In this article, I thought of touching an important topic- communication strategy when your company is pivoting its business. Pivoting, or changing the course of a business, is not a new idea. We have seen companies, especially during their early years, doing a course correction or resetting their business models, to stay relevant or increase their profits.
A pivot is not only about changing the product in totality. It may be about altering the customer segment, the channel, revenue model/pricing, resources, costs, partners, customer acquisition strategy, or geography.
Pivot is essential
As Winston Churchill said, “To improve is to change; to be perfect is to change often”.
Businesses pivot due to a number of reasons- the existing business model is not doing well, the customer behaviour has changed, or there is scope to enhance profits by shifting the business focus.
There are numerous examples of young businesses that have done well by pivoting their businesses. Take the example of PayPal that started out as a platform to allow people to “beam” payments from their PDAs (handheld digital computers) and later evolved to become an online payment company. Another example is that of HP- the company that started out as an engineering company in 1947, pivoted a couple of times and moved to computers and printing/scanning accessories few decades later. Yelp started as an automated email service, and YouTube was once a dating site. Some other brands that pivoted (in some cases multiple times) successfully during their lifetime include Starbucks, Instagram, Suzuki, Nokia, and Groupon.
Startups need to pivot
Pivots are common phenomena when it comes to startups. Entrepreneurs start out with a disruptive idea and change their course or focus areas, over a period of time. Startups are all about testing certain hypotheses and make the changes based on their success or failure. Hence, it is intrinsic for startups to evolve and change their course.
However, in some cases, startups are forced to pivot due to external factors that are beyond their control. The Covid19 pandemic is a classic example. A number of young brands have rejigged their business models, changed the strategy and rehashed focus areas, to make the most of the ‘new normal’ or to ensure that they stay afloat. There are companies in verticals like travel, hospitality etc. that have either added new business lines or rehashed their focus, to ensure that they stay relevant in the pandemic era.
As per industry research, startups that reinvent their businesses have higher chances to succeed. The primary reason for this is that with changing course they tend to conserve their resources and also gain a better understanding of their customers, partners as well as latest technologies.
But there is a hindsight
Pivots can be damaging for the reputation of a startup as they can be seen as an admission that the original plan that the founders were very confident of. The deviation is not only a sign of incompetence or inconsistency, but can also be detrimental when it comes to the startup’s relationship with its multiple stakeholders. It can cause a sense of insecurity and result in lack of trust in the company and the Founders. Hence, it is advisable for the Founders to have a comprehensive strategy in place around pivoting their business.
Pivot and communication
When a brand is pivoting, one of the most important and critical elements to focus on is to manage all internal as well as external stakeholders. This can be managed by defining a well thought –through communication roadmap that cuts across all possible stakeholders. The plan need not be the most aggressive one, but it definitely needs to be highly impactful. There are some key focus areas that are critical in the communication plan for a business that is pivoting.
Talk about the bigger picture and vision
It has been observed that when entrepreneurs start out, they focus on a specific product or have a plan that caters to a specific need or solves a specific problem. This helps that win the confidence of the investors and raise funding as they are able to showcase that they have a defined roadmap for growth and profitability. However, when a business is pivoting, it is important to talk about the bigger picture. It is important to outline the larger purpose and weave in an emotional appeal. The Founders should focus on building a narrative around the destination and the larger impact. This will help gain acceptance for the change of course, across stakeholders.
One good example is that of Netflix that started out with the purpose of offering the best home video viewing for everyone. Even while the company moved from selling DVDs by email to digital distribution, the larger vision still made logical sense.
A compelling storyline
A compelling story that clearly outlines the problem at hand and the solution, in turn can do wonders for the brand that is pivoting. The story should carve a clear narrative around why the business decided to change course. Stories are always more impactful as they have the ability to connect with various stakeholders, whether it is customers, employees, partners or investors. A good story can help build brand connect and brand recall.
Businesses are built on trust. Startups are young companies with limited years in business and hence, it becomes extremely critical for them to try and show continuity in the pivot. This is because deviations in a company’s business model or way of doing business may position it as less legitimate and non-trustworthy brand. However, if the pivot is seen as an organic progression, the customers will be more open to accepting it. It will also help refute all stories around the business pivoting because it wasn’t doing well. For example, if you are a fintech company with one specific product, it is acceptable for you to evolve and add new fintech products/business lines to your offering.
The linking tactic works even more magically if the overriding aim matches a larger societal purpose. For example, if the fintech company mentioned in the above example talks about a larger vision of ‘Financial Inclusion for Indians’, its pivot will seem to be a part of the original plan.
Let the leaders lead the story
The Founders are the face of any brand. Hence, company should leverage the Founders and their brand equity. They should have a robust plan in place to leverage the Founders’ goodwill to connect with all key stakeholders- investors, employees, partners and customers, and communicate the reason behind the shift. Face-to-face meetings with investors before deciding to pivot, a townhall for employees on the day the decision to change course has been put into action, and specific conversations with key partners will do well. These activities will help drive transparency and build stakeholder confidence and support.
If your business is undergoing a major restructuring, or you will have to let go of people due to the pivot, it is advisable to be empathetic. Empathy and remorse work as a balm when informing people of changes they may not welcome. Key stakeholders, like employees and early customers, are far more willing to stay put and extend all possible support if they receive clear guidance on how they’ll be affected by the pivot. This is the time when leaders who are empathetic and value their employees can have an edge and get better support than the arrogant and snobbish ones.
It is absolutely okay and human to be apologetic for a pivot. CXOs and Founders need to understand that being empathetic or genuine will not result in them losing support or respect. Infact, it will help them to better connect with their employees and key partners.
To conclude, pivot is an essential part of a business cycle, and more so in case of a startup. The best of ideas may require evolution, change, or a pivot, to help a business to grow faster or become more sustainable. In some cases, the change in consumer behaviour or an external factor can make the pivot unavoidable. When pivoting, the Founders should try and align their business to the larger purpose and the long-term vision of the organisation. Also, they should remember to communicate well, so as to manage all their stakeholders well.
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