Grow Your Business By Pivoting
Dan Arens is an Indiana-based business growth advisor.
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIn the recent hit movie "American Made," actor Tom Cruise played a former TWA pilot by the name of Barry Seal who was recruited by the CIA in the late 1970s. Seal was an agent of change in all of his dealings with various entities including the DEA, Medellin Cartel in Columbia, and Manuel Noriega in Nicaragua.
As the plot unfolded he was flying drugs, then guns and money all over Central America. As Seal saw each new "opportunity" or had one presented to him, he changed his business model so he could make even more money.
Whether new possibilities come along or even when things are not working as well as you would like, your business model might need to change and adapt to give your business a better growth trajectory. Pivoting is exactly what it implies, a change of direction. In order to realize whether things are working or not, you need to be able to measure the success or failure of your changes. You also need to be committed to making the change and be confident that it will be successful.
In order to be an agent of change in your organization, you need to be able to realize when your business is not where it needs to be. Many business owners and managers are of the opinion that once a sweet spot is found in their business, they tend to fall into the trap of holding on to the phrase that represents the seven words most fatal to a business "We’ve always done it that way before." A primary means of measure is usually sales revenue. In fact, breaking down sales revenue into more logical groupings or segments like products, departments, or models, might be more helpful.
A company by the name of Violight is a good example. They make products that sanitize toothbrushes. Several years ago, their founders Joel and Jonathan Pinsky, hit upon the idea of expanding their business model to embrace cell phone sanitizing as a means to increased growth. They were not dissatisfied with their growth in the toothbrush segment, they just wanted to try and capture another segment in the product sanitation market. According to Inc writer Amy Barrett, they were used to selling their products through drugstores and specialty retailer markets. As they performed their market research they determined cell phone sanitization was going to involve selling through electronic stores, a major shift in their strategy. But they made it work and were successful in broadening their business model to include cell phones as well as toothbrush sanitation devices.
Eric Ries, author of Lean Start-Up, encourages entrepreneurs to "pivot" or change their business model, as driven by their customers, as often as necessary, in order to determine the viability of a product or service. Validation of the product will confirm the market segment and the market.
A key observation by Ries is the consideration of the ideal pivot. According to him it is when "a company will be able to test a new business model while keeping the old model intact."
You should research and review where your company could change your product or service to appeal or reach another segment of the market, just like Violight did.
- Develop a budget of what you are willing and able to spend for your new approach.
- Reach out to existing customers who could use the service and get their feedback.
- Reach out to new customers in order to determine the viability of what you are wanting to do.
- Get quantitative in looking at your revenue projections and your costs. Get as detailed as possible.
- Test market the new product and measure the results.
- Based upon the results of your market tests, be prepared to change the approach you are taking.
- Regardless of the outcomes, celebrate your success or failure. If you were successful, it was obviously worth the effort. If it was a failure, you certainly learned something in the process, remember what you learned for the next time.
In the case of startups, Ries encourages entrepreneurs to keep one foot in the past and one foot in the possible new future, using the foot metaphor to accentuate the term "pivot," like in the game of basketball.
Remember, in order for your business to grow, you will need to try new things, hopefully better things, in order to get to that next level of growth. Unlike Barry Seal in the movie, make sure everything is legal.
Dan Arens is an Indiana-based business growth advisor.