Study of entrepreneurial pivots

Abstract

With the advent of the Lean Start-up approach, the term "pivot" entered the entrepreneurial vernacular. Since then, entrepreneurs and people in general have adopted the word "pivot" to denote almost any strategic change taken by an organization, an individual, or even a government. Even though the term "pivot" is frequently used, little is known about the circumstances under which entrepreneurial organizations decide to make a strategy change or when a strategic change qualifies as a pivot. After client feedback contradicts a company's business hypothesis, a pivot is a "structural course adjustment" conducted by the Lean Start-up process. A pivot is a change in a firm's strategy that reorients the firm's strategic direction through the reallocation or reorganization of operations, resources, and attention, according to the literature on strategic transition. With this definition, we don't care if the change is in technology, a product, or a market; instead, we believe that pivots call for a reorientation of the company's strategic direction, backed by resource commitments. Although mature organizations and governments can change their objectives, entrepreneurial firms must operate amid great uncertainty and frequently unstable or contingent funding arrangements, making pivots crucial to defining their strategy. While all businesses manage risk, entrepreneurial businesses move to generate and capture value while not being able to predict the set or the distribution of probable outcomes. An entrepreneur's primary strategic difficulty is how to select [their plan] because they have a variety of options available to them and must make a decision without understanding the relative merits of each option. Once a project has been developed, entrepreneurs try to put it into practice to see if it is workable; nevertheless, this approach can produce very "noisy estimations of the worth of an idea." Entrepreneurial enterprises may begin to doubt their chosen strategies as they put them into practice due to new information, but it is unclear how and when they make this decision. A poster example of pivoting is Slack, a messaging company. A group of Slack employees led by their boss Stewart Butterfield developed the online game "Game Never ending." Although it was never successful, Flickr, the first widely used photo-sharing website on the web, was created using the tools they used to develop it. Yahoo reportedly paid $35 million to acquire it in 2005. Mr. Butterfield made another attempt to make an internet game called Glitch four years later. Furthermore, it failed. But to cooperate, Mr. Butterfield and his colleagues created an internal chat platform, which served as Slack's foundation.