Anyone who has founded a startup can tell you. It’s a roller coaster. Expect the unexpected. Make a plan B, and C and probably D too.
One of the most critical skill sets for a startup founder is agility. It can be difficult, especially when you’ve poured your heart and soul and personal savings into your big idea. But often times, the most successful founders are the ones who were willing to make necessary adjustments, either in the product or the business model. This is the pivot. This is the moment when you acknowledge and act to chart a new course. So how do you know when it’s time to pivot?
There’s no perfect answer, but conducting a bit of market and competitor research will often reveal important pivot points. Most pivots arise from gaining a piece of competitive intelligence that invalidates a prior assumption. For example, have you made assumptions about your market size being larger than it really is? Have you made assumptions about the age or habits or disposable income of your buyers? Have you made assumptions about the likelihood of being granted a patent?
Here are three real life examples we’ve seen recently:
1. The founder made an assumption that her customers would be predominantly Millennial generation because the product would be sold through online channels. After we researched her market segment, we learned that in fact, buyers in this category of ecommerce were almost evenly split between Millennials, GenX-ers and Baby Boomers. The research opened up two entirely new verticals to market towards and provided more detailed definition to the market size.
2. The founder made an assumption about the most compatible retail outlet for his product, a “fit food”. When we researched the market segment, we could see that the grocery market was saturated, but the open opportunity was distribution through sporting goods stores. The likelihood of capturing market share was far greater with the less obvious channel partner.
3. The founder made an assumption about the adoption of his product by government agencies as the primary sales channel. However, the research showed the inefficiency of landing contracts with those agencies in relation to the sales pipeline necessary to hit investor growth targets. The decision was made to pivot to private contractors for the initial go-to-market strategy and develop a secondary long play for government agencies.
In each of these cases, the research invalidated an assumption the founder had made regarding his or her market segment or primary buyer. But by analyzing and accepting the research, each was able to make a critical pivot to their startup and undoubtedly improved their chance of success.