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Pivoting – The Essential Capability of an Agile Business

“Pivoting” is the latest buzz word in the startup and business world but it’s not just a faddish phrase – it’s a critical business capability your company just has to have.

Pivoting is all about shifting gears in your business – its direction; who it serves; the value it delivers to your customer; the products and/or services it provides; etc. Essentially, you can shift gears at almost any level of your business.

Having the ability to identify the need to pivot, define what the pivot looks like, and then execute the pivot successfully are all important for business success in a volatile and evolving business environment.

Identifying the Need to Pivot

Like most things, if you wait until trouble shows up in your financial results, you have waited too long to identify the need for a pivot in your business. What you must do is have the ability to detect important shifts on the business horizon that will require a pivot response long before the need to pivot becomes crucial. This requires an ongoing process of listening and inquiry, and the ability to understand, at a deep level, where your business environment is truly going.

To do this successfully, you must:

● Talk to customers and non-customers constantly about what they need and expect, and what trends, products, services, and companies in their life (across all spectrums) excite them and why;

● Understand what’s going on in the business environment from all angles (including economic, political, regulatory, trade/supply chain, and technological);

● Keep an eye on existing and future competitors and non-competitors to understand what they are doing for your target customer and what is, and isn’t, working for them and why;

● Understand where trends are going in your industry (and related industries) regarding products and/or services, models of distribution and delivery, and business models; and

● Keep a keen eye out for the potential for a serious or catastrophic disruption in your industry.

Many companies feel comfortable completing this inventory every few years during the SWOT analysis phase of their strategic planning process, however, this is problematic. The new reality requires companies to get into the practice of gathering and looking at this information on an ongoing basis.

However, obtaining this intelligence is only the first step in the pivoting process. With this information in hand, companies must develop the ability to identify (1) changes that require a pivot response, and (2) the type of pivot required.

Defining the Right Pivot Response

It is important to realize that not all pivots are created equal. I would characterize some pivots as tweaks while others represent significant shifts for your business. Whether a pivot is a tweak or a significant change has implications for the execution phase of pivoting (more on that below). For now, let’s look a little closer at the some possible pivot responses.

Sometimes you discover that you are selling the wrong product or service to the wrong customer. If you want to stay in business, you need to pivot. Do you change your product or service to match the needs of your current customer or do you target a new customer for your current product or service? It’s hard to say in a hypothetical situation. One school of thought would be to leverage your deep understanding of your current customer and offer them a new product or service while another way to go is to change your niche and marketing to focus on the ideal customer for your existing product or service.

Sometimes you need to respond to a change in your environment with a change in the service experience you provide to your target customer. This often happens when they have new experiences through their dealings with other businesses that change their service expectations across the board. For example, the ability to receive instantaneous service from other companies may cause your customer to wonder why they can’t get the same level of response from your company. To keep your existing customers (and possibly attract more customers) you may need to lead your industry and pivot by finding a way to deliver instantaneous service where it has never been offered before.

A bigger pivot may involve changing your customer value proposition. For example, you may decide to respond to a shift in what your customer values by making a change from being the McDonald’s of your industry (i.e. the king of low cost, cookie cutter service and products) to truly putting the customer at the center of your business and providing customized service based on the customer’s unique profile. This type of pivot is often complicated to undertake.

The most significant pivots are often triggered when a disruption is about to take place in your industry that will either change the industry as we know it or virtually eliminate it all together. The changes to the music and publishing industry are examples of significant industry changes requiring a pivot in business models. The move to digital cameras and digital photo technology has virtually eliminated the consumer film industry. When your industry essentially disappears, the ability to pivot into a new business is essential for a chance at survival.

Determining the right pivot response to a change in your business environment is a critical capability. The key to success is understanding the true nature of the change and the pivot response options available that actually make sense given the change. A full review of the pro’s and con’s of each pivot response option must be part of your decision- making process.

Successful Pivot Execution

As with all things in business, it’s not just good enough to make the right pivot decision – the key to success is fully executing the pivot. The secret to pivot execution success is to ensure that your company is fully aligned to support the pivot. This includes making sure that your people understand the new imperative, receive the required training and develop the necessary skills, and have access to the resources they need to put the pivot into action. Lining up your business correctly with the pivot may require a change in your business model, business processes, supply chain, tools, and technologies. The depth of the re-alignment required in your company will have an impact of the speed at which you can execute the pivot, however, successful companies develop the ability to appropriately re-align their business in response to a pivot quickly and effectively.

Some pivots are simply tweaks because the degree of organizational re-alignment required to execute the pivot is limited. Pivots executed in response to a disruptive change in your industry are generally significant because they require you to either re-align your entire company or rebuild it from the ground up in an entirely new way.

The ability to pivot pro-actively, appropriately, and quickly is the new imperative for companies, business units, and teams alike. It is the key to ensuring ongoing business success in an evolving business environment where the risk of significant disruption is a real reality.

The capacity to pivot requires three new organizational capabilities – the ability to: identify the need to pivot, determine the right pivot response, and execute the pivot appropriately. If you are smart, you and your company will invest now in developing the processes, tools, and technologies, and employee skills and capabilities required to ensure your organization’s pivoting ability before you are faced with a change in your business environment that requires a significant and quick pivot response for the ongoing survival of your company.