As every person in a startup will tell you, it can be hard. And in most cases, the ones that succeeded did so because they found their product market fit early and executed to serve that market.
I’ve been fortunate to work during different stages of startups, many that eventually went from funding round to 9 figure exits. And while the founders and leadership teams are always celebrated for their success, what that exit won’t show is the struggles to get to that point -- whether it’s to get traction or push past the plateau of growth.
In my opinion, the most interesting stories are the ones where the leadership team figured out how to claw back from uncertainty to reach success. There are tons of stories like this:
- Shopify emerged as the leading ecommerce platform after a few friends built a storefront for their own snowboarding store business but soon turned their side-project into a product since there was a greater need in the market to help businesses make better online stores.
- Instagram started as a social check-in app with a ton of gamification features. When they saw that traction was low due to too many aspects of the app, they stripped down the app to focus on the most used functionality - photo sharing.
- YouTube launched as a dating site. When users started using it to upload videos of their life beyond dating, the founders let users define what the service eventually became.
The people and decisions the leadership team made were the keys to each company’s continued growth. But this post is not about the leadership of those companies. It’s instead about the process they went through to “pivot” after learning more about their market, customers, or product market fit by getting their MVP in the hands of the customers.
Pivot stories aren’t always linked to major businesses; in order to survive and thrive, many businesses needed to pivot at some point before they ran out of runway or spent too much searching for product market fit. Here are some real lessons from some startups I know on when, where, and what to pivot.
The company that learned it’s neither the chicken nor the egg that comes first
At first glance, there was a market need and an opportunity ripe for disruption. The thought was to better connect reseller partners to all of their vendors, similar to how a person connects to all of their friends on Facebook. The platform offered a community where a partner could interact, engage, learn, and access the tools to drive more revenue.
In theory, it was the Channel Sales version of a social network meets partner portal. On launch, there was major industry press coverage, hundreds of vendors on the platform, thousands of user sign ups. The bad news - after a while, vendors were not actively publishing content. What was the reason?
In a proverbial tale as old as time, it became a challenge of which comes first - the chicken or the egg? Vendors wouldn’t make the investment if their partners weren’t already there, and the partners wouldn’t get value if there were only a few vendors active. The company needed to quickly pivot from a two-sided marketplace to a single-sided. It turns out that vendors and manufacturers really wanted something with their brand on it, not a combined network.
The business turned to focus on vendor acquisition with a slightly modified product, essentially turning the product inside out. The team started to create mobile-first, custom branded apps for vendors to communicate and engage with their entire partner base. This model attracted many of the top 100 IT and Telecom manufacturers as customers.
Take Away: Sometimes, pivoting means adjusting your entire product and go-to-market strategy to find the best product market fit and a customer base who’s willing to pay for your product. There’s an old adage that “sales cures all.” In this case, the buyers wanted something they could call their own. And that was something the leadership team never would have guessed with their initial idea.
The company that learned building Noah’s Ark is unsustainable
When the SaaS evolution was just beginning, this business was trying to gain more traction and solidify their product market fit. On the outside, the company was growing strong.
On the inside, their customer list looked like the roster on Noah’s Ark; two from Industry A, two from Industry B, two from Industry C, etc. Each customer segment used a fraction of the product. The company couldn’t keep growing by focusing on building a product for everyone they sold to. It was time to analyze the data.
The team called every customer and looked at the product usage data to uncover some of the challenges. A group of roughly 30% of the customers arose from the pack with exactly the same problems. The customers said they would never go back to their homegrown systems; they couldn’t function without the product! That was the turning point - to continue to grow, the company aimed to make software specifically for that customer to run their business, better.
That eureka moment focused the company to pivot towards one single market and make the tough call to abandon customers in other verticals. Without doing so, the company would have been building a solution for too broad of an audience and never would have found traction.
Take Away: There’s a quote I love from Brian Alvey, where he said, “If you build something for everyone, it works for no one.” Focus on solving a customer problem should be goal #1, but finding the right customer problems to solve is more important in the long run. Otherwise, you risk building a business on an unstable foundation of customers and feel pulled in many directions to solve multiple customer challenges.
The company that learned to focus on their losses
Business was booming and the product was solid; there was a market fit already. The challenge wasn’t finding the market, it was how to grow market share as it became more commoditized and competitive.
The company decided to look at all aspects of the business for answers. Sales and marketing analyzed their pipeline and active deal flow to find who the marketing and messaging was targeting. Product Marketing analyzed win/loss data and calls for commonalities from successful deals. Customer Success analyzed retention, NPS, and customer profiles.
The data showed it wasn’t a pivot in product market fit, rather it was a sub-segment of the market that was asking for help. There were many losses for the same reason. Product changes, new packaging, and better industry vertical focus opened up a whole other side of the market that the company was already attracting.
Not only did the company double down on their successes, but they looked for ways to grow the business even further by changing the overall strategy to find more customers like the ones that close faster, pay more, and stick around longer.
Take Away: The target market may shift and change. Sometimes it’s best to understand why you win or lose for answers. Analyze who the message is attracting, what pains or help you can provide, and why it is or is not converting to get more of your happy customers.
Four lessons in pivoting:
There are some common themes I’d like to highlight from these stories:1. Follow the money
Sales cures all. It doesn’t matter if your first idea that you loved doesn’t work. There’s no business in following a vision that no one is willing to pay for or join you along your journey. Cut losses early and pivot to where the business can generate the most revenue.2. Your first idea isn’t always the winner
Focus on the wins. In all the examples above, there was opportunity to adjust the GTM approach. Sometimes it was a side project or changing the target market that unlocked the business growth. Having the flexibility to explore those options and let go of lesser ideas is tough, but many times necessary in order to keep the business afloat or reach the next growth milestone goal.
3. Focus on building for the right ICP
Pivoting may mean spending extra time defining the specific profile to target, but that doesn’t mean casting a wide net to encompass any type of buyer. It means experimenting enough to gather data to clearly define the ideal customer profile and aligning the entire customer acquisition strategy, qualification process, and retention strategy around that customer’s need. If done correctly, focusing on the ICP can help the business become hyper-focused on solving a specific set of customer challenges which aligns the business model and product development efforts.4. Be open to change
If you hit a pivot milestone, be open to change. The first idea isn’t always “it.” Look at things from another angle. And finally, have the guts to let go of your baby and transform it into something new and better.
At the end of the day, not all pivots are the same. Some pivots are a result of “when” (there was not a product market fit). Some are pivots of “where” (to focus on one target group). Others are pivots of “what” (needs to be changed in order to grab market share). In all instances, what it came down to was the ability for the company to remain agile, flexible, and focused on scalable revenue growth. And with that, each company found their product market fits.
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