Pivot The Business Model? Starting a new business venture, whether creating a startup or launching a new product in a multinational , involves investing a considerable amount of resources in testing if there is a market willing to pay for what we do … But there is another, more agile and flexible, which puts the focus on early testing the assumptions we have made and on pivoting our business model to find the one that best captures customer value by satisfying their needs.
Although it is necessary to have business plans, in many cases it is more important for the exercise of reflection that implies that for its validity in time, since the circumstances of the environment, the response of the clients or simply the model force to go adapting the strategy … which implies that at the beginning of any business venture (either creating a new line of business or starting a business as a startup) it must remain in continuous adaptation (and therefore, not usually tolerate dedicating 3 months full time to make a perfect business plan). This is the system of Pivot The Business Model.
However, we tend to fall into a kind of obsession to plan to the last detail , which largely obeys a subconscious fear of starting to walk through an unknown space … which leads us to invest much more time than necessary in planning the necessary (the famous “paralysis by analysis” ), and above all, to build a great cathedral (our project) on a series of foundations (assumptions and preconceived ideas) that we have not been able to prove and that may be wrong . All this is a consequence largely of the low tolerance to failure that not only swarms the offices of the top managers of this country, but also permeates most of the cultural layers of this country.
Therefore, I believe that one of the obsessions we must have to launch any project is, on the one hand, identify what assumptions we are taking as good , and above all, prove in the real world its validity as soon as possible ( and usually be it much earlier than we think ). Although it may be anachronistic, the end of a startup (at least in its early stages) is NOT PROFITABILITY , but demonstrate the VIABILITY of your model … contrary to how we usually think.
The effects of monolithic thinking “a startup is a big company in pequeñito ” are usually devastating for the new company , activity or line of business , since:
Oblige to invest a lot of resources and effort in something that we do not know if it is what the client really needs. This is another system of Pivot The Business Model.
They delay the generation of funds ( monetization ) of the business model, which in some paradigmatic cases can be fatal ( I have known some entrepreneur who invested years in preparing the perfect product … and before launching it, it was left without liquidity and had to close )
They allow to adapt faster to the market, since from the moment in which the project is conceived until it is launched there may have been changes in the environment that affect its viability
So, what are we talking about when we refer to ” pivoting “? We talked about the process of iterating the business model to find the most appropriate … or in other words, to try and “spinning” the business model incrementally and from different approaches until finding the one that is capable of capturing the value better. .
For me one of the best descriptions that puts in context this concept is that of Steve Blank (father of Customer Development ):
The startup is ” temporary” as an organization, it is not yet a company and in fact its structure is highly adaptable and modifiable in each of its phases. Once the business model is identified, it is usual for it to become a more solid organization. This is another system of Pivot The Business Model.
The key word ” discover ” gives us a view of the volatile and elusive nature of business models : from what has been designed as a business model to the one that is finally adopted, there are multiple prototypes that must be evaluated and discarded until the one that best captures the value.
Undoubtedly, the two keys that should define a startup “are” profitable “and” scalable “: Unless you are looking for a business for self-employment, the traditional thing is that these are business models whose key feature is your financial profitability and above all, that are decoupled from the resources invested ( or in other words, that to produce more do not have to spend more resources .. .as typically happens in consulting services, where to earn more money should be incorporated more people )
This means that we must identify which is the best PRODUCT-MARKET setting, and focus on discovering and validating the customers and adjusting the product to their needs. For this, one of the best techniques is the one that uses the Minimum Viable Product (MVP in English). This concept contains an absolutely transforming message and that should be the heart of any new initiative, from the creation of a startup to the launch of a product in a large multinational:
The Minimum Viable Product (MVP) is that version of a new product (or service) that allows the team to collect the maximum amount of validated knowledge about the clients with the minimum effort.
The goal of pivoting the business model around the MVP is that it allows us to identify a minimum unit of work, on which in each phase we must make ONE change only, following the recommendations of the customers on which it has been tested, and then start a phase of trying to listen to customers, capture feedback and measures about the MVP. If we go in the right direction, we must fix this change and make it permanent. Otherwise, you have to go back and go to the next iteration.
As it is already clear, the client is the key point on which to pivot the business model (not on what we think is better for him, but what he wants). This means dedicating a non-negligible effort to talking with the client, understanding their point of view (often what is said is not what is meant) and internalizing it, finding common positive and negative patterns among several clients … in short, It is not a science but an art.
I think it has already been clear, but I want to insist that, according to my point of view, a startup is not and should not be managed as a “company” , and that due to its condition it can avoid a large number of the easements that are inevitable ( Really?) Currently in companies, as a result of canned MBA training, which is taught to follow some steps and not to think. However, what is more striking, and lately I am checking in several scenarios, is how powerful it is that the company looks at the startup and embraces many of its management principles , more agile and flexible. This is the system of Pivot The Business Model.
Some of the aspects that are transplantable and that I believe you should carefully study the company already established are:
The startup works largely as a laboratory or benchmark, and serves to validate (soon!) The business model, its adaptation to the market and the presence of customers willing to consume their products or services
Risk is a systemic characteristic, and therefore we must get used to coexisting with it, and with the uncertainty that generates
There is a set of assumptions about the future and how it is going to develop that we must question ourselves permanently
Invest resources in proportion to the success of our product or service in customers … customers are not attracted to millionaire marketing budgets, but with proposals of value adjusted to their needs .
Another of the obsessions that we must have at the time of pivoting the business model , and that usually goes hand in hand with the previous point, is to identify which are the assumptions or critical assumptions on which the business has been built … or what is the same, the pillars, and validate their adjustment to the market as soon as possible. Some of the classic examples that I usually find:
Although when we talk about business plans and briefly commented, this type of assumptions that are given as true to raise a business model are the main point of failure, since in many cases can invalidate the entire model if they are discovered wrong . In this scenario, the most important thing is to detect them early and avoid the important opportunity cost (and economic!) That it can represent. In other words, and summarizing in one sentence what was said. This is the system of Pivot The Business Model.
Once we have identified all the assumptions or assumptions that pose a risk, it is important to identify their priority , which can be the cause that triggers it and, above all, what response plan we could adopt (in a similar way to what we had for the management of risks in projects ) … which will give us an ordered list of assumptions that we have to validate in the market as soon as possible.
For example, one of the most dangerous and habitual assumptions is “building a good product (who decides it?) The customers will come”. There is an important difference between what we think the client wants and what he or she is really willing to buy … and the tensions between these two visions are the main source of startup failure …
In summary, once the most appropriate business model has been identified through the validation of the client and the base assumptions , the authentic phase of execution begins, where the focus of VIABILITY to PROFITABILITY changes , and in which our obsession will be due focus on exploiting and scaling the model … but of which we will speak in the future. These all are the system of Pivot The Business Model.