What do you do when it is obvious that everything is not going according to plan? Do you stick to the original plan and persevere; or pivot to create something new? Find out how the world’s biggest companies dealt with that decision to re-position themselves and their business.
The world’s most popular video site actually began as a video dating site called ‘Tune In Hook Up’. Due to lack of traction, the founders scrapped the idea and turned it into an online video sharing platform. Launched in 2005, the online video service was quickly acquired by Google for US$1.65 billion in 2006.
However, when the company was still unable to make profit from passively runned ads on the website after two years. Hence, Youtube embarked on an aggressive partnership campaign with premium content providers like NBC, ABC and CBS. Simultaneously it launched a Partner Program that allowed popular users to grab a share of the ad revenue generated by their videos. By March 2010, Mashable reported that YouTube’s revenue was already approaching US$1 billion per year.
During the early stages of this well-known search engine, the company struggled to find a stable revenue source. Nevertheless, after making a little profit from selling search appliances to businesses and its own search technology to other search engines, Google began to change its business strategy.
In 2003, the company launched its AdWords program which allowed companies to advertise to people searching for things on Google.com. It became an advertising juggernaut from just a popular search tool overnight. In 2008, Google generated US$21 billion in advertising-driven revenue alone. To this day, AdWords contributes to the larger part of Google’s total annual revenue and profit.
In its early years, Facebook consisted entirely of college students. When Facebook realised that it could only expand so much by catering to only college students, Facebook founder, Mark Zuckerberg, decided in 2005 to expand its reach to high school students. A year after, the service was then opened up to anyone 13 years or older that had a valid e-mail address.
For the most part, the strategy change not only worked, but succeeded. Facebook had turned into the most popular social network in terms of unique views and monthly visits. Not before long, the company struck gold after it sold a 1.6% stake to Microsoft for US$240 million.
Known to few, Twitter started out as ‘Odea’, a network where people could find and subscribe to podcasts. However, it wasn’t long before the founders were feeling pressured by the release of iTunes and various other competitors. They felt that Odea’s service would soon lose its relevance.
After giving the employees two weeks to come up with new ideas, the company decided to make a drastic change. They pursued the idea of a status-updating, micro-blogging platform and named it Twitter. It now has over 200 million users, together with a secondary market trading that places the company’s valuation around US$7 billion.
The coffee shop that now occupies street corners and malls worldwide did not always sell fresh-brewed coffee to customers. Starbucks started off in 1971 just selling espresso makers and coffee beans after Howard Schultz (current chairman, president and CEO) fell in love with it at first taste.
After a visit to Italy in 1983, Schultz was determined to brew and sell Starbucks coffee in an European-style coffeehouse. This vision has thus transformed Starbucks into the nationwide java sensation it has become today.
Flickr is a great example of a feature becoming its own product. To those who are not familiar, Flickr’s roots lie in the development of an online role-playing game called Game Neverending created by gaming startup Ludicorp.
The game included a photo-sharing tool, which turned out to be one of its most popular aspects. Therefore, the company decided to leverage on this feature popularity instead and pivoted to turn into what Flickr is today. It achieved a major milestone when it was purchased by Yahoo! in 2005 for an undisclosed sum.
Founder Kevin Systrom started Burbn, a HTML5 check-in project on mobile photography. Later, him and his co-founder felt that the feature-rich app was becoming too cluttered and similar to Foursquare cluttered.
From these dissatisfactions,, Burbn pivoted to become more focused and by removing everything except the most important features and it was renamed to Instagram. In 2012, they raised US$50 million from venture capitalists in exchange for a share of the company. The same year, Instagram ended up being valued at a whopping US$500 million.
As one of the popular names in the beauty product industry, Avon started by selling books door-to-door. The founder, David H. McConnell, realised that his female customers were more interested in the free samples of perfume that came with the books rather than the books themselves. He then quickly began to recruit women to sell his perfume product, believing they would be able to relate and sell to one another better than male salesmen.
While we’re not in the same league as the companies listed, but we would like share Supahands’ experience in with changing business strategies. Supahands started of as a virtual assistant service to help individuals with their tasks. However, due to the limited market, we realised that catering to only the B2C segment would not be enough to sustain our goals to be a fast-growing company.
To differentiate our service from the competitors, we opt to diversify and focus more on the outsourcing business instead. Thus far, the journey has been great and we are now gaining more B2B clients. Below are some of the tips that we use as guideline to change our strategy.
Do you have any tasks i.e lead generation, data management, content moderation and online support that you wish to outsource?
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4 Tips For Successful Pivoting
Identify important threats and opportunities
When classifying forces that will impact your business positively, include factors such as emerging technologies, new customer categories and market growth. As for the negative changes that’ll affect your business environment, consider economic downturn, labor issues, altered consumer behaviour and competitive threats in your list.
Exploiting new ideas doesn’t mean that they have to be a major breakthroughs. It can also be a series of small or incremental changes, as long as they reduce costs and competition while increasing productivity, brand value and profitability.
Evaluate different strategy options
List your choices and think about each scenarios based on:
– Suitability: rationale of the ideas to solve the issues you face
– Feasibility: resources required to implement it i.e. funding, people, time and data
– Acceptability: the expectations of the identified stakeholders i.e. shareholder, employees and customers/clients.
Map out the implications
Draft the outcome of your new strategy for every aspect of your business. This includes process, profits, cost, brand, team structure and culture.
What we can learn from this is that changes in business strategies or directions are somewhat needed to unlocked new dimensions of revenue and profitability. This would never have been reached by staying the course. It is important to recognise that existing strategies are ill-suited for future opportunities.