Books In Minutes: The Lean Startup Chapter 8 – Pivot (or Persevere)

The word pivot sometimes is used incorrectly as a synonym for change.

Eric Ries
The Lean Startup

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With the scientific method of creating a hypothesis and then testing it that we learned so far, we might think there will be clear evidences that tell us whether we should pivot or persevere. After all, it's science. But the truth is, it relies on our judgment as humans.

The goal of creating learning milestones is not to make the decision easy; it is to make sure that there is relevant data in the room when it comes time to decide.

An Example of Pivoting

The CEO of Votizen, David Binetti, made three pivots before founded Votizen. The first product took him eight months and the metrics were not good enough for him after several improvements. The second product was to focus on one feature from the first product, it took him four months and the metrics were a lot better than the first one, but the revenue was not enough to support the business. The third product was identical to the second one, but selling to a different segment of customer. And this time, no customer was willing to pay. The fourth product, which is Votizen, showed the sign of an actual growth model that could work.

RatesFirst ProductSecond ProductThird ProductFourth Product
Time taken8 months4 months3 months1 month
Engine of growthStickyPaidPaidViral
Registration17%42%42%51%
Activation90%83%83%92%
Retention8%21%21%28%
Referral6%54%54%64%
Revenue1%0%11%

It is surprising to see that with each pivot, it took David less time to ship the product than the last one. The reason is not because features were added incrementally, in fact the opposite, many features were discarded. It is because they have learned critical things about customers and the market from the process that help them make clear hypothesis to test in the next round.

Longer Runway

When an entrepreneur is trying to cut costs in the hope to extend the company's ten-month left runway, it could also cut its chance to learn from the Build-Measure-Learn feedback loop, which is the critical process in which the company find its way to sustainability. It is better to think it differently, how many pivots can still be made? Even better, figure out the ways to get to each pivot faster.

The Three Reasons Why Pivot usually Comes Late

We often hear entrepreneurs say they wish they have pivoted earlier. Here's why:

  • Tricked by vanity metrics
    "The metric is going up and right, we must be right", not if it is a vanity metric. It is hard for people to neglect what they have seen, after all, seeing is believing.
  • Unclear hypothesis
    "If you don't know where you're going, you might not get there." Without a clear hypothesis, it is impossible to tell whether it is a failure or a success.
  • The fear of regret
    "If it fail because we are not putting enough effort and resources now..."

To overcome the late to pivot, or worse, sticking in the land of the living dead of not pivoting. Ries suggested to hold regular pivot or persevere meetings not shorter than a few weeks intervals and not longer than a few months interval. The meeting should have both business leadership and product development teams involved. The product development team should bring the results of their efforts to optimize the product over time, and how they are different from the expectations. The business leadership should bring detailed accounts of their conversations with customers.

10 Different Types of Pivot and What They Mean

  • Zoom-in Pivot
    All in on one of a previous features
  • Zoom-out Pivot
    Build out related features around the previous product to form a new product
  • Customer Segment Pivot
    Figure out the product solves problems, but for a different type of customer than originally anticipated
  • Customer Need Pivot
    Figure out the targeted customer has much more important problems than the one we're solving
  • Platform Pivot
    Started from selling a product, and build out a platform that allows others to sell the same products; or the other way around, started from building a platform, and change to focus on selling a product
  • Business Architecture Pivot
    Change from high margin, low volume business to low margin, high volume business, or the other way around
  • Value Capture Pivot
    Change the combination of features and pricing
  • Engine of Growth Pivot
    Change from one of the viral, sticky, and paid growth model to another
  • Channel Pivot
    Change the distribution channel
  • Technology Pivot
    Change to a technology that can provide superior price and/or performance compared with the existing technology

Highlights

Startup productivity is not about cranking out more widgets or features. It is about aligning our efforts with a business and product that are working to create value and drive growth.

The goal of creating learning milestones is not to make the decision easy; it is to make sure that there is relevant data in the room when it comes time to decide.

The true measure of runway is how many pivots a startup has left: the number of opportunities it has to make a fundamental change to its business strategy.

Most entrepreneurs' biggest fear is not that their vision will prove to be wrong. More terrifying is the thought that the vision might be deemed wrong without having been given a real chance to prove itself.

The word pivot sometimes is used incorrectly as a synonym for change. A pivot is a special kind of change designed to test a new fundamental hypothesis about the product, business model, and engine of growth.

A pivot is better understood as a new strategic hypothesis that will require a new minimum viable product to test.

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