The dictionary defines "leap of faith" as "an act of believing in or attempting something whose existence or outcome cannot be proved." Jumping head-on into such uncertainty is exactly what all entrepreneurs who hope to be successful must get very comfortable doing.
At Pluralsight, we've experienced many such turning points into the unknown. But our biggest leap of faith to date was one that required us to make a hard choice that involved, in essence, "throwing away" half of the company's revenue stream from which the enterprise had originally been founded. The potential payoff? Realizing an even bigger mission and greater rewards down the line.
Here are three lessons we learned from the experience about how to take a leap of faith in business:
Finding the big bet requires patience. While most founders start out with the same goal of quickly creating an innovation as big as the iPhone, it's hard to anticipate at the startup stage what will work and what won't from the original vision and thesis. It's crucial to work closely with customers to discover the right product/market fit that's worthy of making a bigger bet.
As companies follow this process, they become more aware of the true potential of new ideas and revenue streams. It becomes more obvious when the new ideas have the potential to grow faster than the original ideas. At such moments, it's critical to be able to take a leap of faith and move quickly in the most promising direction--even if it means letting go of a primary piece of your original business.
You must be prepared to pivot. When my partners and I cofounded Pluralsight in 2004, our tech training company relied solely on in-person training. We rented classrooms to teach coding and software development to large groups face-to-face, and through that format, we reached a few million in revenue three years after launch with no outside funding. Yet 2007 ushered in the convergence of several new technology trends that allowed us to envision a low-cost platform for taking our training business online.
We knew our audience was limited with the off-line approach, and started to see an opportunity to scale our offering to the world--if we were willing to take a chance on it. We also knew that we had to give serious thought to our future direction, as before us was a make-or-break decision: either to stay the course in the physical classroom, or take a hard pivot by turning our training services into a Web-based platform. We opted for the latter, banking on the future power of the online model. In one fell swoop, we shifted our focus away from professional services and into building a product with a clear mission to democratize professional learning.
Once we decided to pivot, our work had just begun. We were confronted with the realities of building a new online training platform from scratch, plenty of naysayers, and the challenge of overhauling our pricing model on a shoestring. When we released our new online product in 2008, with one hand still in classroom training, we maintained the same revenue level as we had the year before. In 2009, with the economic crisis in full swing, our overall revenue dipped significantly but the online piece actually grew substantially and helped us get through it. Over the next year, we continued to invest in both businesses. By the end of 2010, our online revenue matched that of our offline business, at which point we faced a real dilemma of focus.
It's important to face the dilemma and do something. At this crossroads, we faced the classic innovator's dilemma. Though we've since done away with sales commissions, our sales incentives at that time were aligned to sell the classroom products, which made it even harder to grow the online business. In addition, we didn't know where to most effectively focus our precious resources.
So we now faced the choice to either separate the businesses completely, or to quote William Faulkner, "kill our darlings" (and our own internal competition) by doing away with the classroom training. The fact was that our old business just didn't have the potential to achieve the same mission or the same scale as the online business. So although we brought along the spirit of the original business, we decided to "burn the boats," as the saying goes, specifically so that we'd be left with no option but to succeed in our new direction.
This leap of faith paid off. Not only did our tighter focus allow us to keep making payroll, but year after year we continued to experience substantial growth, attracting more and more customers as our online course library expanded. We nearly tripled our revenue in the following year, and have continued to see triple-digit growth every year since then. The key was a collaborative willingness from everyone in the company to doubt the doubters by first having--and then realizing--a compelling vision that has since proven more powerful than any naysayer.