In the dynamic world of startups, the ability to adapt and evolve is crucial for long-term success. A recent study by CB Insights found that 42% of startups fail because they are unable to understand the need of the moment.
Let’s delve deeper and explore the concept of pivot and its relation to Darwin’s theory of evolution to understand the importance of adaptability, the challenges faced by startups, and the role of stakeholders in this transformative process.
What does pivot mean??
Noun – the central point, pin, or shaft on which a mechanism turns or oscillates.
Verb – (especially in a business context) completely change the way in which one does
something.
If we read the above 2 definitions together, it can help us infer that while Pivot means to change something completely on a central point.
That is, while the business model, objective, vision and mission may have changed but the underlying DNA remains the same.
For example,
● Airbnb started out as a way for people to rent out their homes to travelers. However, the company quickly realized that there was a demand for short-term rentals in general, so they pivoted to become a marketplace for all types of short-term rentals.
● Netflix started out as a DVD-by-mail service. However, the company realized that there was a demand for a streaming service, so they pivoted to become a streaming service.
Many times pivot is viewed as a weakness by internal and/or external stakeholders.
But is it really so ???
To understand this, let’s go back ~ 2 centuries.
Charles Darwin, a British naturalist proposed the theory of biological evolution by natural selection. Here are the key points and their relevance in the start-up ecosystem:
● Darwin defined evolution as “descent with modification,” the idea that species change over time, give rise to new species, and share a common ancestor.
So are businesses and especially start-ups.
● Businesses innovate over time in terms of product, market, price, distribution and others to stay relevant.
● They give rise to newer distribution models, revenue models and go-to market strategies.
● They share a common organizational culture across the pivot/evolution journey
The evolution in the case of a large business takes decades, while in the case of a start-up the evolution is fast and evidently visible. Thus sometimes it is perceived as an instability rather than adaptability.
● The mechanism that Darwin proposed for evolution is natural selection. Because resources are limited in nature, organisms with heritable traits that favor survival and reproduction will tend to leave more offspring than their peers, causing the traits to increase in frequency over generations.
Similar is the case with business – ‘Survival of the fittest’. Resources that an individual business possesses like capital, human resource, competitive advantage are limited.
Businesses with (traits):
- Strategies & tactics to optimize resources for growth and
- Efficient & effective teams for execution
tend to attract more customers and revenues thus creating a brand and business with insufficient resources or inefficient leadership struggle to survive.
● Natural selection causes populations to become adapted, or increasingly well-suited, to their environments over time. Natural selection depends on the environment and requires existing heritable variation in a group.
Adaptability is amongst the most crucial traits that enables businesses to survive and thrive in the dynamic environment. Thus it’s very important to inculcate adaptability in the organizational DNA during the foundational years.
The Approach
The example of Netflix and Airbnb shared above depict how startups have successfully pivoted to achieve long-term success. While pivot is an essential part of the evolutionary journey, it’s not always the answer. Each situation demands careful evaluation, and sometimes fine-tuning existing strategies may yield better results.
If you are a startup founder, don’t be afraid to pivot if you need to. Start-up journeys need to be adaptive to the ever evolving ecosystem.
Embracing organisational adaptability:
Beyond pivot, it is crucial to foster an organizational culture of adaptability. Founders and their teams must –
● remain open to change,
● embrace new opportunities, and
● manage stakeholders effectively.
This includes –
● listening to feedback,
● leveraging diverse perspectives, and continuously learning and evolving.
At Auxano, we provide guidance and support to our portfolio companies in their pivot decisions. We believe in the philosophy of being like Krishna of Mahabharat – providing the guidance and founders being the Arjuna – the warrior and the one taking the decisions and acting upon them.
We understand that pivot doesn’t guarantee success, but it can lead to growth and, in some cases, even the rise of the phoenix.
Is it pivot or natural progression ???? – Pivot is the way to natural progression
Outlook : In the ever-changing landscape of startups, adaptability is the key to survival and growth. By understanding the significance of pivot, drawing lessons from Darwin’s theory, and nurturing organizational adaptability, founders can position their startups for long-term success. Founders must embark on this evolutionary journey embracing the power of adaptability to shape a future of endless possibilities.
Author:
Karan Gupta
