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Knowing when to pivot

  1. A Nintendo Entertainment System controller.
    iStock/Luza Studios
    Melissa Tredinnick

    Melissa Tredinnick UKBF Regular Staff Member

    252 1
    4 |

    Nintendo, a company that most of us think of us as a product of the video game boom of the 1970s and 80s along with Atari and Konami, is in fact set to celebrate its 130th anniversary this September. 

    Now one of the largest video game companies in the world, and mostly known for titles such as Mario, Donkey Kong, and The Legend of Zelda, its beginnings were very different. 

    Nintendo was founded in 1889 as a hand-made playing card company. Between then and the 1960s, it launched a wide variety of niche businesses – some more in keeping with its current family-friendly image than others. (Maybe don’t open that link in the office.) It failed in almost all of them. 

    Then, after the Tokyo Olympics in 1964, the company’s stock fell to its lowest recorded level of ¥60 as sales of playing cards diminished.

    Luckily for Mario fans around the world, the company survived by moving into the production of electronic toys, and eventually into the video gaming industry, which has seen it grow to a market value of more than $37 billion.

    Rapidly changing technology, overwhelming competition, or shifting markets can be a death sentence for businesses that can’t keep up. 

    Sometimes, to avoid that fate, a drastic change of direction can seem like the only option.

    Coping with competition or meeting demand

    The decision to fundamentally change a business’s course, or pivoting, is common among startups.

    Eric Ries’s The Lean Startup defines pivoting as “a structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth”.

    As in Nintendo’s case, this course might be taken to keep up with new technology and changing demand. In other cases, business owners have made the decision to pivot when they’ve found themselves facing a competitor they simply can’t hope to beat.

    One of the most famous examples of this is Twitter’s beginnings as podcast network Odeo, which was threatened with failure in 2005 when Apple announced it would include podcasts in iTunes. The idea of creating a platform for status updates was put forward by Jack Dorsey, who was an employee at Odeo at the time, and Twitter grew from there.

    Alternatively, a business owner might decide to pivot because they’ve noticed their product does not match up with what their customers are actually interested in.

    This is what happened when the creators of Instagram saw the need to simplify their location-based check-in app to focus on sharing photos.

    It was also the case when William Wrigley Jr. noticed the free chewing gum he gave away was more popular among customers than the soap and baking powder he was selling.

    Is a pivot always the answer?

    For every anecdote about a pivot that resulted in huge success, there are plenty of examples of those that have gone horribly wrong. It’s not always going to work, and it’s certainly not a quick way to fix a failing business.

    Taking your business in a new direction might help you to steer away from a model that’s not working, but doing it too many times could just end up damaging your reputation instead. Investors might lose faith in your decision-making ability, and employees who were on board with your original idea could end up feeling alienated and disinterested.

    It can also be expensive, and it means you’ll be taking the risks of starting from scratch all over again. 

    Make sure you’re not just doing it because you’re getting bored – there should be a clear opportunity you’re making a move to seize.

    And change doesn’t have to mean a dramatic 180° turn. Almost every startup goes through some amount of change early on, but it’s most often in the form of a natural evolution, tweaking areas of the business over time, rather than a total rethink.
     

    #0
  2. The Byre

    The Byre UKBF Ace Free Member

    9,050 3,548
    I never miss 'The Bottom Line' either!
     
    Posted: Jul 4, 2019 By: The Byre Member since: Aug 13, 2013
    #2
  3. Ray Newman

    Ray Newman UKBF Regular Staff Member

    115 6
    Oh, fancy that. (Link here for anyone else who might be passing.) We put this on our editorial calendar ages ago after a conversation in the office about Nintendo and Melissa's been working on it since. Synchronicity and all that.
     
    Posted: Jul 4, 2019 By: Ray Newman Member since: Dec 13, 2018
    #3
  4. TheoNe

    TheoNe UKBF Regular Full Member

    135 14
    And don't forget the keyword is pivot, not do something completely different. Playing cards are still in the same space as computer games.
     
    Posted: Jul 8, 2019 By: TheoNe Member since: Jul 6, 2019
    #4
  5. FIZIX Agency

    FIZIX Agency UKBF Newcomer Free Member

    753 239
    In their case yes, but something completely different isn’t invalid. An example in video games:

    1975, a small construction firm in Japan called Den Yu Sha who specialised in power line construction. Nothing at all to do with games. They became SquareSoft (now Square-Enix).

    The founders son had other interests, as a result he created a department creating simple turn based computer games with the help of part timer staffer (I believe a computer technician/engineer) Hironobu Sakaguchi, thinking that games with a story and more complex mechanics would be a hit.

    They created a few obscure games which were failing. Sakaguchi convinced them to have one last shot at a pet project he had in the back of his mind, a big, ambitious game. They named it “Final Fantasy”, acknowledging that it was their final punt. It redefined the RPG genre, caused the founding of SquareSoft and one of the worlds iconic video games brands.

    Power line construction company to Square Enix.

    I like this story because they tried something totally new for them, failed and then took a massive gamble, believing that failure was inevitable and exploded.

    I think complete changes in direction and field might be quite common during tech revolutions where new industries appear. Some companies will have the expertise that those new industries demand and may take those big risks.
     
    Last edited: Jul 12, 2019
    Posted: Jul 12, 2019 By: FIZIX Agency Member since: Jul 9, 2012
    #5
    Melissa Tredinnick likes this.