In the popular American television series, Silicon Valley, Jared rightly says, “A lot of successful startups launched with a different business model and when they ran into trouble, they PIVOT it to something new.”
That actually stands true in real life.
If you are running a startup and find yourself in a need to change your business’ direction or revenue model (slightly or completely), that’s absolutely normal.
However, there is no right answer to whether a company should pivot or not. It is just a way of not giving up on building your startup.
But if things look a little dull, look at big names such as Instagram, Twitter, Reddit, where the founders made some adjustments to their business models and the pivot paid off nicely.
See how these popular businesses pivoted and overcame the hard times.
When two 20-odd year old, University of Virginia roommates came together to start a business, it was actually about mobile food ordering. But when they pitched this idea for funding, Y Combinator co-founder Paul Graham said, “We don’t like your idea, but we like you guys.” That brainstorming session for a new idea gave birth to Reddit. Watch the video below where the Reddit co-founders, Steve Huffman and Alexis Ohanian tell the story of how they created ‘The front page of the Internet.’
What we all know today as Twitter actually started out in 2005 as Odeo, a podcasting company founded by Evan Williams. But when Apple iTunes moved into podcasting, Odeo started losing its customers to Apple and thus decided to pivot into a messaging service that allowed instant updates. In this video, the co-creator of Twitter, Dom Sagolla, talks about the transition of Odeo to Twitter. Dom, who was the ninth employee at Odeo, was not a core Twitter founder but he was there right from the beginning.
Instagram began as Burbn, a check-in app that included gaming elements as well as a photo element. The creators paid close attention to user’s feedback and concluded Burbn had too much clutter. So they rebuilt a version of the app that focused solely on photography.
In this video, Instagram co-founder Kevin Systrom explained how they pivoted and stripped all the features from Burbn except photos to make it Instagram.
The global coupon website is nothing similar to when it started. In 2007, Andrew Mason, the founder of Groupon’s parent company started a website called ‘The Point’. The idea of this website was to create ‘social good’ campaigns that ran on a tipping point system, where a cause would only receive funding once the pledged donations reached a certain number.
But unfortunately, the website headed towards a failure. In 2008, in an attempt to save the company, Groupon was started as a side project which applied the same ‘tipping point’ concept but to unlock discounts on services instead of social campaigns. The side project soon eclipsed the popularity of the main business. Watch the video below where Andrew talks about his pivot move.
PayPal was initially designed as a way to ‘beam’ sums of money between handheld devices such as mobile phones, palm pilots, and pagers. After the merger with a financial services company, PayPal became the preferred online payment system for eBay sellers. Soon the newly found PayPal proved a better brand name and the company went on to find a niche as the payment system of choice among eBay sellers. After securing a relationship with eBay, PayPal was soon handling over 40% of eBay transactions before being acquired by the company in 2002 for $1.5 billion.
Reid Hoffman, co-founder of LinkedIn and former executive vice president of PayPal, explains the pivot story of PayPal:
Pandora actually started as a music recommendation engine. The founder of Pandora, Tim Westergren and his team spent years building a software program that could learn people’s taste in music and recommend new songs they might like.
But after several attempts to sell the software to companies in the music industry, such as record stores, the idea didn’t work out. So, they pivoted and tinkered with a consumer-facing product that would help listeners create personalized, online radio stations. Hear from Pandora’s ex-CEO how the music recommendation service pivoted, for something better.
When Zappos launched in 1999, their plan was to be an online shoe company which will be a mediator between the vendor and the customer. Customers would order footwear on its website, it would transmit the orders to vendors, and vendors would ship them from their own warehouses. But even after 4 years of launch, Zappos wasn’t profitable, and that’s when Tony realized outsourcing the warehousing service to a third party was a bad idea.
Overnight, Zappos stopped selling any shoe that it didn’t ship itself, ditching a 25% revenue of its business. In this video, Tony discusses how Zappos’ pivot to focus on customer service and company culture has paid off—for both customers and employees.
And some bonus:
Eric Ries is the man who coined the term pivot. He is recognized for pioneering the lean startup movement, a business strategy which directs startup companies to allocate their resources as efficiently as possible. In this video below, Eric explains what exactly a ‘Pivot’ is and how startups can make the best of it.