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What 'Pivot' Really Means
 

We hear about pivots all the time. But what separates the great ones from the disasters?
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“Pivoting” is a familiar word in the startup world.  When your first business model isn’t working (and this happens more often than not), the CEO and team pivot to plan B.  These are deep breath moments!

But pivoting doesn’t necessarily mean desperation.  It can be a tool to discover additional growth--growth you might otherwise have overlooked.

Businesses can grow beyond their initial dreams by re-imagining their assets and talents, thinking more broadly about the customer problems they solve, and accessing growth capital to seize the new high ground.

Take for example Earth Networks, one of our portfolio companies. It started as a classroom science equipment company in the early 1990s, connecting students with weather information outside their classroom and other classrooms across town.

The internet, not surprisingly, changed everything. Soon, Earth Networks’ management realized it was becoming a fast growing media company that could sell advertising alongside real-time weather reports provided by a growing number of connected weather stations.  Eight thousand connected weather stations later, their “Weatherbug” app now has the most complete local weather information available.  Meteorologists and safety officials in local and national government agencies--and hedge funds, too--use the app to get them a degree of detail they never anticipated.

The re-imagination of Earth Networks as a network sensor and data analysis company was just the first major step - one which opened new markets and revenue streams.  A second re-imagination exercise opened yet another new market - using network sensing and data analysis to gather detailed information on the source and flow of greenhouse gases, worldwide.

Now that’s pivoting for growth.

It’s not just Earth Networks. Many CEOs at our portfolio companies have re-imagined their companies and discovered lucrative pathways. Most asked themselves:

  • What do we do--whether based on talent, technology, or culture--that is distinctly valuable and defensible and might be extended to other customer needs? 
  • How can our customer interactions be made more lasting and valuable?  Are there recurring revenue services and products that can extend beyond the initial sale?

These entrepreneurs and their teams closely study their customers’ broader behaviors around the use of their products and services.  Here’s another example of careful listening and watching.

Phreesia began by offering doctors and their practice management staff wireless tablets as a substitute for their clipboards. The tablets could be used to check patients into the office and prepare the doctor for that particular patient. By paying close attention to the needs of doctors and their staffs, Phreesia saw that its network could also be used to accurately and discretely collect co-pays and settle outstanding  balances. Phreesia conceptualized itself in a new and more rewarding way as the “Patient Engagement” company.

Earth Networks and Phreesia are constantly pivoting, constantly re-imagining themselves.  Should you be, too?

Last updated: Aug 10, 2012

ALAN SPOON is a general partner in the Boston office of Polaris Venture Partners. Alan focuses on investments in information technology, with an emphasis on revenue-stage companies, digital media, e-commerce, distance learning, and financial services.




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