In your business’s life cycle, you may find it necessary to undertake a course correction in an effort to realize a more favorable performance from your company. As an entrepreneur, you will need to either pivot or move on from your business venture. Pivoting may seem to some as a sign of admitting defeat when, in fact, it more relates to survival and the life, or death, of your company. Knowing when and/or how to pivot, or move on entirely, can be one of the biggest challenges for any new entrepreneur.
A pivot is a change in the direction of your business model or product, and can happen at any point during your startup process. Most successful startups have pivoted in one way or another. In an article titled, “The Startup that Died so Instagram can Live” by CNNMoney, details Instagram’s transition from a failing mobile app, Burbn, to the $50 billion dollar company it is today. Do not become the martyr to a failing idea or company; instead, react and know when it is time to change course. There isn’t an algorithm or some magic formula for you to use, but it’s important to always keep an open mind.
When should I pivot? A tool that you can use to determine whether your plan is, or isn't, working is taking a step back from it and examining through the lenses of an investor. You have already committed time and other resources into this project, but before you commit even further, take a look at it again to see if there is still true value there.
A great way of knowing the true value of a business model or product is creating a Business Model Canvas. A Business Model Canvas is a strategic management and lean startup template for the development of new, or documentation of existing, business models. It is a visual chart with elements describing the value proposition, infrastructure, customers, and finances of a product or firm. This template will assist in knowing to pivot, if necessary, prior to putting all your time, money and effort into building a successful business.
The Business Model Canvas consist of these nine areas:
- Customer Segments: For whom are we creating value? Who are our most important customers?
- Value Propositions: What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? Which customer needs are we satisfying? What bundles of products and services are we offering to each customer segment?
- Channels: Through which channels do our customer segments want to be reached? How are we reaching them now? How are our channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines?
- Customer Relationships: What type of relationship does each of our customer segments expect us to establish and maintain with them? Which ones have we established? How costly are they? How are they integrated with the rest of our business model?
- Revenue Streams: For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each revenue stream contribute to overall revenues?
- Key Resources: What key resources do our value propositions require? Our distribution channels? Customer relationships? Revenue streams?
- Key Activities: What key activities do our value propositions require? Our distribution channels? Customer relationships? Revenue streams?
- Key Partners: Who are our key partners? Who are our key suppliers? Which key resources are we acquiring from partners? Which key activities do partners perform?
- Cost Structure: What are the most important costs inherent in our business model? Which key resources are most effective? Which key activities are most expensive?
In the entrepreneurship world, the phrase is known as “killing your darlings,” which means to change your original business model or product in order to fit the needs of your product or service.
About the Author
Bradley Blankenship was born and raised in Las Vegas, NV, is a current MBA student at UNLV emphasizing in New Venture Management. He completed his undergraduate degree at UNLV (Entrepreneurship, 2012). He plans on taking everything that he’s learned thus far and open his own investment firm in the future.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of RVF or UNLV. In addition, thoughts and opinions are subject to change and this article is intended to provide an opinion of the author at the time of writing this article. All data and information is for informational purposes only.