by James H Hunter III, author of “Graduate A CEO: Why College Is The Perfect Time To Start Your Business“
Entrepreneurs make seemingly countless decisions throughout their journey. But few, if any, will be more important than deciding whether to pivot or to persevere on the plan they’re following.
It’s a decision that can come up at several points during the life of the company, and each time it can determine whether the business survives only another year or so, or grows into a sustainable, profit-making enterprise.
Knowing when to pivot or when to persevere can be a delicate dance an entrepreneur does with his or her nature and market forces. Many entrepreneurs are oriented toward taking quick action, but in some cases that might mean an overreaction. A sub-par performance two quarters in a row, for example, doesn’t necessarily mean you should make wholesale changes. Entrepreneurs need to closely inspect every aspect of their business before deciding whether to change course or stay the course. They need to ask themselves if they’re pivoting due to impatience and restlessness or because they’ve uncovered details that call for tweaking the plan.
The Lean Startup Model
Eric Ries, author of “The Lean Startup”, knows all about the importance of a business’ decision to pivot or persevere. In his book, Ries tells entrepreneurs that a great product and hard work in and of themselves will not lead to a successful and sustainable business; rather, it is the boring, mundane details and small individual choices that make or break a startup.
Ries formalized his Lean Startup method after years of experience, study, and the worldwide success of a business he co-founded, IMVU (an avatar-based social network). One of his principles, build-measure-learn, is central in determining when to pivot and when to persevere.
The Lean Startup model views the products that startups build as experiments; the outcome of those experiments is the learning of how to build a sustainable business. At its core is the build-measure-learn feedback loop, and the key to this feedback loop is to minimize the total time through it.
- Build: Once your value hypothesis and growth hypothesis have been determined, the goal is to quickly enter the build phase with a minimum viable product (MVP) that you can get in front of customers and assess their response to it.
- Measure: In this phase, you are measuring your value hypothesis (Does anyone even want this product?) and your growth hypothesis (Is it scalable?)
- Learn: Using the data from your measure phase, it’s time to set up what Ries refers to as learning milestones, creating actionable metrics that enable you to assess the progress of your product, strategy, and growth accurately and objectively.
With the loop complete, it’s truth time: Should you pivot or persevere? Quickly determining that even one of your hypotheses is false allows a start-up to pivot swiftly and efficiently, saving time and money. If your hypotheses prove to be correct, you can confidently persevere on the same course, creating and testing new hypotheses until one of those hypotheses proves to be false. At that point, it’s truth time all over again.
Will pivots extend your runway?
Ries contends that pivots are the best measurement of a startup’s runway (how many months a business can continue operating before it runs out of money) rather than the standard measurement of a startup’s runway (cash in the bank divided by monthly spend rate). How many pivots can a business get to before it runs out of money? Think back to that build-measure-learn feedback loop. The faster and leaner a startup can continually get through that loop, the more pivots it can make in a shorter period of time. As a result, its chances of success will be better.
This is not to suggest that pivoting is easy. Pivots require an objective and open mindset, a purposeful and validated approach, and a bit of courage. After all, the need to pivot means that something along the way failed, and that can be a challenge to accept for some entrepreneurs. But if you are not failing, you are also not learning or innovating.
If you persevere when you should pivot, your business will not be able to maintain long-term sustainability. And if you pivot for the sake of change rather than because of measurable and validated data that leads you to a pivot, you will waste precious time, money, and morale that will pull your company down.
Key points to remember:
- It’s important to purposely and continually assess whether your business should pivot or persevere.
- The decision to pivot or persevere must be founded in objective and proven data.
- Create products that fill a customer need and that customers will buy. You will not succeed by creating something that is shiny and new, but that no one will buy.
- The first iteration of your product should be a minimum viable product that is tested on a finite group of early adopters.
Whether you decide to pivot or persevere, the key is to make those decisions intentionally. You can do so via a scientific methodology while channeling the human elements of vision, intuition, and judgment.
James H Hunter III is Bostrom Entrepreneur-in-Residence at the University of Wisconsin-Milwaukee, where he is an adjunct assistant professor of business. Hunter is author of “Graduate A CEO: Why College Is The Perfect Time To Start Your Business“. Hunter has started several businesses and sold two of them for significant profits in his long entrepreneurial career. He is currently the president/managing member of three companies.