Embedded Files
Learning Goal: Utilize the product development process to determine the appropriate time to pivot and iterate.
Learning Goal: Utilize the product development process to determine the appropriate time to pivot and iterate.
There are two types of change within a business model: iterations and pivots.
Iterations
Iterations
Iterations are minor changes to business model components (For example, when Amazon changed the price of Prime from $79 to $99). I often refer to these changes in class as feature set changes. Peter Thiel, a founder of Paypal, refers to this is as going from 1 to 1.1. These are horizontal forms of progress and simply mean things that work are being copied. 1 to 1.1 is easy to imagine because we already know what it looks like. Iterations are incremental advances that continue in the same direction of the original concept. These steps should be taken daily as the company learns more about its real value and customers.
What does an iteration look like? Start with the iPhone and work your way through the x. Each one of these MODELS offers a slightly new improvement. There is nothing substantial from one to the next.
Cars offer another unique example of iterations. For instance, the Ford F150 has a new model each year. Every year nothing really changes. This can be seen vividly in 2013 when Ford launched the step up tailgate seen to the right. This novel invention is nothing more than a bland iteration.
Pivot
Pivot
Pivots are substantive changes in one or more of the nine boxes of the business model (e.g., a pricing change from freemium to subscription model or a customer segment shift from boys 12-15 years old to young men 21-30). You should notice that a pivot is a dynamic change to the product or company focus. Pivots at there extreme go from 0 to 1, as defined by Peter Thiel. Vertical or intensive progress means doing new things. Vertical progress is harder to imagine because it requires doing something nobody else has ever done.
In layman terms, a pivot is essentially the idea that successful startups change directions but stay grounded in what they've learned. Successfully utilizing the pivot allows startups to keep one foot in the past and place one foot in a new possible future. Over time, this pivoting may lead you far from your original vision, but if you look carefully, you'll be able to detect common threads that link each iteration. By contrast, many unsuccessful startups simply jump outright from one vision to something completely different. These jumps are extremely risky, because they don't leverage (utilize) the product development (validated learning about customers) that came before.
My favorite example of a pivot is when Apple knowing transitioned their brightest engineers from focusing on developing new models of the iPod and placed an all-in bet on the iPhone. In January 2007 the iPod market share reached 72.7% according to Bloomberg Online. In January 2007, Apple reported record quarterly revenue of US$7.1 billion, of which 48% was made from iPod sales. Apple literally pivoted away from their best selling product. A product that was literally carrying their business.
A good example is Instagram. Instagram is the best-known mobile photo app. However, that wasn’t always the plan. Instagram was initially known as Burbn and took in elements of Foursquare, combining them with gaming elements inspired by Mafia Wars.
So, why the switch? As CEO Kevin Systrom has explained on Quora, “We decided that if we were going to build a company, we wanted to focus on being really good at one thing. We saw mobile photos as an awesome opportunity to try out some new ideas. We spent 1 week prototyping a version that focused solely on photos. It was pretty awful.
“So we went back to creating a native version of Burbn. We actually got an entire version of Burbn done as an iPhone app, but it felt cluttered, and overrun with features. It was really difficult to decide to start from scratch, but we went out on a limb, and basically cut everything in the Burbn app except for its photo, comment, and like capabilities. What remained was Instagram.”
3 Types of Pivots
3 Types of Pivots
1. Pivot on who you are selling to
Try to take our existing product and use it to solve a similar problem for a different set of customers. This happens commonly when consumer products get unexpectedly adopted in enterprise. In those cases, the product may stay mostly the same, but the positioning, marketing, and - most importantly - prioritization of features changes dramatically.
2. Pivot on customer problem: How you are helping the customer.
Try to solve a different problem for the same customer segment. This is an exciting kind of change, usually. When doing intense customer development, the problem team can attain a high level of empathy with potential customers. If the results of that exercise is a realization that customers have a problem that our solution doesn't address, and that problem is more promising - it's time to pivot. Starbucks famously did this pivot when they went from selling coffee beans and espresso makers to brewing drinks in-house. They were still serving high-end coffee afficionados, but in a more convenient form. This paved the way for their crossing-the-chasm type breakthrough with mainstream customers.
3. Pivot on a specific feature
We select out a specific feature from our current product and reorient the whole company around that. We select out a specific feature from our current product and reorient the whole company around that.
Lesson Information
Lesson Information
Presentation
Presentation
Pivot.pdfVocabulary
Additional Reading
Student Activity
After your first and second iteration, determine whether you should persevere or pivot.
Report abuse