Why some companies pivot and others fail13th January 2021
Earlier this week, I asked you about the biggest business lesson you learned during the pandemic.
The answers came thick and fast - and the interesting thing was how varied they were!
Here’s a sample:
“Keep talking to your team, your clients and your suppliers” - Steve
“Control over working capital, with prudence around cash expenditure, is critical” - David
“I have learned that you should never rest on your laurels and get complacent as disaster can just be around the corner” – Les
“I kept overheads to an absolute minimum and built up a war chest that has/will see me through this” - Alan
“Be prepared to change fast – it’s the quick and the dead when a crisis hits, nothing in between” - Howard
It’s all great advice - and that last one was the key lesson for me, too.
The pandemic has really re-enforced the importance of being able to make fast decisions for your business.
I’ve seen a vast difference between the companies that were able to perform the “Pandemic Pivot” quickly and make radical adjustments when conditions changed…
…And those which took much longer to adjust - sometimes falling into disarray or sinking into self-pity and anger before making difficult decisions to change their business model.
The former have generally prospered.
The latter have generally done “okay” or struggled. (Or, as Howard put it, died…)
I’ve thought long and hard about why some companies manage to pivot successfully, whilst others just can’t.
It’s worth going back to the writings of Eric Ries, the author of The Lean Startup, who was the first to use the word “pivot” in the entrepreneurial sense.
He points out that pivoting is something which companies do the whole time - not just as a response to external crises! It’s essential to continue evolving your business in order to succeed.
For Ries, this is a deliberate process that companies go through, as they gradually test approaches, products and services, and zoom in on the ones that work best for their business.
None of this is random!
For Ries, pivoting isn’t about deciding on a new direction and going with your gut.
As he put it:
“Many unsuccessful startups simply jump outright from one vision to something completely different. These jumps are extremely risky, because they don’t leverage the validated learning about customers that came before.”
“Successful startups change directions but stay grounded in what they've learned. They keep one foot in the past and place one foot in a new possible future.”
In other words, companies that pivot successfully don’t do it in a vacuum. (Not just startups by the way, but all companies.)
They rely on past learnings - real information - real data.
Having good financial information is a critical part - if not the critical part - of that.
It’s much easier to decide where to go next with your business, including in a crisis, if you have proper numbers in front of you. You need to understand your business’s existing strengths and weaknesses at a deep level before changing course.
It’s also easier to pivot when you have well-thought-out financial projections, instead of taking a wild guess at what your changes might mean for your company financially.
Because as company leader, good financial data gives you the confidence you need to change when necessary.
Good financial information unlocks all kinds of secrets about your business that you just can’t see otherwise…
…Information about which parts of your business are most profitable, when you might be facing financial trouble down the line, and what you can really afford to do.
Armed with this information you can make clearer, better decisions about how to evolve.
Without that data, it’s too easy to become consumed by fear and stick with what you know - even when you really should be changing.
Giving growing companies this quality of financial data is what we do all day, every day.
Because pivoting isn’t just for 2020 or for COVID.
Your business should be evolving continually - and all those decision you make about your future requires excellent financial information.
So if you’d like to grow faster, more smoothly and in a more strategic way, please get in touch today. Simply email me back or call us on 01279 647 447.
We can’t wait to help you.
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