepreneur craft a story of the former versus latter?
Recently retired GE CEO, Jeff Immelt, wrote an article for the Harvard Business Review within which he described what many entrepreneurs are not willing to do/are not good at doing that becomes their undoing:
"There's a tension - even as you're making a major commitment of resources, you've got to be open to pivoting on the basis of what you learn, because you're unlikely to get the strategy perfect out of the gate. Nothing we've done (at GE) has ever turned out exactly as it began."
And therein lies what may entrepreneurs miss.
No matter how much you've put your shoulders behind something, you must recognize when that head on your shoulders is telling you it's time to change. And you do so when you're constantly open to new information and signals even as you're pressing forward with your current endeavor.
Since then the company has successfully pivoted from a learning marketplace for fun stuff like painting and surfing, to a training platform that teaches people specific skills needed for specific jobs and then places them in those jobs, even guaranteeing jobs when working with partner employers like The Kroger Co. or MassMutual.
Founder Kash Shaikh explained the why behind the pivot to me:
"Our original model was a good idea when we began developing it in 2013. But market conditions changed, customer demand evolved, and I saw two crises colliding: the student debt and skilled worker crises. I spent 2016 researching and analyzing to figure out how to pivot the company. Many tough choices were made but so far it's paying off. I've learned you can't be blinded by your own ideas or how it was 'supposed to be'. Only two things matter--the moment and the vision. What are you going to do RIGHT NOW, based on the information and instinct at hand/heart? And where do you want to end up?"
Building from Shaikh's advice, and whether you're a founder or a leader of a new venture within a giant conglomerate, here's what to be open to/stay alert for so that you'll know if it's time to pivot.
1. Where is your head and heart?
Has your interest in and attitude towards the business idea waned? Is it still important to you? Too many kid themselves for too long, most often born out of pride or fear of what it will take to pivot.
2. Industry Trends.
What is the industry trending towards? Is your idea ripe for disruption and/or potentially soon-to-be irrelevant? You simply must take time to read the tea leaves.
3. What are customers telling you?
Whenever I'd come home from a focus group frustrated by what my consumers/customers were saying about my product, my wife would tease me, "Well you've just got to get better customers then!".
No, you've got to get better at listening to your customers. They will tell you if there is suction for your business idea/model, or if a subset or some other sliver of your proposition has peaked their interest. You just have to be willing to receive that gift of feedback.
4. Why are sales declining (or is suction absent to begin with)?
First of all, see number three above for insight. Then it's important to really understand what's going on with your business and whether or not (as Seth Godin describes it) you're in a dip or a dead-end. You must be brutally...honest...with...yourself.
5. Has it become riskier to stay put rather than change?
When the cost of entrenchment has become too high, it may be time to pivot.
So while greenlighting your time and attention to your current venture, don't miss the yellow lights along the way indicating it may be time slow down, reconsider, and change direction.