Tag: Pivot

The art of a pivot

Pivoting is a jargonized word for resetting your business to be relevant. It’s used extensively in the start-up world and has become a buzz word as a response to the crisis wrought upon all businesses during the 2020 covid nightmare we have all lived through.

Why, when, and how do you do it as an established business? Listen to Pavlo Phitidis discuss this on The Money Show on 702 & CapeTalk:


Why?

To survive or thrive requires to you to be constantly adapting and adjusting your business. It’s a natural outcome of growth as well as a response to a change in the status-quo.

When?

When you face a threat or opportunity, an entire reset of your business, or part reset is a highly likely outcome. We call it the break-build period and it’s often the outcome of next-level-growth. When under threat, it’s driven by necessity to survive. A threat changes the status-quo of your and your clients/customers world. Persisting with a business-as-usual approach reduces your relevance and value to your customers….and that can be your death knell.

How?

Start with defining your value stack

This includes all your tangible and intangible assets, relationships and insights, sector knowledge and foresight and personal attributes.

Then peel your onion

Using the onion peeling method, you can allocate and categorize your value stack into the 3 layers of core-strategic, non-core-but-strategic and non-core-non-strategic.

Generate a cashflow forecast

Cash is king, preserve it, build it, hold onto it and invest it only to accelerate the generation of it until things stabilize.

Do not raise debt!

Finally Reset, Rebuild and Reignite

Reset is a re-definition of your value from the experience of your customer.

Rebuild is the ‘reconstitution’ of your business model and operating activities to create scale in your reset business.

Reignite is accelerating your growth through acquiring the customers, stock, plant, equipment, talent etc. of your competitors who have failed to reset and are losing their relevance and revenues.

Pivot: what does it mean and how to do it

It has become one of the worst pieces of jargon through the Covid-19 pandemic and lockdown, and one that Pavlo has steered clear of. But at its simplest, the word pivot means you need to find revenue from a different place and space.

The word was popularised 15 years ago on the West Coast of the USA where the startup industry was booming. Investors into that market were engaging in what is called portfolio investing, but which Pavlo calls ‘roulette investing’ – throwing money at a host of business plans and ideas. When these failed, the investor would ask: ‘What Now?’ and the startup would say: “We have to pivot”. And this is possible in the startup environment because they have nothing to lose as they haven’t built up a legacy business.

It is very different when you have an established business with the baggage of your business, in these instances, you need to pivot very differently.

Listen to Pavlo discuss how establish businesses did, and should pivot on The Money Show on 702 & CapeTalk:


To make his point about how different businesses pivoted, Pavlo reminded us of a massive phenomenon at the very beginning of lockdown: everyone was stockpiling toilet paper. Why? His view is that in a crisis, the fist thing we do is to ACT to avert the crisis, we do something, even if it is misguided to make us feel as if we have some form of control over the crisis.

Pavlo witnessed similar behavior among business owners. He saw established businesses making pivots based on their own biases. Their history and legacy were affecting their decisions and actions as they tried to find ways to bring in revenues.

The first grouping were those businesses that had invested plant and equipment that the business owned. Consider a fleet of trucks, or workshops or fridges. The tendency was to look at the equipment lying idle, and figure out what they could use that for to make something new or store something different.

Very often those types of businesses are run by people with an engineering background, and these are people who are good at working with their hands… making something or doing something. So making or doing something new was their place of safety – their toilet paper stockpile.

The 2nd pivot grouping was with those who had created their own product or service. Whether it was baked goods or a scientific invention, or a service innovation. These business owners went back to their product or service and figured out how to make the product or service better. Whatever their strength was, they focused their energy there, that was their safe space.

Finally there were pivots where business owners moved towards their customers and suppliers. They sought to understand what those suppliers were doing differently, and how they needed to pivot to be relevant to them.

Pavlo believes that going to your customers is always a good idea as that is where the revenue is going to come from first. And he shares a technique you can apply to get it right.

The Onion Peeler:

Pavlo has developed an incredibly simple but effective technique called The Onion Peeler to understand where your strengths lie in your business.

Every business has a core and strategic competence. It might be in your services, skills, or with your customers. Without it you don’t exist at all as a business.

The middle layer is not core but absolutely strategic. For example – technology, accounting, inventory management or whatever it is that enables your business but is not what your business does.

The outer layer is what you can shed, it is not core nor strategic. You can buy it as and when you need it.

If you apply this to your approach to pivoting – take what is essential to your business and take that to your customers and ask them what has changed about their needs that mean they no longer need your core offering, in the same way.

The customer that guides your pivot will be the first one to pay for the pivoted offering.

 

© 2003-2021 Aurik
Aurik and Asset of Value are trademarks of Aurik