The art of the pivot
To pivot or not to pivot? This is the question my clients ask.
It’s the point at which startups have progressed through the customer development cycle: they’ve set hypotheses, designed a plethora of experiments and earned validation from ‘early evangelist’ customers. According to Steve Blank, author of The StartUp Owner’s Manual, this is the point where a startup must review and discuss the following questions:
- Have we identified a problem that lots of customers will eagerly pay to have solved?
- Does our product solve these needs distinctively, cost-effectively and profitably?
- If so, do we have a sizeable market and a viable, scalable and profitable business model?
- Can we draw a day in the life of our customer before and after the purchase of our product?
- Can we create an organizational chart of users, buyers and channels?
By this point, many entrepreneurs should have a stack of business model canvases they’ve iterated upon in order to scale from product-market-fit.
Enter Ethical Ocean: Concept to pivot in six weeks.
Things were pretty good at Ethical Ocean (EO) during the first week of January 2012: the company was growing monthly revenue 50% mt-mt (the ultimate sign of validation), exceeding even their own expectations. EO had grown from a team of one full-time employee headquartered in a coffee shop to a team of four having raised $500k and headquartered at MaRS. Not bad for the largest shopping platform for socially responsible goods. But, they still faced a major question:
To pivot or not to pivot?
Brenna Donoghue, President of Marketing explains: “We had realized the channels we were using to acquire customers were expensive and simply wouldn’t scale cost-effectively. We took a few days off over Christmas with the goal of relaxing and recharging, but we all spent the holiday reflecting on 2011 and pondering the path ahead. We all came to the same conclusion: small tweaks alone would not suffice in building the business we envisioned.”
However, EO quickly realized they didn’t need to reinvent themselves; they needed to pivot by changing their model. To do so, they mapped out a blueprint for the new Ethical Ocean on a white board.
I was there during the session and it ‘fired me up’ because they were outlining an ecommerce pivot model (public to membership) that we have seen work very well in the US, but it hadn’t been implemented in Canada. Some good examples of companies that have done this successfully include Thrillist and Fab.com. In fact, you can read about the Fab.com pivot here.
Long story short, six weeks later EO re-launched. They were no longer a public Etsy-style marketplace, but a members-only social boutique for the ethically inclined. EO now relies on its members to socially endorse the platform, invite friends and create the community.
The results speak for themselves: within two weeks of launch, EO doubled their membership and drastically improved the way they reach their customers, making it more efficient and effective, a great example of a ‘channel’ pivot on the Osterwalder Business Model Canvas.
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Nathan is a Sr. Strategist, Customer Development and Mentor within the Info. technology, Communications and Entertainment (ICE) practice here at MaRS. He is a Champion of Customer Development helping startups navigate the forest for the trees and reduce the risk of failure. Follow him @cowboytweets. See more…