In the world of entrepreneurship, a startup is said to “pivot” when it makes a change in its business model. Though often difficult and laborious, pivots are a crucial part of the business process, helping a startup develop or update products for the right customer and finding the perfect positioning. As the name suggests, a pivot often results in a change of direction. A pivot can lead to a completely new company altogether or it can help a startup achieve a new level of growth.
What ‘Pivot’ or “Pivoting” Means
The pivot is an essential part of the lean startup model, in which businesses are launched quickly but with highly controlled spending. In the lean startup model pivots are very often driven by specific customer feedback, and directly respond to what is working and what isn’t. A number of prominent, high-profile companies have pivoted, including PayPal, Starbucks, and Groupon. Silicon Valley culture is in fact built around the idea that a pivot can turn a mediocre idea into a multi-billion dollar company. The idea is that by fluidly shifting course or radically altering direction can tremendously boost a company’s profitability.
The Groupon Pivot
Groupon is perhaps one of the most notable examples of a company pivot. When Groupon first got its start, it was an online activism program called “The Point,” a platform that allowed users to contribute to causes. Founders theorized that people were hesitant to contribute to causes if they didn’t think their contribution would make a difference. They therefore allowed cause founders to set a tipping point, in which a plan would go into action after a pre-determined amount of money was raised. Unfortunately, however, The Point received little attention and gained virtually no traction. In order to promote their young company, the founders opened a WordPress blog and launched a coupon promotion for a pizzeria located in their building. Only twenty people redeemed the coupons, however, the floundering founders realized that their idea was significant.
The founders of The Point did some thinking and quickly realized that the most effective campaigns on the platform were those that gave consumers buying power. They took the coupon idea and ran with it, blogging various deals found from different businesses each day, calling it “Get Your Groupon.com.” Soon the team was calling hundreds of vendors each day to create daily deals. This is where the original tipping point idea of The Point came into play. In order to get vendors to agree to the deals, the team allowed them to set “tipping points” — Groupon would only get part of the profits if a certain number of people had bought into the deal. Otherwise, they took nothing.
The pivot was dramatic but tremendously successful. Groupon was able to please both consumers and vendors. “Get your Groupon.com” took over four major cities in six months. They went on to accrue millions of subscribers and even turned down a multi-million dollar offer from Google. Ultimately, the Groupon pivot is emblematic of everything a good pivot should be: the founders learned from previous failures, paid attention to consumer wants and needs, focused on what was working and got rid of what wasn’t, and created a win-win situation for all parties involved. By pivoting quickly and efficiently, Groupon went from failure to multi-million dollar success.
Pivot International is a product design, development, and manufacturing firm with extensive experience in the medtech industry. If you are interested in engineering a new product or updating an existing product, contact us at 1-877-206-5001 or request your free consultation today.