A business pivot refers to a shift in direction, this could be a small shift like changing their pricing model, changing their target audience or looking at new routes to market. Alternatively, this could involve a radical change like completely changing their core product or service. Often, some of the greatest examples of these radical pivots can be found in the tech industry where there is high competition, but also a fast pace of innovation and a wealth of user data to inform decisions.
Rather than talk theory, let’s take a look at five examples of high-profile tech companies that have been bold and made a significant shift in their strategy to find the success they have today…
YouTube
YouTube is one of the most recognisable tech companies in the world with over 2.5 billion monthly users. It was launched in 2005 but it only took 18 months for it to be acquired by Google for $1.65bn (and in 2021, its annual ad revenue is $28.8bn). With such a short time between launch to acquisition, it can be surprising that there was a very user-led strategic shift in YouTube’s origin story.
YouTube’s co-founders have said that their original plan for YouTube was an online dating site and they even had a slogan ‘Tune in, Hook up’ according to co-founder Steve Chen. This site would allow users to upload videos of themselves, but this strategy only lasted a couple of months with co-founder Chad Hurley stating “it was too narrow” as users started to upload general videos. YouTubes founders, rather than being too committed to their original vision, allowed their users to force this shift in their strategy which ultimately set the foundations for the success of the business today.
Netflix
Netflix doesn’t feel like an old company. Sure, it’s been in our lives for quite some time, but many people would be surprised to hear that it was founded 25 years ago as it feels very much like a modern tech company. However, its origins date back to being founded in 1997 as a mail-order DVD service. This pivot occurred when Netflix capitalised on emerging tech and changing consumer demands to start their switch to the streaming platform that we know today.
It would be a disservice to tell the Netflix story without mentioning Blockbuster which on the flip side, tells the story of a goliath that didn’t pivot its strategy and is now a hallmark example of adapt or die.
Everyone has heard of Instagram, but not as many people will have heard of ‘Burbn’. Burbn was initially an app that allowed people to check in at locations, but also post pictures whilst there. However, founders Kevin Systrom and Mike Krieger faced two issues early on: firstly that Foursquare was already a similar app that allowed users to check in at locations and secondly, they discovered users were using Burbn’s photo-sharing features more than the check-in features.
Knowing Instagram as it is today, you’ll already know what the founders did to find success. They pivoted to focus on rebuilding Burbn into Instagram which primarily focuses on photo-sharing and quickly gained traction before later being acquired by Facebook for $1bn in cash and stock.
Mailchimp
Mailchimp, the email automation/marketing software, was acquired by Intuit in 2021 at a valuation of ~$12bn through a combination of cash and stock. However, Mailchimp may never have grown to the goliath that we know today if its two founders, Ben Chestnut and Dan Kurzius, didn’t pivot their strategy 15 years ago.
Ben and Dan’s initial focus was on their web design agency called Rocket Science Group. It was only on the side that they built Mailchimp as an email marketing service with a focus on small businesses. In 2007, Ben and Dan closed their web design business to focus all of their efforts on Mailchimp. This change in focus and strategy was a justified one, as the sale to Intuit proved years later.
Groupon
Back in 2006, Andrew Mason founded The Point. The Point was intended to use the collective power of people to achieve a goal, such as social causes. Ultimately, it was used for a wide variety of things with little success.
However, some campaigns that did gain traction were the ones that looked to use a collective group to leverage buying power. So whilst The Point wasn’t a success, this became the idea for the founders to pivot into Groupon and focus solely on group buying. This quickly gained traction and it was reported that only a few years later in 2010, Groupon rejected a $5.3bn acquisition offer from Google to instead IPO.
Key Takeaway
Whether you’re an established business or a startup looking to find product market fit, it’s never a bad idea to take stock and review whether your current strategy is the right one. What feedback and data are you seeing from customers/users? What emerging technology and competitors are there? Are there trends in the external market?
As a founder, it’s easy to fall victim to sunk cost fallacy. You’ve invested a lot into your business, so pivoting can be a bitter pill to swallow. However, one of the most important skills that founders and senior leaders can have is being decisive - knowing when to stay on course and when to change to a new one. In an industry that moves fast, stubbornness and resistance to pivot can be the cause of business failure.
The next step
At UHY (East), our Tech & High Growth department have been on hand to advise tech businesses at various stages in their journey. If you would like to discuss this or any other ways we can support you, please contact James Foster at j.foster@uhy-uk.com or your usual UHY advisor for further advice.
