Lean start-up: Is it time for your small business to pivot?
Launching a new business has always been a hit-or-miss proposition. According to the decades-old formula, you write a business plan, pitch it to investors, assemble a team, introduce a product, and start selling as hard as you can. And somewhere in this sequence of events, you’ll probably suffer a fatal setback. The odds are not with you, because about 70% of all start-ups fail.
Meet Lean Start-up
In the last decade however, a new approach to managing start-up has emerged, and it can make the process of starting a company less risky. It’s called “Lean Start-up” and it favours experimentation over elaborate planning, iterative design over traditional development, and customer feedback over intuition.
First, you’ll need to create a minimum viable product, or MVP – this is a basic version of your product that early customers can give feedback on. From there, you develop based on measurement and learning. When this process is done correctly, it will be clear whether or not the company is moving in the right direction. If not, it’s a sign that it is time to pivot – make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth.
What is a pivot, and how can it help your business?
Making the decision to pivot is one of the hardest aspects of the Lean Start-up method, because founders and entrepreneurs are emotionally tied to their products, and energy and money have been invested. A pivot isn’t necessarily a failure – it means that you will change one of your hypotheses about your product or service. There are different variations on the pivot:
- Zoom-in pivot. A single feature in the product now becomes the entire product.
- Zoom-out pivot. The opposite of above. A whole product becomes a single feature in something much larger.
- Customer segment pivot. The product was right, but the original customer segment wasn’t; this changes the customer segment, but the product stays the same.
- Customer need pivot. Through validated learning it becomes clear that a more important problem needs to be solved for the customer than the original.
- Platform pivot. Often platforms start out as an application, but due to success it grows to become a platform ecosystem.
- Business architecture pivot.
- Value capture pivot. Changing how value is captured fundamentally changes everything else in the business (marketing strategy, cost structure, product, etc).
- Engine of growth pivot. Start-ups typically follow one of viral, sticky, or paid growth models, according to the founder of the Lean Start-Up movement, Eric Ries. Changing from one to the other might be necessary to fuel faster growth.
- Channel pivot. The internet has created more channel options for start-ups, and complex sales or advertising channels are far less dominant. A start-up has many more options from the get-go.
- Technology pivot. A new technology can offer substantial benefits in cost, efficiency, or performance, and let you keep everything else the same.
Want to learn more about Lean Start-up and other handy methodologies to build and measure business success? Check out our industry-leading small business training video program.